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Cost Estimating w/ a Crystal Ball. NHI Course. Two pilots Virginia DOT Caltrans, next week History Probabilistic (Risk Based) Based on Washington State DOT’s CEVP Deterministic FY 2006. FHWA Version of Risk Based Probabilistic Cost Reviews – WHY?.

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Cost estimating w a crystal ball

Cost Estimating w/ a Crystal Ball

2007 Annual TEA Conference


Nhi course
NHI Course

  • Two pilots

    • Virginia DOT

    • Caltrans, next week

  • History

  • Probabilistic (Risk Based)

    • Based on Washington State DOT’s CEVP

  • Deterministic

  • FY 2006

2007 Annual TEA Conference


Fhwa version of risk based probabilistic cost reviews why
FHWA Version of Risk Based Probabilistic Cost Reviews – WHY?

Threshold (All costs, PE, CN, R/W, UT, CE, etc.)

$500 Million – Major Project

$100 to $500 Million – Division discretion

“Cost to complete estimates based on reasonable assumptions as determined by the Secretary.”

Secretary = FHWA

Reasonable assumptions = Risk based analysis

(Is not WS DOT CEVP process)

2007 Annual TEA Conference


Fhwa version
FHWA Version WHY?

  • Similarities with CEVP

    • Contingency is removed from the estimate

    • Risks/Opportunities are identified in team workshop environment

    • Monte Carlo simulation (@Risk vs. Crystal Ball

2007 Annual TEA Conference


Fhwa version1
FHWA Version WHY?

  • Differences w/ CEVP

    • Developed for one-time use in a DOT

    • State DOT estimate is not changed

    • Estimate is not schedule related

      • Inflation is applied to obtain YOE estimate

    • Risks can be expressed as a simple “contingency”

2007 Annual TEA Conference


Fhwa cost review
FHWA Cost Review WHY?

  • Current Estimate in Excel Format

  • Understand Estimate Process and Scope

  • Review of all estimate cost items

    • Compliance with FHWA Guidance (Checklist)

    • Brief review of Unit Prices and Quantities

    • Discuss Risk and Opportunities

      • Cost Impact and Probabilities

2007 Annual TEA Conference


Fhwa cost review1
FHWA Cost Review WHY?

  • Run a Monte Carlo Simulation (Crystal Ball)

    • Develop assumption curves

    • Run software to generate probability forecast curve

    • Review sensitivity charts

  • Prepare Final Report

    • Use to review Finance Plans

    • Generate estimate expectations

2007 Annual TEA Conference


Fhwa guidance checklist
FHWA Guidance Checklist WHY?

  • Estimate is escalated to year of expenditure dollars for each element of the project.

  • Process includes risk-based assessments of unknown and all uncertain costs.

  • Estimate is well documented.

  • Estimate has been independently validated.

2007 Annual TEA Conference


Fhwa guidance checklist1
FHWA Guidance Checklist WHY?

  • Estimate is consistent with project scope.

  • Estimate includes all initial preliminary engineering costs and final design costs.

  • Estimate includes all right-of-way and administrative costs.

  • Estimate includes all third party (e.g. utility, railroad) costs.

2007 Annual TEA Conference


Fhwa guidance checklist2
FHWA Guidance Checklist WHY?

  • Estimate includes all TDM/TSM costs.

  • Estimate includes all construction costs.

  • Estimate includes construction contingencies.

  • Estimate includes construction administration.

2007 Annual TEA Conference



Fhwa guidance checklist3
FHWA Guidance Checklist WHY?

  • Estimate includes public outreach cost.

  • Estimate includes a management reserve.

  • For planning or conceptual estimates, consideration was given to expressing the estimate as a range.

  • For projects under design, estimates include a design contingency at each stage of design.

2007 Annual TEA Conference


Understand estimating process
Understand Estimating Process WHY?

  • Estimate prepared March 2007

  • Design/Build Procurement

  • Anticipated Award March 2008

  • Prepared by State DOT using an extensive database of unit prices for D/B/B contracts

  • Design is 30% complete

2007 Annual TEA Conference


Presentation
Presentation WHY?

  • Before leaving

    • PowerPoint

    • Findings and Recommendations

  • Concurrence of State DOT project designers and executives

  • Final Written Report to Follow

2007 Annual TEA Conference


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