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Cost Estimating w/ a Crystal BallPowerPoint Presentation

Cost Estimating w/ a Crystal Ball

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Cost Estimating w/ a Crystal Ball

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Cost Estimating w/ a Crystal Ball

2007 Annual TEA Conference

- 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

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

- 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

- 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

- 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

- 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

- 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

- 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

- Estimate includes all TDM/TSM costs.
- Estimate includes all construction costs.
- Estimate includes construction contingencies.
- Estimate includes construction administration.

2007 Annual TEA Conference

2007 Annual TEA Conference

- 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

- 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

- Before leaving
- PowerPoint
- Findings and Recommendations

- Concurrence of State DOT project designers and executives
- Final Written Report to Follow

2007 Annual TEA Conference