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Mike Ginnaty Director, Project Scoping and Cost Management

Mn/DOT’s Cradle to Grave Estimating Our Cost Estimating Journey Transportation Estimators Association Conference Omaha, NE. Mike Ginnaty Director, Project Scoping and Cost Management. Cradle to Grave Estimating. Why MN/DOT needed to change What: Cost Estimating Project Overview

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Mike Ginnaty Director, Project Scoping and Cost Management

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  1. Mn/DOT’s Cradle to Grave EstimatingOur Cost Estimating Journey Transportation Estimators Association ConferenceOmaha, NE Mike GinnatyDirector, Project Scoping and Cost Management

  2. Cradle to Grave Estimating • Why MN/DOT needed to change • What: Cost Estimating Project Overview • Implementation • Issues MN/DOT faced in implementation • Status of Implementation Items Cost Estimation and Cost Management

  3. Why? Cost Estimation and Cost Management

  4. Performance Measures • Projects in 3rd (4TH) Year of STIP are let on time • FY 2008 65% of projects • FY 2007 76% of projects • Projects in 1st Year of STIP are let in current year • FY 2007 92% of projects • FY 2008 82% of projects • Percentage of projects let within +/- 10% of original 3rd year STIP construction estimate • FY 2008 28% of projects • FY 2006 29% of projects Cost Estimation and Cost Management

  5. Cost Estimating Issues/Concerns • Emphasis on estimating • Transparency • Public Trust and Confidence • Credibility • Following Through on Commitments Cost Estimation and Cost Management

  6. Cost Estimating Process Improvement and Organizational Integration Project Cost Estimation and Cost Management

  7. Cost Estimation and Cost Management

  8. Cost Estimation and Cost Management

  9. NCHRP Report 574 Cost Estimating and Cost Management Practices • Make Estimating a priority by allocating time and staff resources • Set project baseline cost early and manage throughout • Communicate estimate meaning and uncertainty • Protect estimators from internal and external pressures • Complete every step in a structured estimating process • Document estimate basis, assumptions, deviations • Identify project uncertainties early and establish contingencies • Perform estimate reviews and obtain management approvals Cost Estimation and Cost Management

  10. Cost Estimation Process Improvement and Organization Integration Project • Created CE/CM vision for Mn/DOT • Developed Policies and procedures • Created an implementation plan • Developed a manual • Developed a training course • Completed this work December, 2008. Cost Estimation and Cost Management

  11. Organization Change/Integration Case for Change Accountability Communication Incentives Sustained Change Action Plans Vision Resources Processes Skills Training Cost Estimation and Cost Management

  12. Mn/DOT’s Vision for CE/CM • Department-wide priority on estimating, managing and controlling costs • Total Project Costs (including Engineering, R/W, Construction and other elements) • Reliable and accurate estimates • Statewide uniformity and consistency • Improved communication and credibility with external stakeholders • Clear accountability Cost Estimation and Cost Management

  13. CE/CM Policies • Project Cost Estimation Policy • Districts will have dedicated estimators • Estimates will be Total Project Cost Estimates (TPCE) • Management approval required at gates • Uncertainty, Risk, and Contingency Policy • TPCE will identify risks and estimate contingencies • There is no program contingency, all contingency will be at the project level • Unused contingency will be returned to the program Cost Estimation and Cost Management

  14. CE/CM Policies • Cost Estimate Communications Policy • All projects will have a Project Summary Report (one-pager) • MN/DOT is only committed to projects in the STIP • Projects outside of STIP will be shown in ranges • Project Cost Management Policy • Projects will be managed against a Baseline Cost Estimate • Use of contingency requires approval of Program Manager Cost Estimation and Cost Management

  15. CE/CM Policies • Program Management Policy • Projects will be managed to the scope • Scoping marks the end of discovery • Change to Baseline Cost Estimate requires approval of Transportation Program Investment Committee (MN/DOT Division Directors) • Emerging Issues (Not a policy in TRM) • Design-Build Projects • Special Programs/Funding, i.e. Chapter 152, ARRA • CE/CM during construction Cost Estimation and Cost Management

  16. CE/CM Implementation Plan • Develop system to track and define TPCE elements • Performance Measures and incentives • Role and Responsibilities • Communication of CE/CM • Resources Requirements • Technical Support • Integration with Scoping initiative and others processes • Accurately identify inflation impacts • Identify and develop additional tools and databases • Short-term Implementation (FY 2010, 2011, 2012) • Reduce the use of Setasides in the SRC • Emerging areas to be addressed Cost Estimation and Cost Management

  17. Technical Reference Manual Outline • SECTION I INTRODUCTION (Vision for CE/CM) • SECTION II: ESSENTIALS (Foundation for CE/CM) • Interaction of Project Development and CE/CM Processes • Policy statements • CE/CM Process – Key information Total Project Cost, Risk and Contingency, Roles/Responsibilities • SECTION III: Practice • Overview of Cost Estimating and Risk Methodologies • Cost Estimating/Cost Management procedures for Planning, Scoping, Design and Letting • SECTION IV: Appendix (Terms, Estimating Tools and Tips) Cost Estimation and Cost Management

  18. CE/CM Training • Cost Estimating is 2 days • Cost Management is 1 day • Contract with University of Minnesota who is working with Stu Anderson, Jennifer Shane and Keith Molenaar as the instructors • Held first session August 17-19 • Scheduled to complete the initial training by Summer, 2010 • Session on September 28-30, 2009 will be taped and sessions will be posted on our website Cost Estimation and Cost Management

  19. CE/CM Training Attendees • Training is for estimators and others who provide information to estimators and project managers • Estimators • Managers • Functional managers • Project Managers • Estimated need to train 400 people in the department Cost Estimation and Cost Management

  20. Cost Estimating TrainingAgenda Module 1 Cost Estimating: Why, When, Who, What, Where, and How Module 2 Project Development and Cost Estimating and Cost Management Module 3 Cost Estimating Overview Module 4 Key Cost Estimating Tools Module 5 Determine Estimate Basis Module 6 Prepare Base Estimate Module 7 Determine Risk and Set Contingency Module 8 Review and Approve Estimate Module 9 Determine Cost Estimate Communications Module 10 Cost Estimating Training Summary Cost Estimation and Cost Management

  21. Cost Management TrainingAgenda Module 1 Cost Management: Why, When, Who, What, Where, and How Module 2 Project Development and Cost Estimating and Cost Management Module 3 Cost Management Overview Module 4 Key Cost Management Tools Module 5 Cost Management Based on Updating Cost Estimates Module 6 Cost Management Based on Individual Changes Module 7 Cost Management Training Summary Cost Estimation and Cost Management

  22. CE/CM Training Comments • We didn’t emphasize letting estimates • We had a mix of people at the training from estimators to managers • Performance measures need to be developed • Need to hear from top staff the reason for change, why we are changing • We need to Minnesotaize the tools • Tie training slides to the manual • 3 days is a big commitment of time • This is not how we have done this • We don’t have the resources for this Cost Estimation and Cost Management

  23. Scoping Process • Vision for New Scoping Process • Early • Comprehensive • Documented • Includes a Scoping Change Process • Definition of Scoping: What’s In and What’s Out of a Project Cost Estimation and Cost Management

  24. Scoping Implementation • Scoping Process was developed by Preconstruction Managers Group (PCMG) • Developed a process • Developed a manual • Provided training ahead of implementation • Implementation was for FY 2012 projects in the 09-12 STIP • All projects to be scoped using the new scoping process • Measured results, 95% of projects in 2012 had an approved scoping document Cost Estimation and Cost Management

  25. Scoping Process Flowchart Baseline Change Process Baseline Cost Estimate Cost Estimation and Cost Management

  26. Scoping Implementation –Remaining Challenges • Focusing on earlier coordination, especially with external stakeholders • Need for Risk Management Plans • Shifting resources to earlier in Project Development • Ensuring change is sustained through continued training and resources Cost Estimation and Cost Management

  27. Mn/DOT Scoping and Cost Estimating website www.dot.state.mn.us/cost-estimating Operational Fall, 2008 Includes the Manual, Tools and other information for Scoping and CE/CM Cost Estimation and Cost Management

  28. Project Scoping and Cost Management Office • Created July, 2008 • Created from the work on the Cost Estimating Project • Heighten exposure of the CE/CM effort • Currently have 4 positions filled, Director, Scoping Section Director, Bundle Steward, TTAA (Taxpayer Accountability Act) Cost Estimation and Cost Management

  29. CE/CM Implementation Requirements • Directive by Commissioner in October, 2008 • Chapter 152 Projects (10 Year Program) • Legislative program in Spring, 2008 • Scopes and TPCE’s completed by Dec 1, 2008 • One-pagers completed by Dec 15, 2008 • 10-13 STIP Projects • Scopes and TPCE’s completed by April 24, 2009 • One-pagers completed by May 1, 2009 Cost Estimation and Cost Management

  30. Implementation Issues • We did not have • TRM (Technical Reference Manual) • Training • Limited formal experience with risk assessment • No estimate tracking system (limited tracking in PPMS) • We did have • Experience with cost estimating (we are good at estimating what we know) • Generally are later estimates are very good Cost Estimation and Cost Management

  31. Implementation Kit • Developed Implement Kit including • TPCE Spreadsheet • One Pager format and example • Risk Fact Sheet • Risk/Contingency Guidance • Risk Register • Contingency Chart Cost Estimation and Cost Management

  32. Total Project Cost Estimate Cost Estimation and Cost Management

  33. One-Pagers Cost Estimation and Cost Management

  34. Risk Management Training • Conducted Cost Risk Assessment Value Engineering (CRAVE) Workshops • Conducted on 13 Major bridge projects with cost ranges $50-700M • Projects were from across the state (District 2, District 6, District 7, Metro) • Participants were from various districts Cost Estimation and Cost Management

  35. Implementation Results • Chapter 152 Projects • Districts delivered 100% of projects having scoping documents, TPCE and one-pagers • FY 10-13 STIP Projects • Districts delivered 94% of projects having scoping documents, TPCE and one-pagers Cost Estimation and Cost Management

  36. Organization Change/Integration Case for Change Accountability Communication Incentives Sustained Change Action Plans Vision Resources Processes Skills Training Cost Estimation and Cost Management

  37. Enabling Change Case for Change Accountability Incentives Communication Resistance Action Plans Vision Resources Processes Skills Training Cost Estimation and Cost Management

  38. Enabling Change Case for Change Accountability Incentives Communication Fragmented Action Plans Vision Resources Processes Training Skills Cost Estimation and Cost Management

  39. Enabling Change Case for Change Accountability Communication Incentives Anxiety Action Plans Vision Processes Resources Training Skills Cost Estimation and Cost Management

  40. Enabling Change Case for Change Accountability Incentives Communication Frustration Action Plans Vision Resources Processes Training Skills Cost Estimation and Cost Management

  41. Enabling Change Case for Change Accountability Incentives Communication Confusion Action Plans Vision Processes Resources Skills Training Cost Estimation and Cost Management

  42. Enabling Change Case for Change Accountability Incentives Communication Unsustained Action Plans Vision Resources Processes Training Skills Cost Estimation and Cost Management

  43. Issues/Concerns • Project Summary Reports (One-Pagers), where to store • Tool Development, Minnesotaize the tools • TPCE Tracking System • Risk and Contingency Training • Management wants the “Right estimate”, what is “Right”? Cost Estimation and Cost Management

  44. Keys to Mn/DOT’s Success • We need to become a Risk Management Organization • Emphasis on scoping • Need to increase our effort on scoping projects • The end of scoping is the end of discovery. • Management is looking for “Right Estimate”, need to define “Right” • Retirement of Contingency Cost Estimation and Cost Management

  45. CE/CM Implementation Progress • Develop system to track and communicate TPCE • Define TPCE elements (needs more work) • Group TPCE elements (TPCE Spreadsheet) • Define and develop tracking system (Project Summary Report) • R/W Estimating process • Engineering Estimating process (PET, TTAA position) • Tracking of estimates, comparing estimates to actual expenditures (Bundle Project) • Performance Measures and Incentives • Developing performance measures (Fall, 2009, CTS Transition Contract) • Tracking who needs training and who has completed Cost Estimation and Cost Management

  46. CE/CM Implementation Progress • Roles and Responsibilities • Define role of Office (CTS Transition contract) • Define the role of districts responsibility (somewhat defined in policies) • Communication of CE/CM • Communication plan (updating as part of CTS Transition contract) • Part of the CE/CM training • Role of Office • Presentation at meetings (functional areas, management, TEA) • Resources Requirements • Partially in role Office • District Estimators • Earned Value Management (Resource loaded schedules) Cost Estimation and Cost Management

  47. CE/CM Implementation Progress • Technical Support • CE/CM Training (starting) • Project Management Peer Review • Integration with Scoping Initiative and other processes • Completed Scoping Process integration Fall, 2008 • Other processes include utilities, Program development • R/W Estimate • Accurately Identify Inflation Impacts • Identified process for applying inflation working with Office of Investment Management Cost Estimation and Cost Management

  48. CE/CM Implementation Progress • Identify and develop additional Tools and Databases • Project Summary Report (one-pagers) • Risk Management • Accelerated projects, working with D-B, major bridges scoping efforts • Short-term Implementation (FY 2010, 2011, 2012) • This was the actual implementation • Reduce the use of Setasides in the SRC • Identifying projects earlier in STIP • Still work to be done Cost Estimation and Cost Management

  49. CE/CM Implementation Progress • Emerging areas to be addressed • Design-Build projects • Special programs (ie Chapter 152) • Scope reviews • CE/CM during construction Cost Estimation and Cost Management

  50. Mn/DOT Scoping and Cost Estimating website www.dot.state.mn.us/cost-estimating Cost Estimation and Cost Management

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