Construction Cost Management: Estimating, Pricing & Reporting

3. Introductions •Participant introductions – Name – Experience in the construction industry – Current position, company, and project – Experience using construction cost management 1-2

4. Unit 5 Overview • Understand how the process of estimating and pricing, from concept through detailed estimating to change orders. • Understand how cost reporting can improve the overall success of a project. • Know and apply important project cost management principles. • Know and apply basic management ideas, principles, and skills that will enable you to immediately manage the crew on your construction project more effectively. • Proactively manage project costs. • Proactively manage various risks/potential delays that could impact your project. 1-3

5. Session List • Session 1: Introduction to Improving Productivity and Managing Project Costs • Session 2: Construction Estimates, Planning and Scheduling • Session 3: Who Controls Project Costs? • Session 4: Reporting and Analyzing Actual Costs • Session 5: Planning for Cost Control • Session 6: Cost Control Strategies • Session 7: Quantifying Lost Labor Productivity • Session 8: Equipment Management for Productivity Improvement • Session 9: Working with Project Partners • Session 10: Post-Project Evaluations 1-4

6. Learning Objectives • Identify how contractors obtain work and the process that leads up to the physical construction process. • Recognize the role of the contractor’s staff and the designers in the pre-construction phases of the project. • Indicate how a project is obtained and how that process relates to the construction of the project. 1-5

7. A New Project • Why is this project being built? • What is the scope of our work? • Who is the “owner”? • Is our client someone other than the owner? • Who designed the project? • How much should it cost? • Which costs do I have control over? • How long should it take to build? 1-6

8. The Construction Process 1-7

9. The Pre-Design Phase • Developing the project budget • What can the owner afford/finance? • Developing the schedule • When will the facility be needed? • Determining the program (the project’s physical parameters) • Amount of area needed/wanted. • Types of space. • Building type. • Starting point for the design. 1-8

10. The Design Phase • Schematic design • Floor plans, elevations, site plans. • Design development • Progression of design; includes structural, electrical, and mechanical, modeling of components, including clash detection. • Construction documents • Completion of details, production of drawings, and specifications. 1-9

11. The Bid • Occurs after completion of construction documents by the designer. • Could be negotiated, select bidders list, or public bid. • Every contractor has his or her own procedures for compiling the bid. 1-10

12. Examine Documents • A contractor will determine whether to bid the project based on: • Size of project • Type of work • Geographic location • Work relationships (owner, architect, engineers) • Quality of documents • Schedule • Special conditions • Prevailing wage requirements • Disadvantaged Business Enterprise utilization • Financial arrangements 1-11

13. Estimating Process • Review and understand construction documents. • Decision to bid and planning for the estimate. • Conduct a site visit. • Develop a subcontractor contact list. • Complete a quantity take-off. • Price labor, equipment, materials, subcontractors and other costs ( including general conditions). • Determine the bid price. • Submit the bid. 1-12

14. Estimating Process • SPECIFIC ISSUES FOR CONSIDERATION: • Bidding time • Surety bond requirements • Consistent with company business plans • Personnel required • Cost of bidding • Other projects being bid • Equipment • Supervision • Support staff • Finances • Adequacy of company resources 1-13

15. Estimating Process • SPECIFIC ISSUES FOR CONSIDERATION (continued): • Competition • Experience with parties to the contact • Design considerations in the contract • Conditions in the contract • Quality of documents • Labor supply • Licensing • Community Relations • Availability of suppliers and subcontractors • Time • Availability of funds • Special requirements 1-14

16. The Rest of the Process • Owner selection of a contractor • Indication of award of the contract. • Notice to proceed. • The construction phase • Actual construction of the project. • Post-construction phase • Move-in. • Maintenance and operating instructions. • Warranty period. 1-15

17. Project Delivery Methods • CM at-Risk: A construction manager is first hired and takes on the risk of building a project. The designer is later hired under a separate contract. • Design-Bid-Build: Separate contracts for constructor and designer. The building is designed before sent to bid. • Design-Build: One entity contracted to complete the design and construction. • Integrated Project Delivery: A collaborative process that harnesses the talents and insights of all participants to reduce waste and optimize the whole project through all phases of design, fabrication, and construction. 1-16

18. Construction Contract Types • Guaranteed maximum price (GMP) • A maximum price is guaranteed, both owner and contractor benefit if costs are minimized. • Lump-sum basis (LS) • Time and materials (T&M) • Actual cost plus a fee • Unit-price 1-17

19. The Project • Project plans are included • Project elements: • Site excavation and grading • Two bridges • Two gatehouses • Office building • Receiving warehouse • Foundations and slabs for three warehouses • Paving and landscaping 1-18

20. Session 1 Review • Pre-Construction Phases • Pre-design • Design • Bid/award • The Estimating Process • Project Delivery and Contract Types • The Project 1-19

21. Apply What You Have Learned Learn some of the history behind your project: • What was the intended use of the project and how did this new project start? • What involvement did your company have in the design phase, if any? • How and when was the construction estimate for the project completed? • Is there a plan for the project to be LEED certified? • Did your firm use Building Information Modeling (BIM) in the pre-construction phases for the project? Will BIM be used during construction? 1-20

22. Looking Forward to Session 2 • Learn about the estimate that was required for your firm to win the job you are currently on. • Bring an engineer’s scale and an architect’s scale to the next session. 1-21

24. Learning Objectives • Identify and prepare a conceptual estimate. • Review quantity take-offs. • Perform take-offs. • Review the pricing of an estimate and compile an estimate. • Complete a subcontractor selection process and select subcontractors for an estimate. 2-2

25. The Conceptual Estimate • Developed early in project development. • Limited accuracy. • Large contingency may be required (depending on contractor’s database). • Usually based on simple parameters. • Such as gross area multiplied by the square foot cost for similar projects. • Helps the owner make basic decisions about moving forward with the project. 2-3

26. A Simple Conceptual Estimate Figure 2.1 2-4

27. Conceptual Estimate Summary Sheet for the Project Completed Form 2.1 2-5

28. Creating the Project Budget Project spread over three years to finance: • Phase I: Site work; gatehouses; bridges; Building A for offices; slabs of Buildings B, C, and D; site asphalt paving and landscaping. • Phase II: Complete three warehouse buildings. • Phase III: Construction of new office building, remodel Building A. 2-6

29. Phase I Budget Figure 2.3 2-7

30. Phase II Budget Figure 2.3 (Continued) 2-8

31. Phase III Budget Figure 2.3 (Continued) 2-9

32. The Detailed Estimate • Identifies assembly elements. • Detailed take-off of material quantities. • The more detailed the estimate, the more accurate the estimate can be. • As the documents increase in detail, the estimate increases in detail, and the included contingency decreases. • More accurate than the conceptual estimate. • Little or no contingency is added. 2-10

33. The Detailed Estimate The Detailed Estimate Includes: • A break down of the work by categories of similar items or as required by the bid form. • Quantification of similar elements of work for each category for costing. • Determination of a construction plan. • Determination of a construction schedule. • An estimate of cost of labor, material, equipment, subcontractors and service providers for each element of each item of work. • The direct and indirect cost of the work which includes all the cost elements. • Solicitation and receipt of quotes for materials, services by others and work to be subcontracted. • A summary of all elements of costs (labor, material, equipment, subcontractors and service providers) to determine the total estimated cost of work. • Analysis of risk the project should bear. • Determination of a markup to be added to the cost of work to produce a selling or bid price. 2-11

34. Commonly Used Conversion Factors Figure 2.4 2-12

35. Relationship of Estimating, Accounting, and Productivity Figure 2.5 2-13

36. Concrete Quantity Take-Off Completed Form 2.2 2-14

37. 625 $ 42.00 $ 26,250 $ - $ - $ 26,250 03 03 04.02 Slab Gravel 3361 CY 5 672 $ 42.00 $ 28,232 $ 10.50 $ 35,291 $ 63,523 03 03 04.03 Vapor Barrier 282500 SF 1000 283 $ 42.00 $ 11,865 $ 0.02 $ 5,650 $ 17,515 03 03 04.04 Reinforcing Steel 183.7 Ton 0.05 3674 $ 50.00 $ 183,700 $ 500.00 $ 91,850 $ 275,550 03 03 04.05 Edge Form 2500 LF 20 125 $ 45.00 $ 5,625 $ 1.00 $ 2,500 $ 8,125 03 03 04.06 Screeds 5000 LF 40 125 $ 45.00 $ 5,625 $ 0.30 $ 1,500 $ 7,125 03 03 04.07 Expansion Joint 9000 LF 40 225 $ 45.00 $ 10,125 $ 0.32 $ 2,880 $ 13,005 03 03 04.08 Place Concrete 4861 CY 2 2431 $ 42.00 $ 102,081 $ 52.00 $ 252,772 $ 354,853 03 03 04.09 Finish 250,000 SF 120 2083 $ 42.00 $ 87,500 $ - $ - $ 87,500 03 03 04.10 Cure 250,000 SF 1000 250 $ 42.00 $ 10,500 $ 0.06 $ 15,000 $ 25,500 03 03 04.11 Box-Out Columns 108 SF 6.5 17 $ 45.00 $ 748 $ 2.50 $ 270 $ 1,018 Total Slab-on-Grade 10509 $ 472,251 $ 407,713 $ 879,964 Concrete Quantity Take-Off Project Concrete Recap Sheet Labor Material Man- Unit Quantity Cost code Item Unit Unit/hr hours Cost/hr Total Labor Cost Total Mat. Total Cost 03 03 03 Grade Beams 03 03 03.01 Form Beam Sides 30,000 SFCA 10 3000 $ 45.00 $ 135,000 $ 0.35 $ 10,500 $ 145,500 03 03 03.02 Reinforcing Steel 23.7 Ton 0.0375 632 $ 50.00 $ 31,600 $ 500.00 $ 11,850 $ 43,450 03 03 03.03 Place Concrete 611 CY 3 204 $ 42.00 $ 8,554 $ 52.00 $ 31,772 $ 40,326 03 03 03.04 Chamfer Strips 2500 LF 200 13 $ 45.00 $ 563 $ 0.10 $ 250 $ 813 03 03 03.05 Float Top 2500 SF 300 8 $ 42.00 $ 350 $ - $ - $ 350 03 03 03.06 Embeds 1250 Ea 3 417 $ 50.00 $ 20,833 $ 17.00 $ 21,250 $ 42,083 Total Grade Beams 4273 $ 196,900 $ 75,622 $ 272,522 03 03 04 Slab-on-Grade 03 03 04.01 Fine Grade 250000 SF 400 Pricing for Form 2.2 2-15

38. Selecting Subcontract Bids • Bid analysis is necessary to determine: • Lowest prices, including full scope. • No duplications. • No “holes.” • Responsible subcontractors. • Preferred subcontractors (those you have a long-term relationship with and have used in the past). 2-16

39. Combination Bid Analysis Figure 2.6 2-17

40. 31 64 00 Piles/Caissons Northwest Caisson $1,220,990 32 12 16 Asphalt Paving Statewide Paving $1,730,000 32 90 00 Landscaping Mulchers, LGL Sprinkler $ 42,000 $ 35,000 03 45 00 P/C Deck Panels PC Precast $ 85,000 05 10 00 Structural Steel Steel Struct, Inc. $ 175,000 05 20 00 Metal Joists Steel Struct, Inc. 05 30 00 Metal Deck Steel Struct, Inc. 06 40 00 Arch. Woodwork Chris’s Cabinets $ 7,200 07 20 00 Insulation Quick Insulation $ 35,000 07 50 00 Membrane Roofing Local Roofing $ 89,916 07 60 00 Flashing Local Roofing 08 31 00 Overhead Doors Door & Window Co. $ 18,000 08 80 00 Glazing/Windows Door & Window Co. 09 25 00 Gypsum Drywall Universal Finishes $ 7,300 09 65 00 Floor Covering Universal Finishes 09 90 00 Painting Universal Finishes 23 00 00 Mechanical Charlie’s Plumbing $ 249,000 26 00 00 Electrical Ellen’s Electrical $ 309,000 Total Subcontracts $4,003,406 Subcontractor Selection Section Description Bidder Price Completed Form 2.3 2-18

41. Session 2 Review • Conceptual estimates may be based on specific project areas (measured in SF). • Conceptual estimates are used to establish the project budget. • Contingencies allow for the uncertainties at a specific time in the project design. • More detailed estimates are prepared as the documents are completed. • A take-off of quantities is completed to provide more detail estimates. • These quantities are used to estimate labor, material, and equipment. 2-19

42. Session 2 Review (Continued) • Subcontractor selection is completed using an analysis based on the candidates’ capabilities, scope and price. • A project plan and schedule are usually prepared using either a bar chart format or a critical path method format. • An updated project plan is needed to help the supervisor avoid incorrect management decisions 2-20

43. Apply What You Have Learned • Look at the original estimate for your project. • How is it organized? • How is the information condensed for owner’s billings? • How was the data generated? • How were subcontractors selected? • Is there a correlation between subcontractor selection and subcontractor problems on the job? • Is the estimate organized into crew activities? 2-21

44. Looking Forward to Session 3 • Become familiar with the type of cost control system your firm uses. • Evaluate the cost reporting and control system on your project 2-22

46. Learning Objectives • Analyze the relationship between the estimated costs and those reported within the cost control system. • Define the relationship between cost and the degree of risk inherent to the project. • Classify major risks innate to every construction project. • Define the individual responsibilities for project team members relative to project cost control. 3-2

47. From Estimate to Construction • The Construction Estimate: • Is a carefully measured, quantified, and priced prediction of the costs, assuming: • Scope of work does not change from what is represented on the construction documents. • Project will be built during a particular time period, adhering to a specific schedule. • Site conditions will be as observed or reported. • Labor crews’ productivity can be predicted based on the assumption in the contractor’s estimate with consideration of experience from previous similar projects. 3-3

48. Cost Control • The goal of cost control is to ensure you are building to the estimated costs. • Ideally equal to or less than the estimated amount (at least in most cases). • Project fee is increased when costs are less than estimated. • The goal is to manage costs effectively. 3-4

49. Typical Mistakes in Estimates • Inaccurate calculation of quantity of material (too high or too low). • Use of non-qualified or responsive material suppliers. • Inaccurate prediction of productivity and labor cost. • Scope gaps not identified between subcontractors. • Use of non-qualified subcontractors. • Shortage of equipment or personnel. • Unanticipated time delays. • Miss-interpretation of contract clauses. 3-5

50. Responsibility for Cost Control • Estimator • Responsible for the quality of estimate. • Project manager • Responsible for the overall project and primary manager of the project costs. • Superintendent • Responsible for crew productivity and for reporting the actual amount of work performed by the crews under his or her direction. Good communication helps all project team members identify and understand project challenges. 3-6