UNIT 1 PROJECT COST SYSTEM

Structure
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
1.10
1.11
1.12

NOTES
Introduction
Unit Objectives
Project Cost System
Preliminary Cost Estimates
Final Cost Estimate
Highway Bridge
Quantity Survey
Management Input
Field Supervision
Summery
Key Terms
Questions and Exercises

1.0 INTRODUCTION
This unit introduces learners to the principles and application of
management as they relate to the technical and professional
disciplines of construction, civil engineering and building
services engineering.
1.1 UNIT OBJECTIVES
After going through this unit, you will be able to:

The fundamental of project cost system

Factors affecting on preliminary and final cost system

Discussion with reference to highway bridge project

Know about management influence on project cost system

Techniques to control the cost

1.2 PROJECT COST SYSTEM

During the design cycle of a construction project, the project

budget are continuously approximated and reviewed following
every design change to confirm that they will not exceed the
owners budget. This working financial plan is usually referred
to as the engineers or architects estimate. Depending upon
design completion, the site cost-control system is initiated by
making a final, thorough cost estimate of the entire work. The

contractor or another party who will be directly involved in the

field operations may prepares this contractors estimate. The
contractors estimate is then condensed to a working financial
plan and forms the basis of the construction cost control system.

Project cost system

NOTES
During the construction process, budget tracking methods are used to retrieve
actual construction expenses from construction operations. This data is then
used for cost control purposes on the current project and for estimating the cost
of upcoming projects. Additionally, the cost system offers considerable data
pertinent to project financial control. This chapter discusses cost-estimating
techniques and how the final project budget is achieved.

1. 3 PRELIMINARY COST ESTIMATES

Preliminary estimates of forthcoming construction expenditures, made during

the project scheduling and design phases, are essentially approximate because
they are compiled before the project is fully defined. Making such abstract
estimates is an art moderately different from determining the final detailed
estimate of construction costs.
Basically, all conceptual price estimates are depend on some system of gross
unit costs attained from previous construction work. The unit prices are
extrapolated forward in time to reflect current market situations, project
location, and the specific character of the job currently under contemplation.
Some of the techniques commonly used to arrange preliminary estimates which
includes:
Cost per Function Estimate :This analysis is based on the estimated costs per
unit of use, such as cost per patient, student or car space. Construction cost may
also be approximated as the regular outlay per unit of a plants manufacturing or
production capability. These parameters are usually used as a method of rapidly
defining facilities costs at the inception of a project when only raw marketing
data is known, such as the number of patients that a planned hospital will hold.
This broad technique of developing costs can also provide a powerful check on
more detailed estimates once they have been generated.

Index Number Estimate :This method includes estimating the price of a

proposed structure through updating the construction cost of a similar existing
facility. It is done by multiplying the original construction cost of the existing
structure by a national price1 index that has been adjusted to local conditions,
such as weather

Project cost system

NOTES
labor expense, materials costs, transportation, and site location. A
price index is the ratio of present construction cost to the original
construction outlay for the type of structure involved. Many
forms of price indexes are available in various trade publications.

Index Number Estimate

This method includes estimating the price of a proposed structure
through updating the construction cost of a similar existing
facility. It is done by multiplying the original construction cost of
the existing structure by a national price index that has been
adjusted to local conditions, such as weather, labor expense,
materials costs, transportation, and site location. A price index is
the ratio of present construction cost to the original construction
outlay for the type of structure involved. Many forms of price
indexes are available in various trade publications.

Unit Area Cost Estimate

This technique of estimating facilities costs is an estimated cost
obtained by using an estimated price for every unit of gross floor
area. The way is used frequently in structure and residential home
construction. It offers an accurate approximation of costs for
structures that are identical or have a large sampling of historical
cost data from similar structures. This kind of estimate is used
often in the industry to match the relative worth of various
facilities.
Unit Volume Cost Estimate
This approximation is based on an estimated expenditure for each
unit of the total volume bounded. This estimating method works
well in describing the costs of warehouses and industrial
facilities.
Panel Unit Cost Estimate
This study is centred on unit costs per square unit area of floors,

NOTES

each of several diverse building components or systems. The

prices of field work, foundations, exterior walls, interior walls,
structure, roof, doors, glazed openings, heating and ventilating,
plumbing, electrical, and other items are resolute separately by
unit length of perimeter walls, unit roof area. Generally this form
the use of estimated parameter costs. These unit expenditures
of estimating is used to recover the preceding estimates once
can be statistics
based on
dimensions
or isamounts
of the components
additional detailed
about
the facility
recognised.
themselves or on the collective measure of building square
footage.
Partial Take off Estimate
Parameter Cost Estimate
This analysis uses amounts of major work items taken from
This estimate
includesaccomplished
unit costs, entitled
parameter
costs,These
for
partially
design
documents.
are valued
using estimated unit prices for every work item taken off.
Throughout the design stage, this category of estimate is
considered to offer the most accurate preliminary expenses. Yet
the feasibility of this method is highly dependent on the
obtainability of completed design documents. Normally this
estimate cannot be prepared until well into the design procedure.
Therefore it is often used to improve the previously discussed
estimating approaches.

1.4 FINAL COST ESTIMATE

The final cost approximation of a project is prepared when

completed working drawings and conditions are available. This
thorough estimate of construction expenditure is based on a
complete and thorough survey of work quantities required to
complete the work. The process includes the identification,
compilation, and study of the many items of price that will enter
into the construction procedure. The estimating, which is done
before the work is actually done, requires careful and detailed
training of the design documents, composed with an intimate
facts of the prices, availability, and features of materials,
construction equipment, and labour.

It must be documented that even the final construction

estimation is of limited accurateness and that it bears little
alikeness to the advance determination of the construction costs
of mass-produced goods. By asset of standardized conditions
and close plant control, a builder can arrive at the future
expenditure of a unit of production with significant precision.
Construction approximating, by comparison, is a relatively

Project cost
system
Project cost
system

NOTES
unsophisticated process. The absence of any considerable
standardization together with a countless of unique site and
project circumstances make the advance computation of exact
construction expenses a matter more of accident than plan.
NOTES using cost
However, a skilled and experienced estimator,
accounting data gleaned from previous construction work of a
related nature, can do a reliable job of predicting construction
payments despite the project imponderables usually involved.
The character or position of a construction project occasionally
presents sole problems, but some basic values for which there is
precedent almost always apply.

When pricing a job of certain size, there will certainly be more

than one person involved in the measure take off and pricing
phases. The term estimator is used here to refer to whoever may
be intricate with the estimating process being discussed.

There are probably as many diverse estimating procedures as

there are estimators. In any procedure involving a large number
of intricate manipulations, variations naturally produced. The
form of the data produced, the consecutive order followed, the
nature of the elementary work orderings used, the manner of
applying costs all are subject to significant diversity. Individual
estimators improve and mould procedures to suitable their own
context and to suit their own inclinations. In this size, rather than
attempt any thorough discussion of approximating methods,
only the general characteristics of construction estimating are
presented.

1.5 HIGHWAY BRIDGE

To demonstrate the workings of several major features of project
management, comprising the cost system, it will be beneficial to
have a construction job large adequate to be meaningful, but not
so large that its absolute size will ambiguous the basic
objectives. The highway bridge, a section of the Example
Project, has been nominated to serve as the base for discussion
of a project approximating and cost system. Though the highway
bridge would be projected and bid as a part of the whole
Example Project, it has been remote here for demonstration
purposes.

The highway bridge to be created is a single-span vehicular

bridge that will cross a minor ravine. The bridge is of a deckgirder style and is of complex steel-concrete construction.
Figures 1.1 and 1.2 show the bridge sketch and a oblique

section. The two abutments are of

reinforced concrete, every consisting
of a breast wall and two wing walls.
Every abutment rests on a heavy
concrete footing sustained by
twenty-eight 40-foot-long H- steel
piles. The 10-inch-thick reinforced
concrete slab is sustained by seven
W363150 steel floor girders. A steel
guardrail is compulsory to extend the
length of the bridge along every side.
All unprotected structural concrete is
to be given a rubbed surface, and all
of the metal surfaces are to be
painted.
Figure 1.1 Highway bridge, profile

Figure 1.2 Highway bridge,

transverse section Bridge

NOTES
1.5 QUANTITY SURVEY

The first step in formulating the final

price estimation of the highway
bridge is the preparation of a
quantity study. This survey is simply
a thorough assembling of the nature
and quantity of every work type
necessary. Taking off quantities is
done in considerable detail, with the
bridge being separated into many
different
work
types
or
categorisations. Such a take-off is
made where unit-price bidding is
intricate, although the architectengineer
normally
provides
projected quantities of each bid item
with the bidding papers. A basic
object for constructing a quantity
survey for unit-price bidding is that
greatest bid items

cannot be rated without breaking the

work into smaller subdivisions.
Additional motive is that the
architect-engineers
quantity
estimates, as those given in column
4 of Figure 1.3, are precisely stated
to be estimates only. Making the
quantity survey also offers the
estimator with the close familiarity
of job necessities so vital to realistic
project pricing.

The estimator takes the magnitudes

and numbers of units of every work
category from the design drawings,
enters them on measure sheets, and
spreads them into totals. The brief
results of the quantity survey on the
highway bridge are revealed in
Figure 1.4. This figure does not
illustration any quantities for
painting. This is for the prime
contractor usually limits its take off
to work items it might carry out. The

Figure 3.4 Highway bridge, work

quantities

1.6 MANAGEMENT INPUT

Early in the estimating procedure,

definitely before the work is priced, a
number of significant management
decisions must be made regarding the
project and how construction
procedures are to be directed. When
the work is being priced, the
estimator must utilize every effort to
price every work type as genuinely as
possible. To do this, major
judgements must be made regarding
project organization, the major
construction approaches to be used,
the consecutive order of operations,

and what construction equipment will

be employed. These four concerns
require management thoughtfulness
and are of consuming importance to
the bidding procedure.

A new project cannot be wisely

priced until some major management
NOTE have
discussed,
job necessities
purposes
been made
regarding are reviewed, another choices are
evaluated,
and results
are made.
the Sconduct
of the work.
It is clear,
hence, that there must be specific
1.7 usual
FIELDprocess
SUPERVISION
regular and
for the
estimator to precipitous such decision
making. A real means of doing this is
to have a pre bid meeting of wellpricing
the job,
informed Before
company
personnel
whoit is continuously good practice to
the top
who will be allocated to it. The
have therecognize
authority
to supervisors
make
motive
for
this
is
not
only
to
create
specific salary necessities,
conclusions and binding promises. If
but also the
to identify
most job supervisors do well in terms of
at all possible,
group that
should
costs manager
on some shares of a project than on others.
contain theconstruction
projected project
superintendents
are acknowledged to be very good at
and the Certain
superintendent.
At this
getting
a
work
out
of
the
meeting, particulars of the job are ground but do not make as well during
later stages of the construction. A specified supervisor may be
experienced with one kind of equipment but not with another.
The valuing of a project must take into account the special
aptitudes of key field personnel.
The equivalent of field supervisory talents with the difficulties
of a particular project is one of the most significant
management actions. The best management structure in the
world cannot overwhelmed the handicap of poor supervision.
The significance of an experienced, skilled, and enthusiastic
field supervisory team cannot be exaggerated.
NOTES
1.8 SUMMERY

Project cost system depends upon

Factors for Cost Estimating

UNIT 2 FACTORS FOR COST ESTIMATING

Structure

NOTES

2.1
2.2
2.3
2.4
2.5
2.6
2.7
2.8
2.9
2.10
2.11
2.12
2.13
2.14

Introduction
Unit Objectives
General Time Schedule
Construction Equipment
Summary Sheets
Material Costs
Labor Costs
Indirect Labour Costs
Labour Unit Costs
Equipment Cost Estimating
Equipment Expense
Summery
Key Terms
Questions and Exercises

2.0 INTRODUCTION

Cost estimation of construction projects is a very complex

process containing many variable factors. Occasionally is there a
job operation that can be achieved in only one manner. Rather,
the choice of method is completed after estimating the time and
cost appearances of the feasible substitutions. This is not to say
that a thorough cost study must be accepted before making
judgements concerning other ways of doing every construction
process. Often, convention, together with knowledge and
equipment accessibility, suggests most of these choices to the
estimator. Though, there are times when these operational
selections are sufficiently important to justify conducting a
detailed relative study.

Many examples of another construction approaches can be cited,

such as processes to be followed in sustaining an adjacent
structure, how best to brace an excavation, what technique of
scaffolding to usage, and how to dewater the location. All of
these include judgments of main import to the deportment of the
work. The correct evaluation of substitutions can require
significant time and widespread engineering studies. It is
obvious, though, that the principal construction techniques to be
used must be recognized before the job can be intelligently
valued.

NOTES
2.1 UNIT OBJECTIVES

The objectives is to avoid project cost overrun and also

avoid excessive cost underrun.
Cost overrun leads to shortage of funding to deliver the
project while cost underrun leaves unused funds that
could have been used to deliver other important projects.
To understand the important of identify costly unforeseen
items of work before the project has been programmed to
avoid delays and/or cancelation of the project.
Project cost awareness and control must be practiced
throughout the planning and design of projects. This
begins by establishing realistic assumptions as to final
concept, scope and cost as early in the life of the project
as possible.

2.2 GENERAL TIME SCHEDULE

When a new project is being projected, it is essential to plan a

general plan and working time schedule. Estimators typically do
this during the take off stage, though often in a casual and almost
unconscious way. Small jobs may need little search in this
regard, but bigger projects deserve more than a superficial time
study. Time is of prime position on all projects, in part because
most contracts levy a required project accomplishment date on
the contractor.

An estimated construction schedule is also significant for project

pricing determinations. Many of the job overhead expenditures
are directly correlated to the period of the construction period.
When a schedule of work operations is organised, the time
periods required for every of the major job parts can be
recognised, as well as the types of weather to be estimated. This
schedule provides invaluable data to the estimator regarding
equipment and labor productivity, cold weather operations,
essential of many shifts or overtime, and other such matters.

Devising an overall job plan and time schedule may start with a
study of project necessities. This training will enable an estimate
to be made of the times necessary to achieve each of the major
job sections. Next, the order in which these sections must
proceed is recognised. The result is a bar chart series of bars
plotted in contradiction of a horizontal time scale showing the
accomplishment date of the overall project and the estimated

Factors for Cost

Estimating