Estimating

Ahmed Elyamany, PhD, AVS

Estimate Definitions

An estimate is a quantitative assessment of a likely

outcome.

It should always include some indication of accuracy (e.g.,

+ or - x percent).

Estimate development phases

Project initiation phase:

Feasibility phase:

Preliminary design estimate

Detailed design estimate

Construction procurement phase:

Concept estimate

Preliminary and detailed design phase :

Option analysis estimate

Procurement strategy phase:

Project initiation estimate

Budget cost estimate

Construction phase:

Budget cost updates

Project Initiation Estimate

Project initiation estimate is produced during the

Project initiation phase, normally as part of a Project
initiation report.
This estimate provides budgets for forward
programming.
Major risks must be identified and their impact on the
out-turn cost shall be assessed and included in the
estimate.

Option Analysis estimate

Option analysis estimate is prepared during the

concept phase and compare project options.
Such estimate is based on a preliminary brief, limited
general and site information, and the scope of work.
All possible risks must be identified and included in the
estimate.

Preliminary Design Estimate

Preliminary design estimate is prepared based on an

advanced design.
It provides a check on the position between the approved
scope/budget and the Project estimate
Occurs immediately prior to the detailed design
stage.

Detailed Design Estimate

Detailed design estimate includes all components of a

project prepared prior to seeking construction funding
and the tendering of the physical works.
It is based on detailed design documentation, which
includes final design drawings, specifications, the
schedule of prices, and all consent conditions.

Budget Cost Estimate

Budget cost estimate is prepared during the tender

evaluation period and updated (at least) quarterly
during the construction phase until project completion.
It is based on the tendered price of selected tender and
is used to confirm that construction funding allocations
are sufficient.
It should include change orders provided during the
construction stage.

Estimating Methods

Global estimate
Unit Rate estimate
First Principle estimate
Expert opinion
Trend analysis

Global Estimate / Unit method

Global estimating is an approximate method of estimating that

involves using global composite rates.

With this method, the Project consists of one or a few

estimating elements on which the estimate is prepared.

Examples include:

Bridge costs per square meter of deck area;

Road costs per kilometer.

Used when little is known about the Project.

This estimate requires using historical data.
Analyze the unit costs of a number of completed projects of
the same type

Global Estimate / Unit method

Level 1

Level 2

It is an estimate prepared from the description of the project

scope where there is little or no design.
Accuracy falls between +40 and 10 %.
It is an estimate prepared upon completion of preliminary
design.
Accuracy falls between +25 and 5 %.

Level 3

It is an estimate prepared upon completion of the final

design.
Accuracy falls between +10 and 3 %.

Global Estimate / Unit method

Generally prepared by:

The owner as part of economic feasibility analysis or by

The designer for selecting the design alternatives
The contractor for negotiated work between owner and a
contractor.

Requires cost information from previous projects of

similar type and size is essential.
From the cost records of previous projects, the estimator
can develop unit costs to forecast the cost of future
projects.

Global Estimate / Unit method

The Unit Cost is developed from weighting of the data

that emphasizes the average value, yet it accounts for the
extreme maximum and minimum values.
The following equation is used for weighting cost data
from previous projects:
UC = (A + 4B + C)/6
where

UC = forecast unit cost

A = minimum unit cost of previous projects
B = average unit cost of previous projects
C = maximum unit cost of previous projects

Global Estimate / Unit method

Adjustment of Unit Cost

The cost information of previously completed projects must be

adjusted for the following before applying the cost for the
proposed project

Time,
Location,
Size

Global Estimate / Unit method

Example I

Cost data from eight previously constructed parking garage

projects is shown below.
Project

Total Cost

No. of car spaces

1
2
3
4
5
6
7
8

$466,560
290,304
525,096
349,920
259,290
657,206
291,718
711,414

150
80
120
90
60
220
70
180

Use the weighted unit cost to determine the conceptual cost

estimate for a proposed parking garage that is to contain 135
parking spaces.

Global Estimate / Unit method

Solution I

From the data provided in the previous Table, the unit

cost per parking space is calculated for each project by
dividing the total cost by the respective number of spaces
and the result is shown in Table below:
Project

Total Cost

No. of car spaces

Unit cost per car space

1
2
3
4
5
6
7
8

$466,560
290,304
525,096
349,920
259,290
657,206
291,718
711,414

150
80
120
90
60
220
70
180

3,110.40
3,628.80
4,375.80
3,888.00
4,321.50
2,987.30
4,167.40
3,952.30

Total

$30,431.50

Global Estimate / Unit method

Solution I

The average cost per car space =30,431.50 8 = $3,803.94

The Min cost per car space = 2,987.30
The Max cost per car space = 4,375.80
Using UC = (A + 4B + C)/6
The forecast unit cost (UC) will be
= (2,987.30 + 4(3,803.94) + 4,375.80) /6 = $3,763.14
The conceptual cost estimate for 135 car parking spaces
= 135 x 3,763.14 = $508,023.00

Unit Rate Estimate

Unit rate estimates are based on the historical bid

price
Aided by sound engineering judgment, which can be used
for estimating the cost of each element of the project
by multiplying the quantity of work with historical
unit rates.
Total project cost will be determined by the sum of all
elemental costs.

Cost-Based Estimating

A cost-based approach, aided by sound engineering

judgment, is the most ultimate of the estimate techniques
and uses information down to the lowest level of detail
available.
Utilized by Contractors to price projects.
Accuracy of the estimate depends on the accuracy of
available information.

Expert Opinion / Spot Estimate

Data is collected from the specialist

This technique may be used for activities for which there
is no other sound basis and is most appropriate in the
early stages of a project .
These cost estimates should include:

A list of the experts consulted,

Their relevant experience,
The basis of their opinion.

Trend Analysis

This estimating technique is used for in-progress, current

work.
A trend is first established by comparing originally
planned costs against actual costs for work performed
to date.
Derived cost indices are then used to adjust the
estimate of work not yet completed.
This technique can be used to update cost estimates
developed using other techniques.

Cost-Based-Unit-Rate Estimate

Uses historical bid price down to the lowest level of

detail available

22

Project Study

Drawings

Specifications

Contract conditions

Meeting with the owner and architect

Site visit

23

Quantity Takeoff

Once the estimating tasks are identified, categorized, and

organized, the team begins the quantity takeoff, which is
the foundation to the estimate.

The purpose of a quantity takeoff is to determine

accurately the quantity of construction work.

24

Quantity Takeoff

The quantities calculated must be adjusted for waste.

Material

Typical Adjustment

Reason for waste

Steel reinforcement

10%

Dimension and corner

Concrete

7%

Spillage and shrinkage

Bricks

2%

Breakage and trim

Tiles

5%

Cut to fit

Flooring

5%

Cut to fit

Windows

0%

Structural steel

0%

25

Quantity Takeoff

The volume of soil removed is greater than the quantity

measured in the ground; (Swell)

The volume of soil delivered and compacted sometimes is less

than what was brought to the site; (Shrinkage)

The amount of swell and shrinkage that occurs is a factor of

the type of soil material.

Soil type

Bank (natural
state)

Loose
(as transported
in trucks)

Compacted
(after placed and
compacted)

Clay

1.00

1.27

0.90

Earth

1.00

1.25

0.90

Sand

1.00

1.12

0.95

26

Site Visit

General description.
Soil.
Topography.
Transportations.
Utilities.
Labors.
Safety arrangements.
Temporary buildings.
Neighbors.

27

Cost of Labor

People are the most important resource on a project.

The cost to hire a labor includes the straighttime wage
plus any overtime pay, workers insurance, social security
tax, liability, and health insurance.

Straight time wage normally applies to work done during

the 40hr work week, 8 hrs/day and 5 days/week.

For work in excess of 8 hr/day or 40 hr/week, the

straighttime wage rate is generally increased to 1.5 to
2 times the straighttime rate.

Cost of Equipment

All projects involve use of construction equipment to

some extent.
Construction equipment can be purchased or rented.

Purchased when used extensively

Rented when used sparingly.

When equipment is purchased, it is necessary to

determine:

(a) ownership cost

(b) operating cost

Ownership cost
Investment on money
1. Investment on money

The money to purchase the equipment will be borrowed
from a lender, or it will be taken from the reserve funds
of the purchaser.

So, either the lender will charge an interest for the
borrowed money, or the buyer will lose any interest
income on the money taken out of his reserve funds.

Therefore, the interest expense or the loss of the interest
income, is part of the ownership cost.

Ownership cost
Investment on money

Capital Recovery Equation is as follows:

where

P = purchase price
A = equivalent annual value
I = annual interest rate
n = useful life, yrs

Ownership cost
Investment on money

Sinking Fund equation is as follows:

where

A = equivalent annual value

F = future salvage value
i = annual interest rate
n = useful life, yrs

Ownership cost
Investment on money

Interest rate for the borrowed money,

Additional interest rate to cover the risk
Additional interest rate for taxes, insurance and
storage.
The sum of all the three interest rates is called the
Minimum Attractive Rate of Return (MARR).

Ownership cost
Investment on money.Example

The purchase price of equipment is $145,000.

The estimated salvage value is $25,000 after the end of its
expected useful life of 6 years.
Assume interest for

Borrowing money as 9 %
Risk as 5 %,
Taxes, insurance and storage as 3 %.

Determine the annual ownership cost.

Ownership cost
Investment on money..Solution

Minimum attractive rate of return = 9+5+3 = 17 percent

or i = 0.17
Useful life n = 6 yrs
Initial investment (P) = $145,000

A = $40,397
Salvage value at the end of useful life = $25,000
A = $25,000 x 0.1086 = $2715
Net annual ownership cost = $40,397$2,715 = $37,684.

Ownership cost
2. Depreciation of the equipment

The depreciation of equipment is normally assumed to be
linear over its useful life.

In other words, annual depreciation is calculated by
dividing the purchase price by the useful life of the
equipment =(P F)/n

Ownership cost

3. Taxes
4. Insurance
5. Storage when not used.
For above items, an equivalent interest rate is added to
the interest rate on the borrowed money.

Operating Cost
Cost of fuel

Construction equipment require fuel for operating

The fuel may be gasoline or diesel.
The equipment is seldom used for 60 minutes in an hour.
Most machines normally operate for 45 minutes in an hour.
Moreover, the machine is not operated at its full capacity all
the time.
It may work at its full power only during heavy load conditions.
At normal temperature and pressure;

Gasoline engine will consume approximately 0.06 gallons of fuel

for each actual horse power developed.
Diesel engine will consume approximately 0.04 gallons of fuel for
each horsepower developed.

Operating Cost
Cost of fuel..Example

A shovel is used in a digging operation.

Its rated horsepower is 160.
During an operating cycle of 20 seconds, the engine is
operated at full power while filling the bucket in tough
ground, requiring 5 seconds.
During the balance of the cycle, the engine is operated at
50 percent of its rated power and the shovel is operated
only for 45 minutes in an hour.
Calculate the diesel required per hour.

Operating Cost
Cost of fuel.. Solution

Engine factor:
Filling the bucket: (5/20) x 100% = 0.250
Rest of cycle: (15/20) x 50% = 0.375
Engine factor = 0.625

Time factor = 45/60 = 0.750

Operating factor = 0.625 x 0.750 = 0.470

Fuel required = 0.47 x 160 x 0.04 = 3.0 gallons/hour

Operating Cost
Cost of lubricating oil

The quantity of lubricating oil required by an engine will vary

with the size of the engine, the capacity of the crankcase, the
conditions of the pistons, and the number of hours between
oil changes.
The quantity of oil consumed can be estimated by means of
the following equation:
Q = {(hp x 0.6 x 0.006)/7.4} + c/t
where

Q = quantity of oil required, gal/hr

hp = rated horsepower of the engine
c = capacity of crankcase, gal
t = hrs between oil changes,
0.6 = operating factor

Operating Cost
Cost of lubricating oil .. Example

A shovel fitted with a 100hp motor is used in a digging

operation.
The capacity of crankcase is 4 gal and oil has to be
changed every 100 hours of operation.
Assuming an operating factor of 0.6, calculate the
lubricating oil required for the engine.

Operating Cost
Cost of lubricating oil .. Solution

Substituting numbers in
Q = {(hp x 0.6 x 0.006)/7.4} + c/t

Q = {(100 x 0.6 x 0.006)/7.4} + 4/100 = 0.526 gal/hr

Operating Cost
Cost of maintenance and repairs

The annual cost of maintenance and repairs is often

expressed as a percentage of the purchase price or as a
percentage of the straightline depreciation costs (P
F)/n

HANDLING & TRANSPORTING MATERIAL

Construction materials have to be transported from the

storage yard of the material supplier to the job site and
from the stockpiles on the jobsite to the location where
the material will be permanently installed.
This involves a cost that must be included in the estimate
for the project.
The time required by a truck for transport of materials
is divided into the following four elements:
1. Load.
2. Haul, loaded.
3. Unload.
4. Return, empty.

Cycle Time for Transporting Material

Time for Haul-loaded and Return-empty can be

determined from the speed of the vehicle and the
distance traveled.
Speed depends upon the vehicle, traffic congestion,
condition of the road, and other factors.
For determining time for Load and Unload production
rate must be known.
Production rate is defined as the number of units of work
produced by a unit of equipment or a person in a
specified unit of time.

Cycle Time for Transporting Material

The unit of time is usually I hr.

The production rate will be a maximum if the work is
performed at the same rate during the 60 min of the
hour.
But this is seldom possible due to interruptions and
delays.
A machine or worker may work only for 45 min in 1hr
The actual production rate (efficiency factor) is 45/60
or 0.75 of the maximum production rate.

Cycle Time for Transporting Material

Example 1

175 tons of sand with a density of 1.75 ton/m3 must be

transported 7 km using a 10m3 dump truck.
Two laborers and a driver each will load the truck at a
rate of 1.5 m3/hr.
The haul speed is 30 km/h and return speed is 40 km/h.
It takes 3 min to unload the truck.
The cost of the truck is $25/hr, the driver is $18/hr, and
the laborer is $15/hr.
Determine the total time, total cost, and the cost/unit of
transporting the sand if the actual working time is 45 min
in one hr.

Cycle Time for Transporting Material

Solution

1. Quantity of work:

2. Cycle time:

Volume of sand =175/1.75 = 100 m3

Load = 10/(3 x 1.5) = 2.222 hr.
Haul = 7/30 = 0.233 hr.
Dump = 3/60 = 0.050 hr.
Return = 7/40 = 0.175 hr.
Total cycle time = 2.68 hr.

3. Production rate:

Number of trips/hr. = 1/2.68 = 0.373

Quantity hauled/trip = 10 m3 x 0.373 = 3.73 m3/hr
Production rate = 3.73cy x 45/60 = 2.80 m3/hr

Cycle Time for Transporting Material

Solution

4. Time:

5. Cost:

Using I truck and 2 laborers, time taken to transport 175 m3 of

sand = 100/2.8 = 35.7 hrs.
Truck = 35.7 hrs x 1 x $25 = $892.50
Driver = 35.7 hrs x 1 $18 = $642.6
Laborers = 35.7 hrs x 2 x $15 = $1,071
Total cost $2,606.1

6. Unit cost:

Cost/ton = $ 2606.1 /175=$26

Cycle Time for Transporting Material

Solution

The load time (2.22 hr) is significantly greater than the

travel and dump time (0.46 hr) which indicates an
imbalance between loading and hauling.
The load time can be reduced by using a tractor loader
instead of labor.

Cycle Time for Transporting Material

Example 2

To load the truck with sand, a small tractor loader is

rented at a cost of $50/hr.
The production rate of the loader is 75cy/hr.
The cost of transporting the loader to the site is $400.
The loader operator cost is $21/hr.
Determine the total time, cost, and cost/m3 for
transporting the 175 tons of sand.

Cycle Time for Transporting Material

Solution

1. Quantity of work:

2. Cycle time:

Volume of sand = 175/1.75= 100 m3

Load = 10/75 = 0.133 hr.
Haul = 7/30 = 0.233 hr.
Dump = 3/60 = 0.050 hr.
Return = 7/40 = 0.175 hr.
Total cycle time = 0.591hr.

3. Production rate:

Number of trips/hr = 1/0.591 = 1.692

Quantity hauled/trip = 10 m3x 1.691 = 16.92 m3/hr.
Production rate = 16.92 x 45/60 = 12.69 m3/hr.

Cycle Time for Transporting Material

Solution

4. Time:

5. Cost:

Using I truck and I loader,

Time taken to transport 100 m3 of sand = 100/12.69 = 7.88 hrs
Truck = 7.88 hrs x 1 x $25 = $197
Driver = 7.88 hrs x 1 $18 = 141.84
Loader = 7.88 hrs x 1 x $50 = 394
Operator 7.88 hrs x 1 x $21 = 165.48
Total = $898.32
Transporting loader = 400.00
Total cost = $1,298.32

6. Unit cost:

Cost/m3 = $1,298.32/100 = $12.98

Cost/ton = $1,298.32/175= $7.42

Cycle Time for Transporting Material

Example 3

Using the data in Example 2, determine the economical

number of trucks such that the load time and transport
time balance.
Also determine the cost/unit for transporting the
material.

Cycle Time for Transporting Material

Solution 3

The number of trucks required to balance the loader can

be calculated by dividing the total cycle time by the load
time.
No. of trucks required = total cycle time/load time
No. of trucks required = 0.591/0.133 =4.44

Cycle Time for Transporting Material

Solution 3 - Alternative 1

Using 4 trucks, there are fewer trucks than needed and hence the
production rate is governed by the truck production rate.
Quantity hauled by one truck = 16.92 m3/hr
Quantity hauled by 4 trucks = 4 x 16.92 = 67.68 m3/hr
Time to transport 100 m3 of sand = 100/67.68 = 1.48 hrs
Cost:

Loader = 1.48 hrs x$ 50 = $74.00

Loader operator = 1.48 hrs x $21 = 30.08
Trucks = 1.48 hrs x 4 x $25 = 148.00
Truck drivers = 1.48 hrs x 4 x $18 = 106.56
Total labor and equipment = 358.64
Transporting loader = 400.00
Total cost = $758.64

Cost/m3 = $758.64/100 = $7.59

Cycle Time for Transporting Material

Solution 3 - Alternative 2

Using 5 trucks there are more trucks than needed and hence the
production rate is governed by that of the loader.
Production rate of loader = 75 m3/hr
Time required to transport 100 m3 of sand = 100/75 = 1.33 hrs
Cost:

Loader = 1.33 hrs x $50 = $66.5

Loader operator = 1.33 hrs x$ 21 = 27.93
Trucks = 1.33 hrs x 5 x $25 = 166.25
Truck drivers = 1.33 hrs x 5 x $18 = 119.7
Total labor and equipment= 380.38
Transporting loader = 400.00
Total cost = $780.38

Cost/m3 = 780.38/100 = $7.80

Comparing the two alternatives, alternative 1(4 trucks), is better
because it cost less for transport by $0.21/m3.

Thanks