Const. Cost Estimating and Analysis (Revised) PDF

SEMINAR ON CONSTRUCTION COST
ESTIMATING AND ANALYSIS

NATIONAL ENGINEERING CENTER
PUBLIC SEMINAR SERIES
EDGARDO P. KASILAG II / JESUS N. MATIAS

Intro/Leveling of Expectations
2
 Invocation
 Schedules & Topics
 Participant Profiles
 Expectations from Lecturers
 Expectations from Participants
 Limitations
3 OVERVIEW
4
INTRODUCTION TO PROJECT
MANAGEMENT
INTRODUCTION
A project is a temporary endeavour undertaken to
create a unique product, service or result.
The product, service or result is envisioned to satisfy

the requirements of all stakeholders.
INTRODUCTION
We must continuously build consensus with all
stakeholders through constant communication, so
that we have a balanced set of needs, objectives
and requirements.
This balanced set of needs, objectives and

requirements will identify our project’s product,
service or result.
INTRODUCTION
The project meanwhile, consists of the work activities
that will create the product, service or result.
SCOPE
SCOPE
The work, and

only the work
required to
create the
product, service
or result
COST
COST
How much is needed

to do the work and
create the product,
service or result
TIME
TIME
How long it will take

to do the work
required to create
the product, service
or result
TRIPLE CONSTRAINT
A project scope can be
completed for a
reasonable cost and
reasonable time.
A change in the scope

will result in a change
in cost and/or in time.
SCOPE, COST, TIME, QUALITY
A project scope
accomplished for the
right cost and in
reasonable time, will
create a product,
service or result that
will satisfy the
requirements of
stakeholders -
QUALITY
SCOPE
BALANCE POINT
TIME COST
QUALITY – “SHAPE OF THE BOX”
All projects that create a product, service or result are

bound by the triple constraint of SCOPE, COST,
TIME. These are the PROJECT BASELINES.
SCOPE includes all the work needed to create the

product, service or result with ZERO DEFECTS,
ZERO WASTE and PERFECT SAFETY.
All projects will have a BALANCE point.
The balance point defines the shape of the box, which

defines the acceptable level of quality for a
balance point of scope, cost and time.
FRAMEWORK
• Common Good
PURPOSE • Personal Goals
• Identify
STAKEHOLDERS • Build Consensus
FRAMEWORK
• Collect
REQUIREMENTS • Balance
• Product Scope
PRODUCT,
SERVICE or
RESULT
• Quality
FRAMEWORK
•Scope Baseline
•Cost Baseline
PROJECT •Time Baseline
CHANGE CONTROL
Any change
request has to
undergo an
approval
process.
Construction in the PHILIPPINES
20
 CE Law - RA 544 (approved 1956)/ RA 1582

 Construction Industry Regulation
Department of Trade & Industry
Construction Industry
Authority of the
Philippines
Philippine Contractors Philippine Overseas Philippine Domestic Construction Industry

Accreditation Board Construction Board Construction Board Arbitration
(PCAB) (POCB) (PDCB) Commission (CIAC)
 Licensing  Registration  Policy Formulation  Voluntary Arbitration

 Revocation/  Incentives  Monitoring & Evaluation of Construction
Suspension/  Market Promotions  Adjudication of Claims Disputes
Imposition of Penalties and Disputes in  Policy Formulation for
Implementation of Govt Construction
Contracts Arbitration
THE PROJECT DEVT. PROCESS
21
Owner Feasibility Project

(Feasibility Study)
Approves Study Initiation
Define Prepare Approve Construction

(Detailed Design)
Reqmnts Design Design Documents
Select Invite Bid

(Pre-Construction) Bid Period
Contractor Bidders Packages
(Construction) Authorize Turnover & Owner

(Turnover/Comm)
Construction
Construction Closeout Accepts
CONSTRUCTION COMPONENTS
22
 Engineering
 has to do with application
of methods to materials in
order to “assemble parts
of the whole” BOTH ARE
NECESSARY
 Management TO COMPLETE
 has to do with ensuring
A PROJECT !
that all the resources
required to effect the
“assembly” are available
and in order
3D CONCEPT IN PROJ. MGT.
23
DECISION
PROJECT COST & DECISION TO
MANAGER FINANCE BUILD
PURPOSE/SIZE/
ASSISTANCE
COST/LOCATION
CONSTN. TIME
MANAGER CONTROL
VIABILITY
DELIVERY DESIGN
FULL-TIME SYSTEM CONCEPT
MEN/MATERIALS/ SPACE/FUNCTION/ST
CONSTN. QUALITY EQUIPMENT ABILITY/ENVI/
SUPERV. CONTROL AESTHETICS
DIMENSIONS OF PROJECT GOALS
24
Cost
Target
Quality Time
25 THE PLANNING & CONTROL FUNCTIONS
INTRO TO PLANNING & CONTROL
26
 Planning – determining what has to be done

– responds to the project’s who,
what, when, where, how & how much
 Control – making sure it gets done right
Corrective
measures
taken
Plan is Progress is
prepared/ compared to
updated original plan
Plan is executed
5M’s OF CONSTRUCTION
27
Machine
Materials
Man Project
Methods
Mother
Nature
TOOLS FOR PLANNING/CONTROL
28
 Work Breakdown Structures (WBS)

 Quantity Surveys
 Responsibility Matrix
 Networks/Network Analysis
 PERT/CPM
 Gantt Charts
 Events & Milestones
 Project Cost Estimation
29 PRINCIPLES OF ESTIMATING
THE ESTIMATE
30
 Various Definitions
 A production of job costs
 A prediction of probable cost of construction
 Other key words = approximation, valuation,

educated guess and ballpark figure
 term depends on the objective and/or use
THE ESTIMATE
31
 Function
 The estimate is used to predict costs in order to
determine the budget, bid, or contract price
 The estimate is primary basis for:
 Control of costs
 Measurement of productivity
 Prediction of profit and loss
Procedures for estimating and the persons who do the estimating

may vary from company to company.
BASIC ASSUMPTIONS
32
 That there is basis from which the estimate may be

made (detailed design, product specifications, etc.)
 That resources (possibly in various forms) may be

identified and secured in order to execute the
work
 That there is some clarity in the project objectives,

even if the final details are not
METHODS USED IN ESTIMATING
33
 DIRECT ESTIMATING
 a straightforward assessment made by an estimator
or performer who is familiar with the work being
estimated
 observation & study of the task to be performed and

estimation in terms of labor-hours, materials, eqpt.,
etc.
 skill that comes from experience in estimating and

from actual work performance
34
 ESTIMATION BY ANALOGY
 like direct estimation since considerable judgment is
required, but includes comparison with a similar task/s
(past or present)
 estimator collects resource info on a similar or

analogous task and uses this for the new estimate
35
 STATISTICAL & PARAMETRIC ESTIMATING

 involves collecting and organizing historical info
through mathematical techniques, relating the info to
the tasks being estimated
 most common method is estimating relationship

relates physical characteristics of the work output vs.
the cost or labor hours required for production
36
 STATISTICAL & PARAMETRIC ESTIMATING
Relationships involving costs are known as COST

ESTIMATING RELATIONSHIPS (CER’s) and the widely
used estimating relationship is LINEAR
37
 FIRM QUOTES
 one of the best methods of estimating required
resources for the work
 involves the development of a Firm Quotation by

vendors and/or suppliers
 advantage of choice (usually three sources)

 important to develop a good RFQ
38
 HANDBOOK ESTIMATING
 some catalogues provide “inserts” of price lists
 printed reference materials serve as guide for
determining CER’s
 use of online databases has become common,
providing access to thousands of items
 use handbooks and catalogues judiciously

RELIABILITY OF INFORMATION
39
The reliability of any estimate depends on the

information available at the stage when the
estimate is prepared.
Three (3) categories of information necessary

 Project Requirements
 Resources
 Prices
40
 PROJECT REQUIREMENTS
 identification of project scope of work

 understanding limitation of information vis-à-vis
rough or detailed estimates
 working with rough estimates in the absence of
detailed drawings
 the better the info, the better the estimate

41
 INFORMATION ABOUT RESOURCES

 will be based on scope of work and the Contractor’s
plan for the construction
 may be limited by assumed or actual capability to

undertake certain procedures
42
 INFORMATION ABOUT PRICES

 knowledge of prevailing prices of various materials
and other resources
 previous project prices can be used
 price information may be limited to the date (e.g.

cost per sq.m.) when the previous projects were
implemented
FACTORS FOR GOOD ESTIMATES
43
 AWARENESS OF COST STRUCTURE &

PRODUCTIVITY INFORMATION
 Cost Objects vs. Work Objects
 Productivity and Estimating

44
 APPRECIATION OF CONTRACT DOCS.

 legal responsibilities which impact costs
 construction methods
 material/equipment requirements
 project risks based on rules and liabilities coverage
demanded by the project
45
 COMPLETENESS OF THE FOLLOWING:

 Design drawings
 Technical specifications
 Contract documents
 DEFINED & SYSTEMATIC APPROACH TO

QUANTITY TAKE-OFF
46
 AWARENESS OF SITE CONDITIONS

 recognition of costs not stated in the docs.
 assessment of disadvantage/deficiencies of site
facilities and layout
 check availability of resources
CAUSES OF POOR ESTIMATES
47
 INEXPERIENCED GUESSERS
 problem of assigning amateur estimators who:
 tend to be optimistic about the work

 tend to leave things out in their estimates
 follow no consistent methodology
 are unfamiliar with site location and conditions
48
 POOR TECHNICAL ASSUMPTIONS

 advantages/disadvantages of assuming the best and
the worst conditions to establish contingency
(“unknowns” that are bound to arise during execution
 UNDERSTANDING OF FIRM CAPABILITY TO

UNDERTAKE THE ESTIMATION WORK
 what resources (skills, manpower, time, etc.) are
available?
49
 CHANGES TO THE PROJECT

 changes inevitable affect the cost and/or the
schedule, and may cause overruns
 “at no cost” is not really accurate – the important
point is minimize the negative impact of project
changes
50
 INADEQUATE DATA BASE

 not preparing and/or using records of past projects
as reference for project estimating/cost analysis; for
data such as
 actual man-hours vs. estimated man-hours
 actual eqpt-hours vs. estimated eqpt-hours
 actual duration vs. estimated project duration
51 ESTIMATING & THE PROJECT DEVT CYCLE
ESTIMATING & PROJECT DEVT.
Stage Stage 1 Stage 2 Stage 3 Stage 4 GOAL
Prelim Estimate Detailed Est. Contract Sums Operational Est.
BRIEFING STAGE/ BIDDING OR CONTRACT VALUES ACTUAL COST ACCURATE

Used in: FEASIBILITY STUDY TENDERING FOR CLIENT DURING EXECUTION ESTIMATE FOR
APPROVAL FEEDBACK &
ANALYSIS
Previous project Accurate quantities Contract values Actual site and
Source records & ratio based on working based on bid operational
estimates drawings/ documents negotiation and type information
of contract
Typ. Range 25% to 15% 15% to 10% 10% to 5% 5% 5% to 3%
of Accuracy
Action by Client and Top Engineering Division/ Client/ Contractor’s Contractor Client & Top
Management Designer Management Management
52
COST ESTIMATION, QUANTITY SURVEY &
53
THE WORK BREAKDOWN STRUCTURE
WORK BREAKDOWN STRUCTURE
54
 A systematic and formal approach to defining the work

elements/work packages/work items
 A big list stating the jobs, activities or tasks needed to
accomplish the work
 The preparation of the WBS is about work determination or
work definition
 finding out what needs to be done
 Primary Reference or basis of the WBS
 Engineering Plans & Technical Specifications
 Format….
QUANTITY SURVEY
55
 Determination of the amount of work to be done through the

interpretation of the engineering drawings and technical
specifications
 Calculation of material quantities involved in work

performance as set out in 2-D drawings
 Parallel Term = Quantity Take-off
 Together with the WBS, serve as basis for the determination

of the project’s cost items
QUANTITY SURVEY
56
 Systematic Approach to Quantity Surveying

 learning curve principle
 the more times an individual performs a procedure in
the same manner, the more efficient the person becomes
and the more accurate the result
 PRACTICE MAKES PERFECT (OR ALMOST)

QUANTITY SURVEY
57

 organization of QS documents
 Work Division Order
 Degree of Clarity
 use of checklists
 use of standard forms

QUANTITY SURVEY
58

 observation of proper calculating procedures
 identification of super-item quantities
 familiarization with different measuring systems
 rounding-off and significant numbers
 formulas for volumes & areas of common shapes
 use of conversion tables and formulas
 use of add-deduct principle
 tracking additions between sheets –
footing/subtotals
 choosing optimum units of various measures
59 WORKSHOP
60 STANDARDS FOR COST ESTIMATION
TYPES OF REFERENCES
61
 as to reference materials
 Construction Specifications Institute
 Dept. of Public Works & Highways
 Design-Consultant provided references
 as to estimation form
 industry standard
 office (or company standard)
DOCUMENTS FOR ESTIMATION
62
 Bidding (or Contract) Conditions

 indicate expectations from bidder/contractor in the assessment
& inclusion of cost-related items
 Drawings
 graphical (2-D) representations of the application of
engineering designs to Client requirements
 Technical Specifications
 Instructions for the material requirements, including handling,
inspection; construction and workmanship and even basis for
payment
 VERY IMPORTANT FOR ESTIMATION!
TECHNICAL SPECIFICATIONS
63
 Design and Construction until 1963

 no organized specifications, hence designers suited
documents according to his methods
 resulted in confusion and tended to raise construction
costs due to:
 repetitive writing/interpretation of the specs.
 confusion & misunderstanding
 contractors had to put in higher contingencies
TECHNICAL SPECIFICATIONS
64
 1963 : The CSI Format for Construction

Specifications (The Format)
 organized by US & Canadian contractors
 this Uniform System has the following:
 Specifications Outline
 Filing System
 Cost Accounting Guide
 Index of Key Words
 DPWH Technical Specifications – the other type of
locally-used specifications
CSI FORMAT
65
 16 General Headings
 FIXED major titles
 NOT changed from project-to-project
 4 major categories
 materials – to describe physical characteristics
 trades – to describe inclusive areas of construction
 function – to describe use/performance
 place relationship – how it situates with other specs.
CSI FORMAT
66
 Types of Sections  Components

 Broadscope  General (Scope)
 Narrowscope  Products (Materials)
 Execution (Installation)
THESE INFOMATION CAN SERVE AS

CHECKLISTS FOR THE ESTIMATOR!
CSI FORMAT - Division Numbers
67
1. General Requirements 9. Finishes

2. Site Work 10. Specialties
3. Concrete 11. Equipment
4. Masonry 12. Furnishings
5. Metals 13. Special Construction
6. Plastics 14. Conveying Systems
7. Thermal & Moisture 15. Mechanical
Protection 16. Electrical
8. Doors, Windows & Glass
DPWH FORMAT
68
 15 General Headings called ITEMS

 Items 100 to 700
 Specifications for Public Works & Highways
 inclined for horizontal/civil works construction
 Items 800 to 1700
 Specifications for Public Structures
DPWH FORMAT - Item Numbers
69
VOLUME II VOLUME III

Part A Engineer’s Facilities Part A Earthwork (800)
Part B Other Gen Reqmts Part B Reinforced Concrete
Part C Earthwork (100) Part C Finishing
Part D Subbase/Base Course Part D Electrical
Part E Surface Courses Part E Mechanical
Part F Bridge Construction Part F Piling
Part G Prot. Works & Acc.
Part G Drainage & Slope Prot.
Part H Bulkheads
Part H Miscellaneous Struct.
Part I Water Supply
Part I Material Details
Part J Flood Control & Drainage
TIPS ON FORMAT USAGE
70
 If provided, use formats in the technical specifications

 If the specifications are absent or not adequate, use the type
of format according to the type of project
 Unless otherwise required, CSI and DPWH formats are just
guides – modification is possible
 Together with WBS, use formats as CHECKLIST to ensure that
all items are accounted for
 YOU take responsibility for completeness of the estimate –
therefore check and double-check!
ESTIMATING FORMS
71
 Industry Standards
 from reference books
 from formats of professional associations
 Company Standard
72 COST ELEMENTS IN ESTIMATION
OVERVIEW OF COST ELEMENTS
73
 according to impact on SELLING PRICE

 fixed cost  mark-up
 variable cost
 according to impact on QUALITY
 prevention cost  internal cost of defects
 appraisal cost  external cost of defects
 according to impact on DIRECT COSTS
 labor cost  equipment cost
 material cost  sub-contractors
COST ELEMENTS IN ESTIMATION
74
 AS TO IMPACT ON SELLING PRICE

 Variable Cost (VC)
 bare cost for labor, materials, eqpt. & subcon
 see Direct Cost discussion
75

 Fixed Cost (FC)
 does not vary with volume
 also called non-variable cost
 also called General Expenses
 may include:
 mob/demob  tempfacil
 job salaries  transportation
 security & safety  SSS, Medicare, etc.
 medical/dental costs  Insurances, Bonds
 taxes  home ofc. overhead
76

 Mark-up (MK) - allowance for top management to input financial
factors into the selling price
 may include the following cost items
 opportunity cost of money advances
 proportionate company income tax payment
 proportionate share on real property depreciation
 proportionate share on outstanding loans
 project’s share in firm’s license fees
 project’s fee to the company name or image value
 business net income policy
77

 Profit (P)
 no contractor will invest time, energy and absorb the
risks of a construction project for free
 is added when the work has been quantified and prices
of labor, materials, equipment and all other costs have
been made
 may range from 0 to 25%
IF NO PROFIT IS ADDED, THE COMPANY MAY STAY AFLOAT

BUT WILL NOT GROW!
78
 SUMMARY OF SELLING PRICE, SP
SP = VC + FC + MK-P
VC = Bare Cost for Labor, Materials, Eqpt. & Subcontract

FC = General Expense + Escalation + Contingencies
MK-P = Mark-up + Profit
79
 AS TO IMPACT ON QUALITY
 Prevention Costs
 Appraisal Costs
 Internal Costs of Defects
 External Costs of Defects
80
 Prevention Costs
 incurred in the process of prevention of defects
 may include the following:
 planning the quality control process
 training for quality
 educating the firm’s suppliers
 designing the construction process for quality
 preventive maintenance
81
 Appraisal Costs
 costs of determining the current quality of the
production/construction system
 measuring and testing parts and materials
 running special test laboratories
 acquiring special testing equipment
 conducting statistical process control programs
 receiving inspection
 reporting on quality
82
 Internal Cost of Defects
 costs incurred when defects/errors are found before
delivery to the customer
 late changes in the design
 reworking/re-testing to correct defects
 cost of equipment downtime
 cost of improperly-trained workers
83
 External Cost of Defects
 costs incurred when defects/errors are found after
 quick response to complaints
 adjustment to correct the problem
 lost goodwill
 warranties, insurance and settlement of
lawsuits
84
 Internal Cost of Defects
 costs incurred when defects/errors are found before
 late changes in the design
 reworking/re-testing to correct defects
 cost of equipment downtime
 cost of improperly-trained workers
 ARRANGEMENT OF SELLING PRICE COMPONENTS
TOTAL COST OR
FC = Fixed Cost VC = Variable Cost MK-P = Mark-up &
SELLING PRICE
Profit
5% + 80% + 15% = 100%
Supervision = 2% Direct Labor = 20-25% Mark-up = 10%

Insurance & = 3% Direct Matls = 5 - 50% Profit = 5%
Depreciation, Direct Eqpt. = 3 - 5%
Etc.
Subcontract = ___ %
Reduced fixed costs: An area for: A reasonable amount to cover Final contract price is
Shortens break-even time Increase in productivity contingency expenses, tax commitment to Client
Allows early recovery from Cost control and planning and profit Refers to TCQ deliverables
loss to win situation Value engineering study
Reduction of waste factor
85
86
 AS TO IMPACT ON DIRECT COST
 Labor costs
 Material costs
 Equipment costs
 Subcontractor costs
87

 Labor costs
 must be derived on a man-hour or man-day basis
 account for skill required vis-à-vis prevailing rates
based on location (see RWB rates)
 include mandatory holiday, sick and vacation leaves
 include mandatory benefits such as medicare, Pag-
Ibig fund, SSS, etc.
 must account for possible overtime premium &
possible need for subsistence allowance
88
SAMPLE UNIT (BARE) LABOR COST DERIVATION

89

 Material costs
 cost per unit of item
 consider possible discounts on bulk purchase,
including freebies
 account for delivery (if with additional cost) or
transport (if pick-up only)
 unless number of units is exact, always include
percentage for wastage
 check for local availability and negotiate
 keep a long list of material requirements
90

 Equipment costs
 must be expressed in cost per eqpt-hour
 include all costs for fuel, oil – also known as
OPERATING COST
 include repairs, spare parts, consumables and service
– also known as MAINTENANCE COST
 may already include the operator to simplify the
derivation of cost
 all other owning & operating costs
 keep a long list of equipment information
91

 Subcontractor costs
 Definition of terms
 one in direct contract with the Contractor who
acts for or in behalf of the Contractor in
executing part of the contract, not including
one who merely furnishes materials without
labor
 choose the type of subcontract well and clearly
define the scope and limitations of the work
 clearly define the budget and liabilities involved
92
 Subcontractor Costs (cont.)

Two General Types of Practice
Total Subcontract Labor Only Subcontract
Supply of Supply of
• supervision Responsibilities • supervision
• labor • labor
• materials • transport
• eqpt/ machinery/ tools
• shop facilities
Mode of Payment
• progress billing (lumpsum • periodic frequency (weekly,
or unit price) monthly)
• has greater contractual • limited contractual obligation

obligation
Comparison • limited in scope
• wider in scope
• organization based on job
• well-organized availability
• have safety orientation • limited safety knowledge, or
none at all
93 QUANTITATIVE APPROACH IN ESTIMATING
BREAK-EVEN POINT ANALYSIS
94
 Break Even Point Chart

100%
NOTES:
90%
 Revenue = value of work
80%
done (selling price)
70%
Total Revenue Line, Rc
 Cost = value of expenses
VALUE: REVENUE OR COST (Php)
60%
incurred
 BEP is intersection of Rc & Cc
50%
 Loss is measured at left of

40%
Total Cost Line, Cc
30% the BEP; difference between
BEP (Rc=Cc)
20%
Cc & Rc
 Profit is measured at right of
10%
the BEP; difference between

0%
the Rc & Cc
BEP TIME
TIME : PROJECT DURATION

95 UNIT PRICE ANALYSIS & COST DERIVATION
CONTRACTOR’S UNIT PRICING
96
A. Material Cost Analysis B. Consumables Cost Analysis
1.0 Amt of Materials = ____ 1.0 Amt of Consumables = ___pcs/w.u.

(direct counting) per work unit
2.0 Cost of Materials = Php ___ 2.0 Unit Cost of = Php___/pc

consumables
3.0 Amt. of Work = ___w.u.
this activity 3.0 Unit Direct = Php___/w.u.
Consumable Cost
4.0 Unit Direct = Php___/w.u.
Material Cost
97
C. Labor Cost Analysis
1.0 Amt of Work = ____w.u. 4.0 Work Team Daily Rate

this activity ___ skilled Php __/day
___ unskilled Php __/day
2.0 Work Team Composition
___ skilled /team 5.0 Unit Direct = ___Php/w.u.
___ unskilled /team Labor Cost
___ tools /team
___ eqpt /team 6.0 Duration of Act. = ___days/team
for one team
3.0 Work Team = __w.u./day
Productivity Rate 7.0 No. of teams = ____teams
8.0 Duration of Act. = ____ days

98
D. Equipment Cost Analysis
1.0 No.of Eqpt/team = ____units 5.0 Amt. of Eqpt. = ___u.u./day

Consumables/day
2.0 Eqpt. Prod. Rate = ___w.u./day (fuel, electr., water. Etc.)
3.0 Eqpt. Daily Rate = Php__/day 6.0 Unit Cost per = Php__/u.u.
(incl. operator) Utility Unit of
Eqpt. Consumables
4.0 Unit Direct = Php__/w.u.
Equipment Cost 7.0 Consumables = Php_/day
Daily Rate
8.0 Unit Eqpt. = Php__/u.u.

Consumable Cost
99
unit direct material cost

+
unit direct consumable cost
UNIT +
DIRECT = unit direct labor cost
COST +
unit direct equipment cost
+
unit equipment consumable cost
100
 Unit Direct Cost x Amt. of Work = Total Direct Cost
 Unit Indirect Cost x Amt. of Work = Total Indirect Cost
 Unit Direct Cost + Unit Indirect Cost + Overhead = UNIT PRICE

NAME OF CLIENT
PROJECT :
LOCATION : Unit :
U N I T P R I C E A N A L YS I S Output/hr. :
DESCRIPTION :
Item No.
REF. HOURLY TOTAL

PRICE COMPONENT UNIT QUANTITY
NO. RATE (Pesos)
A. Equipment
101
CONTRACTOR’S
UNIT PRICING TOTAL A
B. Labor
ALTERNATIVE FORMAT
TOTAL B
TOTAL A + B
C. UNIT COST = A + B / Output per hr.
REF. UNIT TOTAL
MATERIAL COMPONENT UNIT QUANTITY
NO. COST (Pesos)
D. Materials per Unit of Item
TOTAL D
E. Estimated Direct Cost (EDC)
F. O.C.M. (10% of E)
G. Profit (10% of E)
H. Value Added Tax (10% of C)
I. T O T A L U N I T C O S T
102 COST CONTROL – SETTING THE BUDGET
SETTING THE BUDGET
 Contractor’s Approach
Prepare BOQ in direct-cost format to derive the budget.
Activity Amt. of Work Unit Direct Material Unit Direct Labor Unit Direct TOTAL COST
(Qty) Cost Cost Equipment Cost
Total Direct Cost
Add: Total Indirect Cost
Total Cost
103
SETTING THE BUDGET
 Consultant’s Approach
The approved contract cost is to be used for monitoring.
Description Unit of Measure Quantity Unit Cost TOTAL COST
(all-inclusive)
Total Cost
 SEE SAMPLE PROJECT DATA
104
105 WORKSHOP
106 SCHEDULING & CASH FLOW ANALYSIS
LECTURE-WORKSHOP
TIME & COST MANAGEMENT
107
 MEASURING FINANCIAL PROGRESS

 S-Curve
 management (financial) planning and financial
scheduling tool
 presented in graphical form through an S-shaped curve
superimposed on a prepared bar-chart
 for the CONTRACTOR – critical for cash flow
management & internal monitoring of costs
 for the OWNER – critical for monitoring of Contractor’s
progress
S-CURVE PREPARATION
108
1. prepare network and conduct required analysis/ establish

sequence of works required
2. develop bar chart based on the network
3. tabulate the cost of the items along the work item description
4. calculate the % weight of each item by dividing the cost of
the work by the total project cost
5. tabulate the % weight of each item beside the cost of each
item; this must total 100%
6. based on the network, establish the projected cost of work
per defined periods of time
S-CURVE PREPARATION
109
7. express the projected cost accomplishment as a % of the

total cost of the concerned work item
8. (you may) indicate the percentages along the proper time
period on the bars of the work items
9. calculate the total project financial accomplishment per time
period
10. calculate the cumulative project financial accomplishment ;
and
11. plot out the cumulative project financial accomplishment
TIME & COST MANAGEMENT Republic of the Philippines
DEPARTMENT OF EDUCATION
Cordillera Administrative Region
DIVISION OF KALINGA
THIRD ELEMENTARY EDUCATION PROJECT
Project Title : Construction of Two-Storey Division Office Building
Location : Bulanao, Tabuk, Kalinga Client : DepEd Division of Kalinga
Contractor : J.C. Baac Construction Design Consultant : AMH Philippines, Inc./ TIS Manila Consultants, Inc.
Contract Amt. : PHP 12,329,817.37 CM Consultant : AMH Philippines, Inc./ TIS Manila Consultants, Inc.
Rev. Contract Amt. : PHP 12,792,015.09
B A R C H A R T, S - C U R V E, and C A S H F L O W
as of 28 February 2006
C A L E N D A R D A Y S
September October November December January February March April
Item No. Description Item Cost % Rel. Wt.
30 60 90 120 150 180 195 210 216
Original Schedule
Planned ###### ###### 21 calendar day work suspension ###### ######
1.0 GENERAL REQUIREMENTS 98,590.91 0.77% Rev ised Schedule Due to VO # 1
100%
Actual due to inclement weather
Planned ###### ###### ###### ###### ###### ######
2.0 SITE WORKS 929,099.88 7.26% 90%
Actual
Planned ###### ###### ###### ###### ###### ###### ###### ###### ###### ######
3.0 CONCRETE WORKS 4,956,018.28 38.74% 80%
Actual
Planned ###### ###### ###### ###### ###### ###### ###### ###### ######
4.0 MASONRY WORKS 547,119.19 4.28% 70%
Actual
Planned ###### ###### ###### ######
5.0 METALS AND HARDWARE 120,406.32 0.94% Rev ised Schedule due to VO # 1 60%
Actual
and 21-day time suspension
Planned ###### ###### ###### ###### ###### ###### ######
6.0 CARPENTRY WORKS 624,518.53 4.88% 50%
Actual
Planned ###### ###### ######
7.0 ROOFING AND ACCESSORIES 22,870.62 0.18% 53.36 % as of 14 March 2006 40%
Actual
Planned ###### ###### ###### ######
7.0 DOORS AND WINDOWS 780,021.98 6.10% 30%
Actual
Planned ###### ###### ###### ###### ###### ###### ###### ###### ###### ###### ###### ######
8.0 ARCHITECTURAL FINISHES 1,962,939.00 15.35% 20%
Actual
Planned ###### ###### ###### ###### ###### ###### ######
9.0 PLUMBING WORKS 802,464.86 6.27% 10%
Actual
Planned ###### ###### ###### ###### ###### ###### ###### ###### ###### ######
10.0 ELECTRICAL WORKS 1,947,965.54 15.23% 0%
Actual
TOTAL AMOUNT 12,792,015.09 100.00%
1.40%
1.40%
1.21%
1.21%
1.21%
5.08%
3.87%
3.87%
4.35%
0.00%
0.00%
0.00%
5.87%
5.87%
5.87%
5.28%
6.24%
7.52%
5.17%
4.87%
4.40%
5.92%
3.70%
2.80%
2.80%
2.80%
2.80%
2.99%
1.47%
PERIODIC ACCOMPLISHMENT (VO # 1 AND 21 CD SUSPENSION INCLUDED)
1.40%
2.81%
4.02%
5.23%
6.44%
11.52%
15.40%
19.27%
23.62%
23.62%
23.62%
23.62%
29.49%
35.37%
41.24%
46.52%
52.76%
60.28%
65.44%
70.31%
74.71%
80.63%
84.33%
87.13%
89.93%
92.73%
95.53%
98.53%
188,225.98 100.00%
CUMULATIVE ACCOMPLISHMENT (VO # 1 AND 21 CD SUSPENSION INCLUDED)
179,497.71
179,497.71
154,849.98
154,849.98
154,849.98
650,451.81
495,601.83
495,601.83
556,392.85
751,189.40
751,189.40
751,189.40
675,711.36
797,972.74
961,550.99
660,954.65
623,229.54
562,438.52
757,235.07
473,012.64
358,374.80
358,374.80
358,374.80
358,374.80
383,022.53
-
-
PERIODIC CASH FLOW PROJECTION (VO # 1 AND 21 CD SUSPENSION INCLUDED)
179,497.71
358,995.41
513,845.39
668,695.37
823,545.36
1,473,997.16
1,969,598.99
2,465,200.82
3,021,593.67
3,021,593.67
3,021,593.67
3,021,593.67
3,772,783.07
4,523,972.47
5,275,161.88
5,950,873.24
6,748,845.97
7,710,396.96
8,371,351.61
8,994,581.15
9,557,019.66
10,314,254.73
10,787,267.37
11,145,642.17
11,504,016.98
11,862,391.78
12,220,766.58
12,603,789.12
12,792,015.09
CUMULATIVE CASH FLOW PROJECTION (VO # 1 AND 21 CD SUSPENSION INCLUDED)
Legend:
Original Schedule of activities
Revised Schedule (VO # 1 included) of Activities
Actual Schedule of Activities
 SEE SEPARATE FULL-PAGE HANDOUT

110
CASH FLOW PROBLEM POINTS
111
 TYPICAL CASH FLOW ISSUES

 actual cash you expect to spend is less than actual
cash you expect to collect
 failure to plan project expenses – yields unrealistic
cash flow plan
(the Client may be paying well, but you are spending more than
what you are receiving)
 too low contingency and profit levels may have a
negative impact on cash flow
 failure to regularly check expenses
CASH FLOW PROBLEM POINTS
112
 SUGGESTED SOLUTIONS
 get financing
 seek credit from suppliers
 defer payments, where possible
 appeal to Client to facilitate payments
SCHEDULE & CASH FLOW CTRL.
113
 Notes
 use the general sked to generate the daily schedule
of the project (or weekly, depending on the scale,
scope and duration)
 cash flow control document is derived by plotting how
much you expect to spend for the project at a certain
time vis-à-vis how much you expect to collect
 negotiation of fair terms and Conditions of Contract is
important.
114 WORKSHOP
115 COSTS & CONTRACT PROCUREMENT
CONTRACT PROCUREMENT
116
 Preparation for Procurement (Owner)

 cost of services for the preparation of documents
(design consultant, in-house staff, etc.), including
Owner’s cost for coordination and approval
 costs of advertisement
 man-hour costs of pre-qualification or contractor’s
eligibility assessment
 costs of printing documents for distribution
 costs of preparation for actual pre-bid meeting (venue,
logistical requirements, etc.)
117
 Procurement of Documents
 actual cost of bid materials
 costs related to the procurement (e.g. transportation)
 man-hours for review of documents and preparation for
pre-bid meeting
 Pre-Bid Activities
 cost of attendance in pre-bid meeting
 cost of conducting site inspection
 cost of representation and other expenses
 cost of man-hours for attending meetings
118
 Submittal of Bid Proposal

 costs related to submittal of Bid Bond (cash, check, bank
guarantee, surety, etc.)
 may be opportunity cost or cost of premiums
 printing and reproduction
 man-hours for bid proposal preparation
 costs of delivery or transport of Bid Proposal
119
 Award of Project
 costs related to submittal of Performance Bond (cash, check, bank
guarantee, surety, etc.)
 securing premium for Contractor’s All-Risk Insurance (CARI)
 costs of preparation of Contract (legal costs, etc.)
 man-hours for the perfecting of the construction contract
120
 FOR THE CONTRACTOR

 account for the costs of securing after projects and – when possible –
charge back against the project you were able to secure
 be judicious in the selection of projects you will run after as these may
further spread your already limited resources
 invest in the collection of information for your bidding
 FOR THE OWNER
 include the costs, not only for design, but also for the ancillary
(related) services necessary for procurement; these may not be very
expensive vis-à-vis construction – but these are costs nonetheless
TYPES OF CONSTN. CONTRACTS
121
 fixed (or firm) lump sum contracts

 lump sum – subject to escalation
 unit price contracts
 reimbursable contracts
 cost + a fixed fee  fixed sum + reimb. conting.
 cost + percentage  cost + fixed fee + E.C. bonus
 cost+ variable fee  cost + fixed fee based on target
 cost + fixed fee w/ GMP price w/ sharing of the underrun
w/ sharing of underruns or overrun
LUMP SUM CONTRACTS
122
ADVANTAGE DISADVANTAGE
 fixed cost  scope of work must be clearly
 admin effort of CM minimal if job

defined; else prone to changes
is well defined  although changes may be defined,
 Contractor assumes all risk

cost nego may be difficult for Client
& profitable for Contractor
 incentive for Contractor to
 extensive changes in scope may lead
maximize production
in claims
 incentive for the Contractor to be
 Contractor will include contingencies
innovative
in the price since he will assume all
 provides a base from which all
risk
changes in scope may be measures
 high degree of inspection required
 potential for front end loading of

progress payment by Contractor
UNIT PRICE CONTRACTS
123
 complete scope of work not  total cost of project unknown until
required prior to contracting actual quantities of work are
 incentive for Contractor to
measured
maximize production – all  high degree of inspection required
savings below unit cost are his from both Client and Contractor
 incentive for Contractor to be  unreasonable or unbalanced prices
innovative – all savings below may prove costly
unit cost are his  while total cost need not be
 Client pays only for items of defined, each item of work must be
work thereby reducing clearly defined
contingency costs
 generally, contract does not need
adjustment for changes in
quantities of units
REIMBURSABLE CONTRACTS
124
 construction can start before the  is generally less economical than
plans are complete fixed price

 increased owner involvement in
 flexibility to make changes at the
actual audited cost construction
 involves more detailed negotiation
 can be used by Contractors and selection process
unwilling to accept high risk
 adaptable for phased
construction
 reduces adversarial relationship
between the Client and the
Contractor
COST ESTIMATION PROCEDURE
125
1. conduct a thorough plan review

2. establish the project scope (WBS) after plan
review; draw up a list, review and confirm to the
extent possible
3. highlight “super-value” work items, or items
expected to have substantial cost and/or impact
on the project cost
4. estimate the items according to (1) level of
importance/impact or (2) tech. specs. format
COST ESTIMATION PROCEDURE
126
5. from the detailed quantity survey sheets (which

show calculation), prepare a summary sheet
showing quantities only
6. draw up the costs for each of the work item,
proceeding either sequentially along the list of
items in the QS, or according to level of
importance – compile this in a long list
7. from the detailed cost derivation of the items,
prepare a final COST ESTIMATE SHEET
ESTIMATION LOOK-OUT POINTS
127
 FOR MATERIALS (FOR DISCUSSION)

 site work
 concrete
 metals
 thermal & moisture protection
 doors & windows
 finishing materials
 electrical
128 COSTING PROFESSIONAL SERVICES
PROFESSIONAL SERVICES
129
 also referred to as consultancy services; sometimes

design/construction mgt. services
 refers to services not involving direct materials, labor
or equipment
 usually covers regulated (if not very specialized)
professions such as engineering
 main resource is (perceived or actual) expertise
 Costing/Budgeting process varies

130
Two Main Models in Costing Professional Service
 Percentage of COST (POC) Basis
 Level of Effort (LOE) Basis

131
 GENERAL COST COMPONENTS

 remuneration
 refers to professional fees paid including multipliers for
overhead & social charges
 out-of-pocket expenses (also called reimbursables)
 refers to non-PF expenses necessary for conduct of
work, usually logistical in nature
 sub-contract expenses
 usually for specialty sampling & testing
132
 REMUNERATION (PROF FEES)

 fees are generally based on the following:
 academic credentials
 field of expertise (incl. specialization)
 project experience
 in general, the more specialized the field the higher
the professional fees
 basic rate vs. billing rate
 format for computation
133
 OUT-OF-POCKET EXPENSES
 project logistical requirements such as
 printing  communication
 transportation  field expenses
 per diem  representation
 if improperly assessed, can be a serious cause of
deficits in the budget
 various agencies/clients have different ways of
treating out-of-pocket expenses
134
 SUBCONTRACT SERVICES
 refers to specialty services whose outputs are needed
by the consultant
 usually involves sampling, testing or data gathering
using equipment
 for engineering projects, usually covers:
 geodetic surveys (topographic/relocation)
 geophysics (georesistivity survey)
 geotechnical survey (sampling & testing)
136 WRAP-UP/FINAL COMMENTS

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SEMINAR ON CONSTRUCTION COST

ESTIMATING AND ANALYSIS

EDGARDO P. KASILAG II / JESUS N. MATIAS

The product, service or result is envisioned to satisfy

This balanced set of needs, objectives and

The work, and

How much is needed

How long it will take

A change in the scope

All projects that create a product, service or result are

SCOPE includes all the work needed to create the

All projects will have a BALANCE point.

The balance point defines the shape of the box, which

 CE Law - RA 544 (approved 1956)/ RA 1582

Philippine Contractors Philippine Overseas Philippine Domestic Construction Industry

 Licensing  Registration  Policy Formulation  Voluntary Arbitration

Owner Feasibility Project

Define Prepare Approve Construction

Select Invite Bid

(Construction) Authorize Turnover & Owner

 Planning – determining what has to be done

 Work Breakdown Structures (WBS)

 A prediction of probable cost of construction

 Other key words = approximation, valuation,

Procedures for estimating and the persons who do the estimating

 That there is basis from which the estimate may be

 That resources (possibly in various forms) may be

 That there is some clarity in the project objectives,

 observation & study of the task to be performed and

 skill that comes from experience in estimating and

 estimator collects resource info on a similar or

 STATISTICAL & PARAMETRIC ESTIMATING

 most common method is estimating relationship

 STATISTICAL & PARAMETRIC ESTIMATING

Relationships involving costs are known as COST

 involves the development of a Firm Quotation by

 advantage of choice (usually three sources)

 use handbooks and catalogues judiciously

The reliability of any estimate depends on the

Three (3) categories of information necessary

 identification of project scope of work

 the better the info, the better the estimate

 INFORMATION ABOUT RESOURCES

 may be limited by assumed or actual capability to

 INFORMATION ABOUT PRICES

 previous project prices can be used

 price information may be limited to the date (e.g.

 AWARENESS OF COST STRUCTURE &

 Productivity and Estimating

 APPRECIATION OF CONTRACT DOCS.

 COMPLETENESS OF THE FOLLOWING:

 DEFINED & SYSTEMATIC APPROACH TO

 AWARENESS OF SITE CONDITIONS

 tend to be optimistic about the work

 POOR TECHNICAL ASSUMPTIONS

 UNDERSTANDING OF FIRM CAPABILITY TO

 CHANGES TO THE PROJECT

 INADEQUATE DATA BASE

BRIEFING STAGE/ BIDDING OR CONTRACT VALUES ACTUAL COST ACCURATE

 A systematic and formal approach to defining the work

 Determination of the amount of work to be done through the

 Calculation of material quantities involved in work

 Parallel Term = Quantity Take-off

1.0 Amt of Materials = __ 1.0 Amt of Consumables = _pcs/w.u.

2.0 Cost of Materials = Php _ 2.0 Unit Cost of = Php_/pc

1.0 No.of Eqpt/team = __units 5.0 Amt. of Eqpt. = _u.u./day