CONSTRUCTION ESTIMATES AND VALUE ENGINEERING
Construction MethodsandProject Management
Prepared by:
Assoc. Prof. CRISPIN S. LICTAOA CE, MSManEng
Civil Engineering Department
PRESENTATION OUTLINE
Definition of Construction Cost Estimates
Types of Construction Estimates
COLLEGE OF ENGINEERING
CIVIL ENGINEERING
Key Components of Estimates
DEPARTMENT
Common Types of Expenses
Bill of Quantities
Types of Bidding
Definition Value Engineering (VE)
Elements of Value Engineering
Phases of VE Job Plan
DEFINITION
CONSTRUCTION COST ESTIMATES
COLLEGE OF ENGINEERING
Construction cost estimating is the process of forecasting the cost of
building
CIVIL ENGINEERING
physical structure.
DEPARTMENT
It is not an exact science.
It is required to have knowledge of construction, common sense and
judgement
Builders and clients both worry about the financial impact of cost
overruns and failing to complete a project. That’s why they devote
time and effort to estimating how much a project will cost before
deciding to move forward with it.
Clients considering large projects often seek multiple cost estimates,
including those prepared by contractors and those calculated by
independent estimators.
CONSTRUCTION COST ESTIMATES
CONSTRUCTION COST ESTIMATES
COLLEGE OF ENGINEERING
Project owners use cost estimates to determine a project’s scope and
feasibility and to allocate budgets.
CIVIL ENGINEERING
DEPARTMENT
Contractors use them when deciding whether to bid on a project. They
usually prepare estimates with the input of architects and engineers to
ensure that a project meets financial feasibility and scope requirements.
A good cost estimate prevents the builder from losing money and helps the
customer avoid overpaying. It’s a core component of earned value management, a
project management technique that tracks a project’s performance against the
total time and cost estimate.
TYPES OF CONSTRUCTION ESTIMATES
DETAILED ESTIMATE
COLLEGE OF ENGINEERING
Includes determination of the qualities & costs of
CIVIL ENGINEERING
everything required to compute the project which
DEPARTMENT
includes material, labor, equipment, insurance,
subcontract work, overhead profit etc
APPROXIMATE ESTIMATE
a. Preliminary Estimate ( Volume and Area
Method )
b. Conceptual Estimate
KEY COMPONENTS OF ESTIMATES
A cost estimate is a summation of all the costs
involved in successfully finishing a project, from
COLLEGE OF ENGINEERING
inception to completion (project duration).
CIVIL ENGINEERING
DEPARTMENT
These project costs can be categorized in a number
of ways and levels of detail, but the simplest
classification divides costs into two main categories:
1. Direct Costs
2. Indirect costs
KEY COMPONENTS OF ESTIMATES
1. DIRECT COSTS
COLLEGE OF ENGINEERING
Direct Costs are broadly classified as those directly
CIVIL ENGINEERING
associated with a single area (such as a department or
DEPARTMENT
a project).
In project management, direct costs are expenses
billed exclusively to a specific project.
They can include project team wages, the costs of
resources to produce physical products, fuel for
equipment, and money spent to address any project-
specific risks.
KEY COMPONENTS OF ESTIMATES
2. INDIRECT COSTS
COLLEGE OF ENGINEERING
Indirect costs, on the other hand, cannot be
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associated with a specific cost center and are
DEPARTMENT
instead incurred by a number of projects
simultaneously, sometimes in varying amounts.
In project management, quality control, security
costs, and utilities are usually classified as indirect
costs since they are shared across a number of
projects and are not directly billable to any one
project.
COMMON TYPES OF EXPENSES
Beyond the broad classifications of direct and
indirect costs, project expenses fall into more
COLLEGE OF ENGINEERING
specific categories.
CIVIL ENGINEERING
DEPARTMENT
Labor: The cost of human effort expended towards project objectives.
Materials: The cost of resources needed to create products.
Equipment: The cost of buying and maintaining equipment used
in project work.
Services: The cost of external work that a company seeks for any
given project (vendors, contractors, etc.).
COMMON TYPES OF EXPENSES
Software: Non-physical computer resources.
COLLEGE OF ENGINEERING
Hardware: Physical computer resources.
CIVIL ENGINEERING
DEPARTMENT
Facilities: The cost of renting or using specialized
equipment, services, or locations.
Contingency costs: Costs added to the project budget to
address specific risks.
BILL OF QUANTITIES (BOQ)
BOQ is a schedule which categories, details and quantifies
COLLEGE OF ENGINEERING
the materials and other cost items to be used in
CIVIL ENGINEERING
construction project.
DEPARTMENT
It is important to know that, direct costs & indirect costs
are to be considered for complete cost of the project
which are covered in different parts of the BOQ.
COLLEGE OF ENGINEERING
CIVIL ENGINEERING
DEPARTMENT
Sample of BOQ No. 1
BILL OF QUANTITIES (BOQ)
COLLEGE OF ENGINEERING
CIVIL ENGINEERING
DEPARTMENT
Sample of BOQ No. 2
BILL OF QUANTITIES (BOQ)
COLLEGE OF ENGINEERING
CIVIL ENGINEERING
DEPARTMENT
Sample of BOQ No. 3
BILL OF QUANTITIES (BOQ)
TYPES OF BIDDING
BID - an offer to do a job for a particular price
COLLEGE OF ENGINEERING
Types of Bid:
CIVIL ENGINEERING
DEPARTMENT
1. Competitive Bidding
Involves contractor submitting a lump sum bid in
competition with other contractors to build the project
The lowest bidder is usually awarded with the project
provided proper procedures have been followed
2. Negotiated Bidding
Involves combination of arrangement between owners, architects
or
engineers and contractors
DEFINITION OF VALUE ENGINEERING
Value Engineering is the systematic application of function-
COLLEGE OF ENGINEERING
oriented techniques by a multi-disciplined team to analyse and
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improve the value of a product, process or service.
DEPARTMENT
Why use value engineering?
Decrease the use of resources
Improve Project Schedule
Improve Constructability
Resolve Stakeholder Issues
Reduce Operating Costs
Reduce Overall Project Costs
Reduce Risks
VALUE ENGINEERING
The value methodology (VM) is a systematic and structured
approach for improving projects, products, and processes.
COLLEGE OF ENGINEERING
VM, which is also known as value engineering, is used to
CIVIL ENGINEERING
analyze and improve manufacturing products and processes,
DEPARTMENT
design and construction projects, and business and
administrative processes.
VM helps achieve an optimum balance between function,
performance, quality, safety, and cost. The proper balance
results in the maximum value for the project.
Value is the reliable performance of functions to meet customer
needs
at the lowest overall cost and it can be calculated like this:
Value = Function/Cost
VALUE ENGINEERING
Where:
COLLEGE OF ENGINEERING
Function is what the product or service is supposed to do.
CIVIL ENGINEERING
DEPARTMENT
Cost is the expenditure needed to create it.
The purpose of value engineering is to help maintain or
improve profitability in spite of increasing costs and
competition.
ELEMENTS OF VALUE ENGINEERING
Selection - not every product is suitable
COLLEGE OF ENGINEERING
CIVIL ENGINEERING
Information - collation of facts are important
DEPARTMENT
Analysis - the basic forms of analysis
Teamwork - not a substitute
Procedure - common procedure saves time
Attitudes - teamwork engenders confidence
VALUE ENGINEERING ANALYSIS
A systematic process of review and analysis of a project, during
COLLEGE OF ENGINEERING
the concept and design phases, by a multidiscipline team of
CIVIL ENGINEERING
persons not involved in the project, that is conducted to
DEPARTMENT
provide recommendations for:
providing the needed functions safely, reliably, efficiently, and at
the
lowest overall cost;
improving the value and quality of the project; and
reducing the time to complete the project.
ELEMENTS OF VALUE ENGINEERING
When to apply VE Analysis?
COLLEGE OF ENGINEERING
CIVIL ENGINEERING
DEPARTMENT
PHASES OF VE JOB PLAN
The VE Job Plan is a systematic and organized plan of
action for
COLLEGE OF ENGINEERING
conducting a VE analysis and assuring the
implementation of the
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provided recommendations.
DEPARTMENT
EIGHT PHASES OF VE JOB PLAN
1. Selection of Projects 5. Evaluation Phase
Phase
2. Investigation Phase 6. Development Phase
3. Function Analysis Phase 7. Presentation Phase
4. Creative Phase 8. Close Out Phase
PHASES OF VE JOB PLAN
1. Selection of Projects Phase
COLLEGE OF ENGINEERING
These are some of the criteria used to select projects:
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high-cost and/or high-priority projects
DEPARTMENT
complex or challenging projects with multiple
stages or complicated/costly traffic control and
staging
projects with extensive or costly environmental or
geotechnical requirements
projects that substantially exceed their initial cost
estimates
projects involving multiple stakeholders
PHASES OF VE JOB PLAN
2. Investigation Phase
In this phase, the study team determines what they know about the
COLLEGE OF ENGINEERING
project from readily available information and what they must know in
CIVIL ENGINEERING
order to really define and/or solve the problem.
DEPARTMENT
To determine user needs
To gather and tabulate information concerning the item as
presently designed
To build team knowledge and understanding of the project
To completely understand the specific use of function
requirements of the item
To visit the site
PHASES OF VE JOB PLAN
Investigation Phase Techniques
COLLEGE OF ENGINEERING
Get all the facts from the best possible sources (e.g. design team)
CIVIL ENGINEERING
DEPARTMENT
Develop cost models
Determine and evaluate the function(s) of the present design
Identify & define project Performance Criteria
Develop project Performance Ratings
Determine present design objectives & constraints
Know what does the customer wants
PHASES OF VE JOB PLAN
3. Function Analysis Phase
Identifying the functions of the project and its elements perform is the next step in the
COLLEGE OF ENGINEERING
Investigation Phase. Function denotes the specific accomplishment to be achieved by an
CIVIL ENGINEERING
element or combination of elements in the overall design. The value methodology requires
DEPARTMENT
that we describe a function by the use of two words - an action verb and a measurable
noun (that is acted upon).
For example:
The function of a bridge is to "cross obstacle." The VE study team should not care whether
that obstacle is a ditch, river, creek, railroad, another highway or a building. The bridge's
basic function is to provide a means to cross that obstacle. If it does not accomplish that
function, we wouldn't buy it, therefore the cross obstacle function is considered to be
basic. The study team should be as non-specific as possible when describing functions to
leave as many options open as possible to perform the generalized problem or function
that the project presents.
PHASES OF VE JOB PLAN
Function Analysis Phase
COLLEGE OF ENGINEERING
To summarize, the goals of the VE study team in the
CIVIL ENGINEERING
Function Analysis Phase are to:
DEPARTMENT
Identify the project's high-cost elements
Conduct a functional analysis of the high-cost elements
Assess their cost / worth relationships
PHASES OF VE JOB PLAN
4. Creative Phase
COLLEGE OF ENGINEERING
The Creative (also referred to as Speculation) Phase follows Investigation
CIVIL ENGINEERING
Phase and Function Analysis Phase. The team applies brainstorming
DEPARTMENT
techniques to develop viable alternatives to the way the project is currently
designed. Brainstorming forces people to be creative.
The value study team applies creativity to the functional statements selected
from the previously conducted cost/worth estimates. The team uses the
generic format of the function to speculate on all possible solutions to the
problem presented in that functional statement.
PHASES OF VE JOB PLAN
5. Evaluation Phase
COLLEGE OF ENGINEERING
To evaluate, criticize, and rank alternatives
CIVIL ENGINEERING
DEPARTMENT
Identify advantages and disadvantages of each remaining
alternative.
Each advantage and disadvantage is described in general terms.
Which alternatives offer the best combination of:
Design ability
Constructability
Operational ease
Quality assurance
Customer satisfaction
Low life-cycle cost
PHASES OF VE JOB PLAN
Evaluation Phase
COLLEGE OF ENGINEERING
To develop alternatives that offer the greatest increase in
CIVIL ENGINEERING
value.
DEPARTMENT
The team can perform a weighted matrix analysis to
determine which alternative is best based upon the
relative importance of each of the desirable criteria
which must be addressed.
PHASES OF VE JOB PLAN
6. Development Phase
COLLEGE OF ENGINEERING
In the Development Phase, the team will select the best alternatives. Once the
CIVIL ENGINEERING
team selects the best, they are fully developed through sketches, cost estimates,
DEPARTMENT
validation of test data, and other technical work to determine if any
assumptions made during the study are in fact valid.
The Development Phase is the final step before presenting the team's
recommendations to the management. The study team formulates an
implementation plan which describes the process that the agency must follow
to implement any recommendations.
PHASES OF VE JOB PLAN
7. Presentation Phase
The final product of a VE study is the formal VE Report and the
COLLEGE OF ENGINEERING
presentation of the team's recommendations. In this phase, the
CIVIL ENGINEERING
VE team presents their findings to the project decision makers,
DEPARTMENT
and strives to convince them that their ideas should be
implemented.
The VE Report serves as a step-by-step record of the work
accomplished during the preceding phases. The report provides
documentation to support the team's recommendations, tracks
the team's deliberations and considerations, and aids in
implementation of the recommendations.
It can also be a useful reference tool for future projects and VE
studies
that must address similar topics.
PHASES OF VE JOB PLAN
8. Close Out Phase
COLLEGE OF ENGINEERING
No recommendation for cost savings can achieve savings until
CIVIL ENGINEERING
the approved recommendation has been implemented. Although
DEPARTMENT
it may not be practicable to implement each and every
recommendation proposed, the project decision makers must
take the appropriate action to ensure that a fair and serious
consideration of the proposed recommendations occurs.
The final phase of the Job Plan also involves determining the
actual amount of savings generated by the VE analysis based on
the amount of recommendations implemented in the
construction project and evaluating the outcome the
recommendation achieved in the project.
Construction Methods Project Management
References
COLLEGE OF ENGINEERING
Engineering Industry Training Board - COURSES FOR MANAGEMENT: Value Engineering
CIVIL ENGINEERING
DEPARTMENT
https://en.wikipedia.org/wiki/Value_engineering#The_Job_Plan
http://www.value-eng.org/value_engineering.php
https://cdn.fbsbx.com/hphotos-xft1/v/t59.2708-
21/11870210_860006627417146_1864400954_n.pdf/What_is_VE.pdf?
oh=0326d1292b85769d4246f9
4822aea55f&oe=566846E7&dl=1
http://www.dummies.com/how-to/content/pmp-certification-4-estimating-techniques-for-
proj.html
Construction Methods and Project Management
COLLEGE OF ENGINEERING
CIVIL ENGINEERING
DEPARTMENT
Thank you for listening.
Keep Safe Everyone….
