LECTURE 5: CONSTRUCTION ESTIMATE AND VALUE ENGINEERING

I. INTRODUCTION TO CONSTRUCTION ESTIMATE

Construction estimate is a vital component in construction business management. Two key

elements in construction are:

1. Efficient Management – Ensures that resources are used wisely.

2. Correct Estimating – Helps prevent unnecessary expenses and losses.

A construction estimate is prepared to determine the probable cost of a construction project. It

forecasts the cost of building physical structures and is often used for budgeting purposes. An
example of a rough estimate is using 25,000 to 30,000 PHP per square meter to compute the cost of
a house.

Take note: Estimating is not an exact science. It requires knowledge in construction and good
judgment. Builders and clients are concerned with cost overruns, so they invest time and effort in
accurate estimation before proceeding.

II. PURPOSE OF ESTIMATES

• Project Owners use cost estimates to determine project scope, feasibility, and budget
allocation.

• Contractors use estimates to decide whether to bid on a project. Estimates often include
input from architects and engineers.

• Good cost estimates help prevent the builder from losing money and helps customers
avoid overpayments.Estimates must be accurate and comprehensive, covering all aspects
including materials, labor, equipment, subcontractor works, and indirect costs.

III. ESTIMATE PREPARATION PROCESS

1. Examine contract documents – Includes completeness of plans and specifications.

2. Prepare tentative progress schedule

3. Prepare a top sheet based on an examination of specification's table of contents

4. Decide on which trade subcontractor bids will be obtained and calculate prices on work
of those trades where the work will be done by the contractor's own forces

5. Use unit prices arrived at contractor's own past records, from estimates made by the
members of the contractor's organization or various reference books that list typical unit
prices

6. Carefully examine the general conditions of the contract and visit the site, so as have a
full knowledge of all the possible hidden costs,

7. Receive and record prices for materials and subcontracts. Compute the total price

8. Review estimate – Clearly note inclusions, exclusions, and exemptions.

 9. Decide on markup – Factor in profit, overhead, owner reputation, and variation
possibilities.

10. Submit final estimate – Complete and timely submission to the owner as required.

IV. COMPONENTS OF COST ESTIMATE

A cost estimate is a summation of all the costs involved in successfully finishing a project, from
inception to completion (project duration).

• Direct Costs: are broadly classified as those directly associated with a single area (such as
a department or a project). In project management, direct costs are expenses billed
exclusively to a specific project.

• Indirect Costs: cannot be associated with a specific cost center and are 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

V. COMMON TYPES OF PROJECT EXPENSES

• 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).

• Software: Non-physical computer resources

• Hardware: Physical computer resources

• Facilities: The cost of renting or using specialized equipment, service or locations

• Contingency Costs: Costs added to the project budget to address specific risks.

VI. BILL OF QUANTITIES (BOQ)

• BOQ is a schedule which categories, details and quantifies the materials and other cost
items to be used in construction project.

VII. TYPES OF ESTIMATES

1. Feasibility Estimate – Rough cost approximation used of the cost of the project.

2. Order-of-magnitude estimates – are more detailed than feasibility estimates because

more information is available

3. Preliminary Estimates – reflect the basic design parameters. For the purpose, a site plan
and a schematic design are required
 4. Baseline Estimates – are preliminary estimates.

TYPE OF ESTIMATE: FOR LUMP SUM OR GUARANTEED

1. Definitive Estimates - Enables the owner to learn what the total project cost would be. The
estimates is based on plane views, elevations, sections and outline's specifications
2. Fixed-Price Estimates or bids - are prepared by a general contractor and represent a firm
commitment by the contractor to build the project
3. Claim and Changes Estimates - are prepared when a difference arises between actual
construction and the requirements of the contract,

VIII. ESTIMATING TECHNIQUES

• Parametric Estimating - takes into account the strong correlation of project cost and
project components that because of size, quantity, installation expense or purchase price
represent a very large portion of project cost.

• Unit Price Estimating - is based on data contained in the contract documents. The project
cost estimates obtained by adding the products obtained by multiplying the unit const of
each item by quantity required

• Crew Development Estimating - is based on the costs for personal and equipment
required for each item during each construction phase

• Indirect Costs - when parametric estimating is used, indirect costs may be determined as a
percentage of the direct cost of the project or as percentage of labor cost or maybe based
on the distance of the volume materials that must be moved from source to site

• Margin or profit - the amount that a contractor includes for profit in the cost estimate for a
project depends on many factors

• Quantity Surveys - is a listing of all materials and items of work required for a construction
project by the contract documents

Bid -an offer to do a job for a particular price

Types of Bid:

• 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
• Negotiated Bidding
- Involves combination of arrangement between owners, architect or engineers and
contractors

BIM APPROACH TO COST ESTIMATING

Building Information Modeling (BIM) is changing the way the construction industry works. With a
rising number of owners requiring BIM on projects, adoption has increased dramatically on projects
throughout the world. Now, companies are partnering for better BIM

• Automated Takeoff Data - Estimating can access data contained in the 2D digital plans or
the 3D models. This means the normal time-consuming and error-prone duties are largely
eliminated from the Estimators workload
• System Calculations - the reduction in manual processes such as measuring or counting
everything in a set of plans or models will inevitably reduce the level of errors. And you can
imagine that it can drastically increase the overall accuracy

VALUE ENGINEERING (VE)

Value Engineering is the systematic application of function-oriented techniques by a multi-

disciplined team to analyze and improve the value of a product, process or service.

Value Engineering Objectives

• Save Money
• Reduce Time
• Improve Quality
• Improve Reliability
• Improve Maintainability
• Improve Performance
• Improve Human factors, attitude, creativity and team-work
• Improve Decision Making

Reasons for Unnecessary Costs

The main objective of VE is to improve value, and VE Techniques can overcome many of the
roadblocks to achieving good value. Unnecessary costs that lead to poor value are generally cause
by one or more of the following:

1. Lack of Information: Insufficient data on the function the owner/User wants or needs and
information on new materials, products or processes that can meet these needs, within the
required cost range.
2. Lack of Ideas: Failure to develop alternate solutions. In many cases, decision makers
accept one of the first workable solutions that come to mind. This tendency invariably
causes unnecessary costs, which can be eliminated by requiring the development of
additional alternate ideas and then making choices based on economics and performance.
3. Temporary Circumstances: An urgent delivery design, or schedule can force decision-
makers to reach a quick conclusion to satisfy a time requirement without proper regard to
good value. These temporary measures frequently become a fixed part of the design or
service resulting in unnecessary costs.
4. Honest Wrong Beliefs: Unnecessary costs are often caused by decisions based on what
the decision-maker believe to be true, rather than on the real facts. Honest wrong beliefs
 can improve a good idea that would otherwise lead to a more economical decision or
service.
5. Habits and attitudes: Human are creatures of habit. A habit is a form of response doing the
same thin, the same way, under the same conditions. Habits are reactions and responses
that people have learned to perform automatically, without having to think or decide. Habits
are an important part of life, but one must sometimes question "An I doing it this way
because it is the best way, because I feel comfortable with my methods, or because I have
always done it this way?"

When to Apply VE

VE should be performed as early as possible -before commitment of funds, approval of systems,

services, or design to maximize results.

Phases Of VE Job Plan

• The VE Job Plan is a systematic and organized plan of action for conduction a VE analysis
and assuring the implementation of the provided recommendations
• Eight Phases of VE Job Plan
1. Selection of Project Phase
2. Investigation Phase
3. Function Analysis Phase
4. Creative Phase
5. Evaluation Phase
6. Development Phase
7. Presentation Phase
8. Close Out Phase

LECTURE 6: CONSTRUCTION METHODS AND OPERATIONS

I. TYPES OF CONSTRUCTION METHODS

1. Traditional Method

o Manual techniques, flexible with irregular shapes.

o Expensive and time-consuming.

2. Modern Method

o Prefabrication, modular systems.

o Efficient, consistent quality, faster construction.

Examples:

• Panel systems

• Volumetric modular construction

 • Hybrid components

• Table forms, tilt-up panels

CONSTRUCTION OPERATION SEQUENCE (9 STEPS)

1. Clearing the Site

• Demolition, salvaging, cutting, burning

• Equipment: bulldozers, backhoes, dump trucks

2. Locating the Structure

• Site layout, benchmarks, and elevation checking using surveying instruments.

• Markings: Property lines, control points, stationing.

3. Earth Moving

• Excavation Types:

o Bulk excavation

o Trenching

o Dredging

o Tunnel excavation

o Scarifying and ripping

• Purpose: Prepare foundation levels, create roadbeds, remove obstructions.

4. Stabilizing Earth and Structure

• Trimming, sloping, compaction

• Dewatering

• Sheet piling, bracing, shoring

• Pile types: Friction piles, end-bearing piles

• Cofferdams for underwater structures

5. Setting the Foundation

• Types:

o Spread footing

o Mat or raft foundation

o Pile cap footing

 • Involves reinforcing, formwork, concrete placement, and curing.

6. Building the Superstructure

• Steel Frames:

o I-beams, H-beams, welded or bolted connections

• Concrete Frames:

o Columns, beams, slabs

o Includes proper concrete covers and reinforcement ties

7. Installing Utilities

• Includes water supply, drainage, electrical, HVAC, communications

• Considerations for layout, safety, and integration with structural members

8. Enclosure of Superstructure

• Roofing Types:

o Flat (<10 degrees)

o Pitched (>10 degrees)

• Components:

o Trusses, rafters, purlins

o Decking, insulation, flashing

• Walls:

o Load-bearing and non-load-bearing walls

o Materials: CHB, bricks, panels

9. Finishing Works

• Trimming: Door and window casings

• Painting: For protection and aesthetics

• Tiling, plastering, cabinetry

• Final cleaning and preparation for occupancy