Cost EstimatingCost Estimating

EGR 386EGNR 300

Cost Estimating--------------------------

ENGR 300Dept. of Computer Science and Engineering

University of Bridgeport, CT 06601

EstimatingEstimating

• Up till this point in our economics lesson– assumed known future cash flows, but…

• An important aspect of engineering is:– the estimation of future costs for use in economic decision

making predicting the future– typical situations:

• estimating cost of a design element(s) or system• estimating fabrication costs• preparing proposals (estimating effort & project costs)• making capital investment decisions

Cost Estimating TechniquesCost Estimating Techniques

• Component-by-Component Estimate– summation of individual design element costs– detailed estimate, but time consuming

• Use of Analogy– gross technique using cost data from similar

previous projects

Cost Estimating TechniquesCost Estimating Techniques

• Statistical Estimating– long range planning based on probability of

occurrence

• Life-Cycle Costing– encompassing all phases:

• research, development, production, implementation, operations, support, retirement, and disposal

Project cost estimation will use a mix of all 4 techniques with certain techniques more important at different project stages.

Two Principal Cost CategoriesTwo Principal Cost Categories

• Direct Costs– material, labor, subcontracts direct to the

project, operating

• Indirect Costs (Overhead)– Supervision, clerical & support staff, utilities,

building rentals, depreciation, insurance, taxes

Preparing Detail EstimatesPreparing Detail Estimates• Divide into as many operations as possible

– avoid missing costs

– systematically list

– each operation given an exclusive code number used throughout: accounting, design, construction, etc.

Sitework 02000

Subsurface investigation 02050

Demolition 02100

Special Construction 13000

Digester Covers & Appurt. 13230

Oxygenation Systems 13240

Sludge Conditioning 13260

CSI Masterformatsample

Estimating CostsEstimating Costs

• Using published standard cost or price indexes– unless a buyer…it is difficult to get timely,

comprehensive price data from vendors– indices: a record of costs or prices over time– indices: useful for projecting (escalating)

future costs or prices

Cost IndexesCost Indexes

• Costing for inflationary effects– Inflation = rising prices for goods & services

• Future dollars less valuable than present dollars• who benefits: long-term borrowers or long-term lenders?

– General rate of price change measures • Consumer Price Index (CPI): broad measure of food,

services, commodities to urban consumers– change in the cost of living

• Produce Price Index (PPI): changes in prices by domestic commodity producers in all stages of processing

Cost IndexesCost Indexes

• Industry indexes– General indexes not specific enough– Construction:

• Means Construction Cost Data• BNI Public Work Costbook

– Air Pollution Equipment:• Chemical Engineering Plant Cost Index (CE)• Vatavuk Air Pollution Control Cost Index

(VAPCCI)

Index FormsIndex Forms

• If you know past costs or different size costs:– Inflationary: Costnew = Costold(Indexnew/Indexold)

– Capacity:CostA = CostB(CapacityB/CapacityA)R

• R = cost capacity factor– chemical equipment: R .6 to .7

– Combined:• Costnew,A =

Costold,B(Indexnew/Indexold)(CapacityB/CapacityA)R

Often applied to fixed equipment cost estimating

Index FormsIndex Forms• Often used in estimating construction costs

when you can estimate quantities

• BNI lists material and labor costs in separate tables

Unit Material Installation Total

4” pipe L.F. .87 2.95 3.82

6” pipe L.F. 1.65 3.15 4.8

02740.10 Drainage FieldsPerforated PVC pipe

Index FormsIndex Forms• Means Example: includes labor and

overhead and profit in materials table

Crew DailyOutput

Unit BareMat.

BareInst.

BareTotal

TotalInc. O & P

240 4” diameter B-20 200 L.F. 1.80 2.52 4.32 5.65

245 6” diameter B-20 180 L.F. 3.84 2.8 6.64 8.3

250 18” diameter B-21 160 L.F. 4 4.24 8.24 10.35

2.530-… Site Drainage & Utilities Polyvinyl chloride pipe, class 150, S.D.R-18

Using Cost IndexesUsing Cost Indexes

• Know what’s included & how data obtained– Do labor costs include taxes (FICA,

unemployment), insurance (workman’s comp., health), overhead and profit?

– Material costs = typical average costs over time or something else?, Include freight?

– Geographic cost modifiers available?