major project estimating - rics.org · 18/08/2020 · major project development –much like an...

making the difference

Major Project Estimating

RICS Seminar

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18th August 2020

Turner & Townsend

Introduction

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Running order

• Intro• Major Projects Estimating – setting up for success

– 45-50mins• Questions -10mins

About me….

• Started in the construction industry when I was 18• 18 years in heavy civils contracting - site engineer

through to contracts manager• 13 years in cost consultancy • Major projects estimating for

• Highways England• Heathrow Expansion• Dublin airport• Crossrail2

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Setting Out Right

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‘There is only one thing more painful than learning from experience and that is

NOT learning from experience’

Archibald MacLeish

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Setting out right

Major projects particularly in construction have a terrible history of overspending

ProjectScottish Parliament

ProjectSydney Opera House

ProjectNHS IT System

ProjectHumber Bridge

ProjectDublin Port Tunnel

ProjectJubilee Line Extension

Overrun1600%

Overrun1400%

Overrun500%

Overrun150%

Overrun160%

Overrun80%

90 years of data suggests we aren’t getting any better.

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Setting out right

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Major Project Development – Much like an iceberg

Construction / Delivery

Planning + Development 3-5 yrs.

90% Mass below water

level

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Characteristics of failure

• Owing to their size and long planning horizons, Major Projects are inherently risky

with complex interfaces.

• Multi & complex stakeholder engagements

• Undefined scope at early stage

• Approach generally stoical around ‘Black Swan’ risks

• Overly optimistic Design & Delivery team.

Setting out right

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‘Over budget, over time, under benefit, over and over again.’Flyberg 2011

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Setting out right

Slow Start

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Fast Finish

Fast Start Slow Finish

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Setting out right

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• Front end planning pushed• Bad projects not stopped• Implementation stage delayed

• Costs Soar

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Setting out right

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Preferred decision process

Ability to impact Cost

Cost of Change

Existing Processes

Design Construction Operation

Eff

ort

/ E

ffect

MacLeamy Curve

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Setting out right

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The importance of the estimate

InformsBusiness Decisions

Feedsthe Schedule

Baselinesthe Project

ProvidesBenefits for

Business case

Informsthe Design

Sets UpThe Project for

Success

The estimate is central to success!

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Setting out right

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Acknowledging Risk

We need to understand

the dynamics at play in

major programmes of work

▪ Will to succeed

▪ Culture of dismissing the bad

news messengers

▪ Ignorance of Black Swan Risks

▪ Projects led by problem solvers –

Engineers and PlannersOptimism Bias will be growing in its perfect

environment

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Setting out right

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Acknowledging Risk

What you don’t know you don’t know

What you know

What you think you know

What you think you don’t know

Costs that reflect the scope provided

Risk of design creep and growth through lifecycle

Project related risks

Uncertainties

‘Reports that say that something hasn't happened are always interesting to me, because as we know, there are known knowns;

there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we

do not know. But there are also unknown unknowns—the ones we don't know we don't know. And if one looks throughout the

history of our country and other free countries, it is the latter category that tend to be the difficult ones’

–

Donald Rumsfeld – US Secretary of Defense 2001 - 2006

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Setting out right

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2

1

4

3

5

6

Go-live

Define the Project Lifecycle and Assurance Process

Select an Estimating Software Platform & Databases

Establish Price Base & Approach to Inflation

Form linkage with Risk Teams & Embed Approach to Uncertainties

Establish Estimating process and procedures

Determine Work and Cost Breakdown Structures

Go!

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Project maturity & its impact on cost

Project Maturity - Key is to understand the purpose of the estimate

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Misalignment will lead estimator to include greater levels of uncertainty, therefore, inducing higher risk

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Project maturity + Impact on cost

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Misalignment will lead estimator to include greater levels of uncertainty, therefore, inducing higher risk

No good expecting a funding approve estimate when the scheme data supports a business case estimate.

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Adherence to Stage is Key

‘Misalignment of design to requirement will lead the estimator to include greater levels of uncertainty, therefore, inducing higher risk’

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Target Improve Control

Making the solution affordable

Demonstrating the price of your brief

Establishing controls and safeguarding your target

Performance Management & Reporting

Knowledge, Data & Tools

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Eff

ort

Gateway Gateway Gateway

Bearer of Bad News

Impact is inevitable

Cost increase lay uncommunicated until the gateway nears

There is little or no time to rectify the impact to the budget of late arriving costs

Unverified Adjustments

Adjustments made to suit time or budget constraints

Traditional Approach

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Eff

ort


Progressive

Collaborative

Permits the consistency of knowledge bank in personnel with demand forecasted

Design + Schedule focussed by Cost derives meaningful value engineered solutions

Considered

Allows time to consider Cost, Risk, Schedule and Uncertainty before the design is finalised

Dynamic Design to Cost

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Project Maturity & Impact on Cost

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Co

st


Uncertainty

Risk

Base Costs

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Co

st


Maturity Cost Curves – the plan

Optimistic

Pessimistic

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Co

st


Maturity Cost Curves – the reality

Optimistic

Pessimistic

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ManageSet up the Team

ExpectRisks &

Uncertainties to move

CollaborateBring the estimate along the journey

Life cycleDetermine the estimate detail

GlideThe Project Costs

NoChristmas trees

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Importance of good data & does it exist?

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The Vacuum of Space

Prior to contractor

engagement it can be a tricky

time for estimating cost

▪ Vagueness of the tasks

▪ Availability of the right data

▪ Could, Would, Should costs

▪ Quality of information

Determining what and how data is applied is the

key to success

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2 3

Pre-Design / Funding Approval

Elemental, Item Rates

Funding Approval / Award

Item Rates, First Principles

Pre-Design

Analogous, Reference Class, Elemental

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Requirements - Large Data set of familiar projects, intelligent data detailed enough to spot anomalies

Brilliant at the basics


Reference ClassData

Powerful demonstrator of

likely outturn costs

Side Steps Optimism bias

May not fit your requirements

Needs to be

used alongside elemental or bottom up process

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Pre Design

Funding Approval

Award

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Requirements - Quality reference data aligned to scope, clean and defined point of cost - Tender, Target,

Outturn etc. Good sample size



Elemental Cost information

Excellent communicator of cost aligned to blockydesign

Confidence -increased granularity matchesscope

Vague scope

data may cloud accurate cost

Data Doesn’t fityour required scope

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Pre Design

Funding Approval

Award

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Requirements - Provenance of rates Inc. location quantity & complexity, large sample data set at common points

of capture i.e. Target



Item Rate information

Granularity allows application of cost to key elements

Tangible – & challengeable costs against scope

Factors –location, Qty, Complexity may not be captured

Ambiguity on scope if cost capture not done well

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Pre Design

Funding Approval

Award

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Requirements - Good sample data , Estimating Software platform to host and manage rate builds and libraries,

requires maintaining



First Principles Rate information

Clear definition of resources & quantities required

Nominal –ambiguity in scope vs. cost

Significant –data required in volume & scope

Requires expertise to develop

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Pre Design

Funding Approval

Award

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So, Does good data exist?

• Data is easy to find

• But Good data needs effort and persistence to get right

Yes , But…

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Communicating the end product

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Keeping the focus

Hard work is done

▪ Integration

▪ Recognise our weaknesses

▪ Reporting

▪ Maintaining the focus

Turning the estimate into a meaningful and live

document

It is time to tell the story

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Lets be honest…

• How estimators perceive themselves and how they are perceived is often mis aligned

• Recognition of a varied stakeholder demographic is key to communication

• Awareness that BOQ’s aren’t the only option

• Speak to the Audience

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Communication Plan

Consistent Formatting

Identify Stakeholders

Use Technology

Engage in dialogue

Different outputs for different audiences – clever use of WBS/CBS to roll up and down costs to suit all stakeholder requirements

Synergy via CBS and WBS provides peripheral interfaces to communicate with the estimate seamlessly . Grasp business analytics tools and get that data working!

Easy to understand projects costs, broken down to critical elements open up informative and effective dialogue

Consistent estimating format and reports span the years Major Projects are in design stage -Project Team familiarity is key

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Communication Plan

This is a Journey

Maintaining a contemporary, robust and considered cost estimate front and centre of a Major Project will be one of the key success factors to the delivery of the scheme.

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Close

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A word from our sponsors….

• Outline the importance of the cost prediction process and the

skills and knowledge required by RICS members and RICS-

regulated firms.

• Define clear and consistent terminology.

• Describe the required inputs for successful cost prediction, their

sources and uses, and the processes required to transform them.

• Describe the prediction process at each stage of project

realisation, identifying the variability in prediction accuracy,

based upon the level of available inputs.

• Integrate ICMS as the standard for cost classification and

reporting to support benchmarking and reliable cost prediction.

RICS introducing a new Cost Prediction Professional Statement – due to launch this winter

Turner & Townsend

Questions

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major project estimating - rics.org · 18/08/2020 · major project development –much like an...

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