mn/dot’s cradle to grave estimating our cost estimating journey transportation estimators...

Mn/DOT’s Cradle to Grave EstimatingOur Cost Estimating Journey

Transportation Estimators Association ConferenceOmaha, NE

Mike GinnatyDirector, Project Scoping and Cost Management

Cost Estimation and Cost Management

Cradle to Grave Estimating

• Why MN/DOT needed to change • What: Cost Estimating Project Overview• Implementation• Issues MN/DOT faced in implementation• Status of Implementation Items


Why?


Performance Measures

• Projects in 3rd (4TH) Year of STIP are let on time– FY 2008 65% of projects– FY 2007 76% of projects

• Projects in 1st Year of STIP are let in current year– FY 2007 92% of projects– FY 2008 82% of projects

• Percentage of projects let within +/- 10% of original 3rd year STIP construction estimate– FY 2008 28% of projects– FY 2006 29% of projects


Cost Estimating Issues/Concerns

• Emphasis on estimating

• Transparency

• Public Trust and Confidence

• Credibility

• Following Through on Commitments


Cost Estimating Process Improvement and Organizational Integration Project

Phase 1

Data Gathering

Oct 06 – June 07

Phase 2

Desired Solutions

&

Implementation Plan

July 07 – Dec 07

Phase 3

Reference Manual

Jan 08 – Dec 08

Phase 4

Training

June 08 – Dec 08


NCHRP Report 574 Cost Estimating and Cost Management Practices

• Make Estimating a priority by allocating time and staff resources

• Set project baseline cost early and manage throughout

• Communicate estimate meaning and uncertainty

• Protect estimators from internal and external pressures

• Complete every step in a structured estimating process

• Document estimate basis, assumptions, deviations

• Identify project uncertainties early and establish contingencies

• Perform estimate reviews and obtain management approvals


Cost Estimation Process Improvement and Organization Integration Project

• Created CE/CM vision for Mn/DOT • Developed Policies and procedures• Created an implementation plan • Developed a manual • Developed a training course • Completed this work December, 2008.


Organization Change/Integration

Vision

Resources

Accountability

Skills

Processes

Communication Incentives

Case for Change

Action Plans

Sustained Change

Training


Mn/DOT’s Vision for CE/CM

• Department-wide priority on estimating, managing and controlling costs

• Total Project Costs (including Engineering, R/W, Construction and other elements)

• Reliable and accurate estimates• Statewide uniformity and consistency• Improved communication and credibility with external

stakeholders• Clear accountability


CE/CM Policies

1. Project Cost Estimation Policy• Districts will have dedicated estimators• Estimates will be Total Project Cost Estimates

(TPCE)• Management approval required at gates

2. Uncertainty, Risk, and Contingency Policy• TPCE will identify risks and estimate contingencies• There is no program contingency, all contingency

will be at the project level• Unused contingency will be returned to the program


CE/CM Policies

3. Cost Estimate Communications Policy• All projects will have a Project Summary Report

(one-pager)• MN/DOT is only committed to projects in the STIP• Projects outside of STIP will be shown in ranges

4. Project Cost Management Policy• Projects will be managed against a Baseline Cost

Estimate• Use of contingency requires approval of Program

Manager


CE/CM Policies

5. Program Management Policy• Projects will be managed to the scope• Scoping marks the end of discovery• Change to Baseline Cost Estimate requires

approval of Transportation Program Investment Committee (MN/DOT Division Directors)

6. Emerging Issues (Not a policy in TRM)• Design-Build Projects• Special Programs/Funding, i.e. Chapter 152,

ARRA• CE/CM during construction


CE/CM Implementation Plan

1. Develop system to track and define TPCE elements2. Performance Measures and incentives3. Role and Responsibilities4. Communication of CE/CM5. Resources Requirements6. Technical Support7. Integration with Scoping initiative and others processes8. Accurately identify inflation impacts9. Identify and develop additional tools and databases10. Short-term Implementation (FY 2010, 2011, 2012)11. Reduce the use of Setasides in the SRC12. Emerging areas to be addressed


Technical Reference Manual Outline

• SECTION I INTRODUCTION (Vision for CE/CM)• SECTION II: ESSENTIALS (Foundation for CE/CM)

– Interaction of Project Development and CE/CM Processes– Policy statements– CE/CM Process – Key information Total Project Cost, Risk

and Contingency, Roles/Responsibilities

• SECTION III: Practice– Overview of Cost Estimating and Risk Methodologies– Cost Estimating/Cost Management procedures for

Planning, Scoping, Design and Letting

• SECTION IV: Appendix (Terms, Estimating Tools and Tips)


CE/CM Training

• Cost Estimating is 2 days• Cost Management is 1 day• Contract with University of Minnesota who is working

with Stu Anderson, Jennifer Shane and Keith Molenaar as the instructors

• Held first session August 17-19• Scheduled to complete the initial training by Summer,

2010• Session on September 28-30, 2009 will be taped and

sessions will be posted on our website


CE/CM Training Attendees

• Training is for estimators and others who provide information to estimators and project managers– Estimators– Managers– Functional managers– Project Managers

• Estimated need to train 400 people in the department


Cost Estimating TrainingAgenda

• Module 1 Cost Estimating: Why, When, Who, What, Where, and How

• Module 2 Project Development and Cost Estimating and Cost Management

• Module 3 Cost Estimating Overview • Module 4 Key Cost Estimating Tools• Module 5 Determine Estimate Basis• Module 6 Prepare Base Estimate• Module 7 Determine Risk and Set Contingency• Module 8 Review and Approve Estimate• Module 9 Determine Cost Estimate Communications• Module 10 Cost Estimating Training Summary


Cost Management TrainingAgenda

• Module 1 Cost Management: Why, When, Who, What, Where, and How

• Module 2 Project Development and Cost Estimating and Cost Management

• Module 3 Cost Management Overview • Module 4 Key Cost Management Tools• Module 5 Cost Management Based on Updating Cost Estimates • Module 6 Cost Management Based on Individual Changes • Module 7 Cost Management Training Summary


CE/CM Training Comments

• We didn’t emphasize letting estimates• We had a mix of people at the training from

estimators to managers• Performance measures need to be developed• Need to hear from top staff the reason for

change, why we are changing• We need to Minnesotaize the tools• Tie training slides to the manual• 3 days is a big commitment of time• This is not how we have done this• We don’t have the resources for this


Scoping Process

• Vision for New Scoping Process– Early– Comprehensive– Documented– Includes a Scoping Change Process

• Definition of Scoping: What’s In and What’s Out of a Project


Scoping Implementation

• Scoping Process was developed by Preconstruction Managers Group (PCMG)– Developed a process– Developed a manual – Provided training ahead of implementation

• Implementation was for FY 2012 projects in the 09-12 STIP

• All projects to be scoped using the new scoping process

• Measured results, 95% of projects in 2012 had an approved scoping document


Scoping Process Flowchart

October 13, 2008

Planning - Scoping - Programming Process 2008 (Refer to Scoping Narrative for detail)

Needs Identification

Identify Alternatives

Fiscal/other constraints

Compiled List of Projects

("Long" List) Define PurposeDevelop Cost

Estimate Range

Compile List of Approved Scoped

ProjectsSTIP

Project Programming

Fiscallyconstrained list /

ATP Process

Project ChangeProcess

LETTING

Project Planning

Compiled List("Short" List)

Issue Resolution and Agreement on

Scope

Refine project schedule

Finalize Project Scoping Report

Project Scoping

Issues + cost compiled by topic on Draft Scoping

Report

Approval of Final Scoping

Report

Scoping Worksheets

Prepare Baseline Cost

Estimate

Develop Preferred Alternative

Develop Alternatives(See HPDP)

ProjectDevelopment

3.33.1

Draft Project Planning Report

Assign PM

Candidate Projects

Selected Projects

Alternative Selection

Detailed Scoping

2.1

No

Yes

No - Project Needs

Rescoping

Continue

Stop

Yes

No

Continue

Stop

3.4

1.51.6 1.7 1.8

1.9

1.10

1.11

2.22.3

2.4 2.5 2.6

2.7 2.8 2.9 2.10

No

ID Needs

1.1

Compiled List of Needs

("Needs" List)

1.2

Define Project Concept

1. Assume Fix2. Rough Cost

Estimate1.3

Fiscal/other constraints

1.4

Create project in PPMS, obtain SP# 1.12

Project Planning Report

1.13

Letting Planned and >5 Years Out

1.14

HIP

1.15 Analysis of effect on performance

trends3.2

Purpose & Need Change

4.2

Scope, Cost, Time Change

4.1

Project Change Request Form

4.3

Program Evaluation Form

4.4

Change Approved

Yes

No

Yes

Yes - Approved

OrNo -

Remains Unchanged

4.5Fund

Don’t Fund

Baseline Cost Estimate

Baseline Change Process


Scoping Implementation –Remaining Challenges

• Focusing on earlier coordination, especially with external stakeholders

• Need for Risk Management Plans

• Shifting resources to earlier in Project Development

• Ensuring change is sustained through continued training and resources


Mn/DOT Scoping and Cost Estimating website

www.dot.state.mn.us/cost-estimating

Operational Fall, 2008Includes the Manual, Tools and other information

for Scoping and CE/CM

http://www.dot.state.mn.us/cost-estimating


Project Scoping and Cost Management Office

• Created July, 2008• Created from the work on the Cost

Estimating Project• Heighten exposure of the CE/CM effort• Currently have 4 positions filled,

Director, Scoping Section Director, Bundle Steward, TTAA (Taxpayer Accountability Act)


CE/CM Implementation Requirements

• Directive by Commissioner in October, 2008• Chapter 152 Projects (10 Year Program)

– Legislative program in Spring, 2008– Scopes and TPCE’s completed by Dec 1, 2008– One-pagers completed by Dec 15, 2008

• 10-13 STIP Projects– Scopes and TPCE’s completed by April 24, 2009– One-pagers completed by May 1, 2009


Implementation Issues

• We did not have– TRM (Technical Reference Manual)– Training– Limited formal experience with risk assessment– No estimate tracking system (limited tracking in

PPMS)

• We did have– Experience with cost estimating (we are good at

estimating what we know)– Generally are later estimates are very good


Implementation Kit

• Developed Implement Kit including– TPCE Spreadsheet – One Pager format and example– Risk Fact Sheet– Risk/Contingency Guidance– Risk Register – Contingency Chart


Total Project Cost Estimate


One-Pagers


Risk Management Training

• Conducted Cost Risk Assessment Value Engineering (CRAVE) Workshops– Conducted on 13 Major bridge projects

with cost ranges $50-700M– Projects were from across the state

(District 2, District 6, District 7, Metro)– Participants were from various districts


Implementation Results

• Chapter 152 Projects– Districts delivered 100% of projects having

scoping documents, TPCE and one-pagers

• FY 10-13 STIP Projects– Districts delivered 94% of projects having

scoping documents, TPCE and one-pagers


Organization Change/Integration

Vision

Resources

Accountability

Skills

Processes


Case for Change

Action Plans

Sustained Change

Training


Enabling Change

Vision

Resources

Accountability

Training

Processes


Case for Change

Action PlansResistance

Skills


Enabling Change

Vision

Resources

Accountability

Training

Processes


Case for Change

Action PlansFragmented

Skills


Enabling Change

Vision

Resources

Accountability

Training

Processes


Case for Change

Action PlansAnxiety

Skills


Enabling Change

Vision

Resources

Accountability

Training

Processes


Case for Change

Action PlansFrustration

Skills


Enabling Change

Vision

Resources

Accountability

Training

Processes


Case for Change

Action PlansConfusion

Skills


Enabling Change

Vision

Resources

Accountability

Training

Processes


Case for Change

Action PlansUnsustained

Skills


Issues/Concerns

• Project Summary Reports (One-Pagers), where to store

• Tool Development, Minnesotaize the tools

• TPCE Tracking System

• Risk and Contingency Training

• Management wants the “Right estimate”, what is “Right”?


Keys to Mn/DOT’s Success

• We need to become a Risk Management Organization

• Emphasis on scoping• Need to increase our effort on scoping

projects• The end of scoping is the end of discovery.• Management is looking for “Right Estimate”,

need to define “Right”• Retirement of Contingency


CE/CM Implementation Progress

1. Develop system to track and communicate TPCE• Define TPCE elements (needs more work)• Group TPCE elements (TPCE Spreadsheet)• Define and develop tracking system (Project Summary Report)• R/W Estimating process• Engineering Estimating process (PET, TTAA position)• Tracking of estimates, comparing estimates to actual

expenditures (Bundle Project)

2. Performance Measures and Incentives• Developing performance measures (Fall, 2009, CTS Transition

Contract) • Tracking who needs training and who has completed


CE/CM Implementation Progress 3. Roles and Responsibilities

• Define role of Office (CTS Transition contract)• Define the role of districts responsibility (somewhat defined in

policies)

4. Communication of CE/CM• Communication plan (updating as part of CTS Transition contract)• Part of the CE/CM training• Role of Office• Presentation at meetings (functional areas, management, TEA)

5. Resources Requirements• Partially in role Office• District Estimators• Earned Value Management (Resource loaded schedules)



6. Technical Support• CE/CM Training (starting)• Project Management Peer Review

7. Integration with Scoping Initiative and other processes• Completed Scoping Process integration Fall, 2008• Other processes include utilities, Program development• R/W Estimate

8. Accurately Identify Inflation Impacts• Identified process for applying inflation working with Office

of Investment Management



9. Identify and develop additional Tools and Databases• Project Summary Report (one-pagers)• Risk Management• Accelerated projects, working with D-B, major bridges scoping

efforts

10. Short-term Implementation (FY 2010, 2011, 2012)• This was the actual implementation

11. Reduce the use of Setasides in the SRC• Identifying projects earlier in STIP• Still work to be done



12. Emerging areas to be addressed• Design-Build projects• Special programs (ie Chapter 152) • Scope reviews• CE/CM during construction


Mn/DOT Scoping and Cost Estimating website

www.dot.state.mn.us/cost-estimating


Thank you!I appreciate your interest in learning

about our Cost Estimating/Cost Management

Journey

Michael Ginnaty, P.E.

Director, Project Scope and Cost Management Office

Email: [email protected]

Phone: 218-846-3604

mailto:[email protected]

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