the estimating process

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“The Estimating Process” 06/06/2022 The Estimating Process 1 A Applied C Cost E Engineeri ng

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Page 1: The estimating process

10/04/2023 The Estimating Process 1

“The Estimating Process”

A Applied

CCost

E Engineering

Page 2: The estimating process

10/04/2023 The Estimating Process 2

Why is a process critical?

A “structured estimating process” should produce:

• Quality Estimates• Consistency – Checks & Balances• Improve Accuracy/Confidence• Improve Competency/On-boarding new staff• Align all Parties• Reduce uncertainty• Reduce Costs• Save Time

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Capital Cost Estimating Process

INPUT OUTPUTProjectPreparation

ProjectEvaluation

CostEstimating

WhatHowWhenWhere

USDAccuracy

Risk

Sound technical basisRealistic execution planProper project planningRisks and opportunities

Appropriate tools & dataQualified Estimators

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What makes a good Quality Estimate

• Qualified and experienced estimator• Good estimating method and data• Proper planning of the process• A realistic execution plan• A sound finalised technical basis• Understand the risks and opportunities

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Input to the Estimating Process

WHAT

WHEN

HOW

Scope Definition

Schedule

Execution Strategy

• PDF/P&ID• Equipment data• Layout• MTO’s• Engineering Standards

• Project organisation• Contracting strategy• Constraints

• Market • Escalation• Currencies

Standard list ofdeliverablesfor eachtype of estimates

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Input to the Estimating Process

WHERE

Location (project) specifies

• Supply sources• Import regulations• Cost local supplies• Productivity• Engineering standards• Etc

Cost Engineeringactivitysupported byProject Engineering

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Estimating ProcessKey Procedures:

• Overview total estimating process• Review estimating requirements• Planning the estimate• Structuring the estimate• Developing the estimate• Analysing cost risk and contingency allocation• Documenting• Review and issue estimate

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Estimating Process

Delivery of Estimating Package

Agree effort& timing

Sign forEvidence

Sign forEvidence

Clarify Estimating Package

Packagecomplete

Scope Change or Additional

Inform

PrepareEstimate

EstimatingPackage

No

No

YesYes

Estimating Process ToolsRequest for

Cost Estimate

Business Process(Exceptions!!)

Estimating Procedures Tools/ Data

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Estimating Process

9

InternalVerification

Draft EstimateReady

Sign forEvidence

Sign forEvidence

AcceptanceCustomer

Estimate Report

Tools

Internal Procedure(Competence!)

Structured Database

DistributionAnd

Filing

End

Estimating Process

Standard Report(Template)

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Quality System (Flow Diagram)

Request Estimate/Agree timings

Delivery of estimating package

Assignment of Work

Clarify Estimating Package

Package Complete?

2

1

3

4

No

Yes

5

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Quality System (Flow Diagram)

Register Estimate

Prepare Input Data

Prepare Project Location Factor

Verification and Approval (R/V/A proposal)

Acceptance Check by the Activity Leader

7

6

8

9

10

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Quality System (deliverables)

Deliverable Type 1+/- 30%

Type 2+/- 30%

Type 3+/- 30%

A. General

Terms of Reference

Project Specification (PS) or Basic Design & Engineering Package (BDEP)

Basic Design Package (BDP)

Project Implementation Plan (PIP)

Project Execution Plan (PEP)

Project Execution Strategy (PES)

Overall plot plan and Overall plot plan rev. A

Preliminary General Foundation Advise

Special facilities required for access

Project Specific Sourcing, Cost and Scope

Recent Sourcing, Cost and Scope Survey Report

Recent Local Cost Data

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Types of Estimates

GSP/1 generally prepare 50/50 Estimates. This implies an equal chance on over or under run. Estimates have a 80% probability to fall within ranges identified.

• Preliminary Magnitude +/- > 30% Scouting• Order of Magnitude +/- 30% FED1 (BOD/PES)• Study Type +/- 20% FED2 (BDP/PEP)• Budget Type +/- 10% FED3 (BDEP or PS/PIP)• Control +/- 10% During Implementation

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Estimating Presentation

User / develop standard form:

Estimate details

Estimate information

To b

e in

clud

ed: • Summary

• Details• Accuracy and contingency• Validity (ref date/exch. rates)• Escalation

• Project reference• Reference input documents• Premises, assumptions and exclusions• Risks & Opportunity

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10/04/2023 The Estimating Process

Estimating Tools/Software Selection

15

CAPCOST Designed for large, small, revamp projects (process plant)CES Topdown, systems based, EP projectsIbisCalc Database available for civil works onlyCleopatra Designed for new projects and maintenance (process plant)ICARUS 2000 Designed for large projects (process plant)Questimates In plant project (process plant)Timberline Powerful system but its database for construction of buildingSuccess Designed for power plantG2Estimation Database available for civil works onlyPipemate Suitable for construction of piping onlyRichardson Designed for process plant projects (detailed method)

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Development of Norms

Essential Steps

• Data Management

• Standard methods and data

• Review / Reconciliation of discipline

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Development of Norms

Critical Elements

• Documentation of design basis• Documentation of execution basis• Estimate documentation• Standard methods and data• Review discipline• Filing practices

Without documentation, numbers are just numbers!

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Development of Norms; the Process

WHAT

HOWWHEN

DesignINPUT

ExecutionINPUT

• Site Agreements• Price Lists• Quotes• Publications• Books

Data Storage& Retrieval

Analyse& Review

Standard Norms &

Factors

StandardCost Estimate

Apply Project Factor

Project Estimate

PROJECTS

FEEDBACK

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Development of Norms

Databank Features: • Should meet site needs• Norms should be normalised (to remove abnormalities)• Establish a ‘single source’ (e.g. a data book)• Develop cost coding structure (maintain kind of order)• Feedback and maintenance system

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Development of Norms

Criteria for an effective coding system:

• Reflect job execution approach

• Defines in- and exclusions

• Geared for project cost control

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Development of Norms

Use consistent method:

• Standard format

• Use cost coding structure

• Define estimate input requirements

• Define validity

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Capital Cost Estimating Process

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Development of Norms

Essential Steps

• Data Management

• Standard methods and data

• Review / Reconciliation of discipline

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Handing over of the estimating package

Seamless hand over from Estimating Department to Project TeamIf you can’t convince them, confuse them!

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Estimating strategy/methodology

Agree upfront: Type input dataTiming / costEstimate format (deliverables)Verification procedure

To be included:• Summary• Details (breakdowns)• Accuracy and contingency• Validity (ref date/exch. rates)• Escalation

• Project reference• Reference input documents• Premises, assumptions and exclusions• Risks & Opportunities• Applied estimating methods/tools

• Estimate details

• Estimate information

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Estimate Validation

Options :

• Witness whole estimating process

• Participate/ witness the review/verification steps

• Benchmarking (IPA)

• Counter Estimate

• Verification deliverables

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Estimate Validation

Structured Approach:

Quality supporting documents (accuracy)

Estimating process

Consistency of project scope

Estimating tools/data

Completeness of the estimate (exclusions)

Risks and contingency

Schedule and escalation

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Estimate Verification

Cost Check:Overall Cost Reference plant

Cost per unit of product

Cost ratios Statistical breakdownEquipment vs. bulkMaterial vs. labourIndirects vs. directs

Detail Equipment Number / Bulk QuantitiesUnit ratesLabour rates (HO office, Direct Labour)NormsMTO basis

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Lessons Learned/tips

• Agreed TOR with customer• Avoid time squeeze• Be prepared (type project/process/location)• Own a tool kit (Knowledge)• Up front agreement estimate format• Kick off meeting (explain purpose / express expectations/agree process)• Willingness to share• Stay at highest level possible• Consult home front• Close out meeting (provide feedback/agree actions)

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Estimate Types, Tools & Level of Detail

Type Tools

1. CES/CAPCOST

2. CES/CAPCOST

3. CAPCOST/ IBISCALC

4. IBISCALC

FacilitySystem Group

System

Equipment Breakdown

Item list – Bill of Materials

Platform

Gas Processing

Gas Dehydration

Pump

20m of 6” Pipe

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Q’s & A’s

Discussion

End