The management of costs of a project using;

• Cost Estimating
• Cost Trending
• Expenditures that are trending realtive to physical accomplishments
• Cost Forecasting
• Predicting an estimate of future conditions and events
• Life-cycle Costing
• Evaluating the initial investment, replacements, operations and maintenance/repair of a investment decision

Owners view the cost estimate as a tool to determine project scope or whether the project should proceed. Contractors use the cost estimate to determine construction bid or whether the company will be bid on project.

1. Program - prepare conceptual estimate
2. Schematic - establish budget for each element of project
3. Design Development - estimate is firmed up as more information is available (Baseline Budget)
4. Contract Document - final pre-bid to anticipate contractors bid amount
5. Contractor Selection - prepare bid estimate for contract
6. Construction - compile quotes for change orders, cost control by contractor

• Cost control (Budget to monitor project costs)
• Baseline for project productivity tracking and progressing
• Baseline for construction schedule and planning
• Inputs for project execution strategies
• Material and equipment procurement
• Contractor evaluation (Bidding and Tendering or sub-contracting)
• Historical information for new cost estimate
• Input to lessons learned

It is the level of accuracy of a project. Classification enables stage-gating project evolution:

• Measurement by how well the estimated costs compares to actual costs.
• Accuracy range should be determined for all estimates.
• All estimates are based on assumptions and there are risks associated with over-runs and under-runs of a single point value.
• Estimates should reflect a range of cost outcomes.

• "Primary" Characteristic, depends on % of complete definition.
• This is based on types of Planning, Design and Other input information available.
• Used in Traditional Delivery methods as well as PPP.

Class 5 - ML 0-2%   Conceptual

Class 4 - ML 1-15% Concept Study

Class 3 - ML 10-40% Design Development

Class 2 - ML 30-75% Bid/Tender

Class 1 - ML 65-100% Controlling Estimate/Change Orders

• Complexity of Project
• Quality of Cost Estimate Data
• Quality of Assumptions
• Skills of Estimator
• Time and Level of Efforts in Estimating Technique
• Estimate End Usage
• Estimate Methodoloy/Type
• Expect Accuracy Range
• Estimate Preparation Effort

*ON REFEAT PROJECTS WITH GOOD HISTORICAL DATA-CLASS 5 ESTIMATE MAY HAVE AN ACCURACY OF A CLASS 3 ESTIMATE*

• Limited information of project.
• Very little time to produce.
• 0-2% Definitions
• Used for strategic decision project screening or capital planning future
• Methods: Area factors, Historical Unit Prices
• Accuracy Range: -20 to-30% and +30 to +50%
• Known as Concept Design Estimate, Rough Order-of-Magnitude, Rule of Thumb

• Used "Basis of Budget Authorization"
• Project is 10-40% defined
• Design information required-Site Plans, Soils Report, Utility Plans, Single Line Diagrams, Floor Layouts
• Methods - Unit Cost Line Items (Assembly Level)
• Factoring used for less important items
• Accuracy Range: -5 to -15% and +10 to +20%(incl. Contingency)

• Detailed Contractor control Baseline
• Used by Contractors in bid estimate for contract value
• Drawings are 30-70% Design Complete drawings but may lack detail
• Methods: Deterministic Estimate, many line items
• Accuracy Range: -5 to -10% and +5 to +15%

• Prepard for parts of Project
• Used by Sub-Contractors for bids, also used as bid check by owner
• Drawings 70-100% Complete
• Unit cost line items
• Bottom-Up Estimate with Labour, Material, Equipment and Sub-Contractors, Definitively detailed
• Accuracy Range: -3 to -5% and +3 to +10%

• Measured by how well the estimated costs compares to actual costs
• Increases as project becomes more defined
• No set ranges that can be applied to all estimates so range should be determined on a project by project basis

1. Top-Down is used where budget is determined first. Contractor/Designer is asked to perform under the budget constraints. In Design-Build, Contractor will be given the maximum budget and work has to within that budget. So the top components are determined first and the Engineer/Designer will design and specify according to the given budget. 
2. Bottom-Up estimate the Owner will use to come up with probable cost of the Project. When primary components have been decided on, the Estimator can use the Bottom-Up estimate to confirm the cost of that component for the given specifications

Accuracy in both methods can be fairly accurate.

List some descriptions of Preliminary Estimates?

• Need high-level of precision
• Typically Class 5 or 4 Estimate
• Accuracy depends on
• Project definitions
• Quality of historical data
• Skills of the Estimator
• Used in repeat projects

• Single Rate
1. Price Per Unit (Hospital beds, per unit cost in an apartment building)
2. Price Per Unit Area: SQF/SQM
3. Price Per Unit Volume: F³/M³(Warehouses)
• Multi-Rate Methods
1. Price per Typical bay (including all components Mechnical/Electrical) Muliply by # of bays and exterior wall)
2. Assembly Estimate
• Capacity Factor Method
• formula drived from new facility (X) from a cost of similar facility (A) of known but different capacity.
• e = is the exponent or proportion factor or correlation exponent
• e = typically between 0.5 and 0.85
• represents the slope curve to reflect the change in price. Know as "six-tenth" method as 'e' is taken as 0.6_n absence of any information
• Ratio or Factor Method
• cost of facility can be derived from cost of major components
• assumes that "ratio" exists between major components and other costs
• use in process industry where cost is driven by the major equipment (aka equipment factor)
• apply to costs within battery limit
• very complex method to calculate the ratio factor
• does not incl. OH, indirect field costs, outside battery limit costs

1. Project location
2. Common utilities (power, water, gas)
3. Project site dimensions
4. Physical dimensions between site major components (condensed or spread out)
5. Geographical market conditions (Contractor availability, Labour supply and demand)
6. Extreme weather conditions
7. Difference between direct and indirect costs
8. Indirect costs have to isolated

• When processes are reliable and repeatable
• Where there is sufficient historical data to draw parametric relationships
• Sufficient industry data exists to draw a parametric relationship