Author: Michael Smith, Process Plus Lead Cost Estimator & Project Services Department Manager
November 14, 2013

Cost estimating is an art. I believe in order to reach the most comprehensive and accurate estimate, the entire project team; consisting of owner, engineer/architect, and major vendors/contractors, need to be involved. Capital cost estimates are often times developed early in the feasibility phase of a project. Taking this crucial step will prove beneficial as you are better prepared to make decisions and control cost throughout the project lifecycle.

Here are a few tips for completing an estimate in the feasibility phase; as phases progress, the dialog can be similar but more detailed:

Scope Development – Early discussions are held to set parameters of scope. Included in the scope development should be a detailed listing of equipment types, size, quantities and associated field materials (concrete/steel/pipe/conduit/etc.).

Constructability – Is space available within the existing site/building for equipment and supporting utilities? Will existing conditions need to be modified to install the new process? Look around for paths in and out for process equipment, construction equipment, field materials and personnel.

If this is a greenfield site, what type of existing conditions are there, including utilities and transportation access.

Equipment and Materials Pricing Basis – Historical data proves quite useful in estimating pricing for equipment and field materials. This is generally determined by the engineer/architect. If the owner has done similar projects in the past, this data is also useful.

Budget quotes (parameter based) are based on preliminary information for conceptual estimates while detailed quotes (specification based) are based on definition level information needed for funding (appropriation) estimates.

Field labor hourly cost research and reviews are needed for all estimate levels. The initial basis is the Means City Index which provides a 30 city average. Further refinement of labor hourly costs can be made by contacting contractors in close proximity to the project.

Risk Analysis – As a first past, the percentage of risk and contingency is typically based on historical data for levels of design completion. Conduct a summary level risk review using a risk template and ask a variety of questions on the following (7) categories for a more precise contingency percentage:

Project Complexity
Completeness of Definition
Site Condition
Project Resources
This process can and should include the client for understanding of scope completeness and buy-in on the contingency.

Estimate Reviews – The following activities are vital steps you should take in the estimating process:

Site Visits
Detailed Scope Equipment & Material Pricing
Recap Sheet