Cost Estimating
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Cost Estimating
Typical Estimate Definition:
“A cost estimate may be defined as a prediction or an evaluation of all costs of the various different elements of a project or effort as defined by an agreed upon scope and execution plan.”
Purpose:
Quantify and predict the cost required to complete a project / facility.
- Based on a defined scope of the project
- Within an agreed timeframe
Uses:
- Economic Viability
- Licensor Selection
- Feasibility Study
- Alternatives Analysis/Optimization
- Project Funding
- Establish a Baseline (Project Budget)
- Assess Change Impacts/Change Management Support
- Bid Proposal (New Work)
- Benchmark / Validation / Check for RFP Bids
Types of Estimates:
- ROM Estimates
- Engineering Screening Level Estimates – Multiple Options
- End of Study Phase / FEED Phase Estimates
- Detailed Estimate (Baseline/Control Base)
- A typical cost estimate for a project includes the following major cost categories:
- Direct Field Costs (DFC)
- Indirect Field Costs (IFC)
- Home Office Costs (HOC)
- Other Costs (OC)
- Contingency and Escalation
Estimate Execution Plan (EEP):
- Development of Estimate Plan is responsibility of the Lead Estimator
- Issued early following estimate kick-off meeting.
- The Plan is the vehicle to document and obtain agreement between project team, Client and estimating team on the estimate development effort:
- Estimate Plan defines the type / Class of estimate to be developed.
- Estimating methodology to be utilized for the development of estimate.
- Define the estimate input required and party responsible for the inputs.
- Includes an estimate development schedule.
- Defining due dates for the required input
- Documentation to be submitted to the estimating team,
- Estimate completion and review dates, etc.
- Identifies major items, cost categories and overlays and defines how they are to be priced and/or estimated.
Basis of Estimate (BOE):
- BOE describes scope of estimate / how the estimate was developed.
- Records agreements defining how estimate was developed, the scope and major estimate assumptions.
- The BOE Includes:
- The estimating methodology
- Estimate organization (WBS)
- Brief summary of scope of facilities and schedule.
- Listing of applicable engineering documents used.
- Definition how major elements were priced and/or estimated.
- Definition of any cost overlays or allowances, etc.
- List of applicable qualifications and assumptions
- List of estimate exclusions
- Other applicable major items having impact on the estimate.