Cost Management
Chapter Three
Cost Estimation
Eng. Mahmoud Nassar
All Right Reserved - Mahmoud Nassar – 01019973993- [Link]@[Link]
Sales, Estimation & Proposals Flow Chart
PreTender
Review
• S/Contr.
Distribute
• Tech. Tender
Prepare Tender
Tender Engineer/ Tender Documents Prepare Support Review
Client Information & Tender • Plant Manager/ Proposal Client
Docs. QS dep. Estimate
Sheet Information • QA Board
Documents • HSE
Cost Estimation Req.
Requirements:
BOQ
QS
BOM
Specs
Consumption rates/Norms
Vendor list
Material consumption rates and market prices
Workmanship rates and wages
Subcontractors quotations/latest price
Equipment rates and market prices
Time schedule
Logistics
Risks/Contingency
Commercial and Technical Submissions
Commercial Technical
BOQ Method statement
Price breakdown Schedule of works
Day work Rates Organization Chart
Form of Tender CVs for key staff
Plant List
Plant ownership
Bidder’s financial statements
Bidder’s similar experience
Tender Bond issuance
List of Preferred subcontractors
In-country Value
QA/QC submittals
HSE plan
Risk Management
Elements and Typical Program
Engineering; if required (4 – 8 weeks)
Direct Cost Analysis (4 – 6 weeks)
Coding the BOQ
Work Groups
Resource pricing (Labour, Plant, Material and S/C)
In-Direct Cost Analysis (1 – 2 weeks)
Staff
Site facilities
Camp Accommodation
Direct Cost Analysis
Labour Wages
Labour wages used in the direct Cost analysis are:
Wage as per × uplift factor
Ministry of labour
The “Uplift factor” is used to compensate for; Indemnity,
notice pay, leave pay, insurance, Ramadan,..etc
Direct Cost Analysis
Plant
Depreciation Interest
Recovery Cost
The Monthly Hire Rate
(direct Cost) provided by Insurance
and Tyres
the plant department registration
includes for the following
Spare parts Filters
Direct Cost Analysis
Material and S/C
Comparison sheets
Is the Price “Delivered
to site”, CIF or CFR ?
Scope of work S/C
S/C payment conditions
Direct Cost Analysis
Resources:
Deciding on the best rate for each resource (not necessary
the cheapest! )
Plant hire rates are prepared by PMV Department
Labour wages are calculated by the estimator for each
Area/Country.
In-Direct Cost Analysis
Mark-ups:
Items Considered as Markups are:
1. Managing Office & Area Overheads
2. Profit
3. Local Agent Fees (If any)
4. Financing Cost
5. Bank Guarantees
6. Insurance Cost
In-Direct Cost Analysis
Financing Cost:
How is the Financing Cost Calculated?
Client
Advance Retention
Payment
By Preparing
a Cash Flow
Payment
Conditions
In-Direct Cost Analysis
Bank Guarantee Cost:
What are the typical bank guarantees required for a project?
Tender Guarantee Advance Payment Performance Retention
(Bid Bond) Guarantee Guarantee Guarantee
• Required for: 90 • Required for: Full • Advanced • Required: Up till
days project duration. payment not paid the end of the
unless this is maintenance
• 1 – 2% of Tender • Typically, in the ready. period.
Value GCC at 10% of • Required: Until • Not acceptable to
project value. end of all clients.
• this is normally maintenance • Usually applied
recovered from period for half of the
monthly payment • Usually at 5-10% retention amount
certificates of project Value (5% of project
value)
In-Direct Cost Analysis
Insurance Cost:
What Costs of insurance should be allowed for in an estimate?
1. Contractors all risk (CAR)
2. Workmen’s Insurance
3. Temporary Facilities Insurance (Camps, Site Offices,
Stores, Precast yard, etc.)
Breakdown
Example (1)
A feeding gas pipeline project (shown in drawings) consists of 5
work packages: excavation, formwork, steelwork, concreting and
ducting. It is required to prepare a detailed contract price showing
; Duration sheet, work sheet, cost summary sheet, Recapping
sheet and BOQ proposal given the following data:
• Reinforcement = 80 kg/m3
• Formwork: 1 labor (100USD/day) + 2 helper (80USD/day) produce 150
m2/day.
• Steelwork: 1 Labor (120USD/day) + 2 helpers (100USD/day) produce 4
ton/day.
• Pouring = 160 USD/day
• Batch plant: 1000 m3/day and
• Ducting: 100m/day
Example (1) Contd.
• Formwork Rent: 15 USD/m2
• Steel Cost: 4000 USD/ton
• Ready mix Concrete Cost : 220 USD
• Equipment: 1 pump (10 USD/m3) + 2 truck (2.5 USD/m3)
• Sub-contractor Ducting cost: 6000 USD
• Sub-contractor Excavation Cost: 9000 USD
• Gas pressure test: 10,000 USD
• Payroll Insurance : 5%
• Payroll Tax : 11%
• Sales Tax : 10%
• Risk : 1%
• Bank Guarantee: 10%
• Site overhead: 70,000 USD
• General Overhead: 12% and
• Profit: 10%
Example (1) Contd.
Example (1) - Solution
1. Quantity Surveying (Work Sheet)
- Exc. = 4.5*4.5*100 = 2,025 m3
- F.W = 2(4.5*0.5) + 2(0.5*100) + 2(4*100) + 2(0.5*4) =
909 m2
- Concrete = (4.5*0.5*100) + (4*0.5*100) = 425 m3
- Steel Work = 80*425 = 34,000 kg (34ton)
- Ducting = 100 m’
Example (1) - Solution
2. Duration Estimate (Duration Sheet)
- Duration Exc. = 1 day assumed
909 𝑚2
- Duration F.W = 150 𝑚2/𝑑 = 6 days
425 𝑚3
- Duration Concrete =
1000 𝑚3/𝑑
= 1 day
34 𝑡𝑜𝑛
- Duration Steel Work =
4 𝑡𝑜𝑛/𝑑
= 9 days
100 𝑚′
- Duration Ducting =
100 𝑚′/𝑑
= 1 day
Example (1) - Solution
3. Cost Estimating (Cost Summary Sheet)
# Work Package L.C M.C E.C S/C Total
1 Excavation - - - 9,000 9,000
2 Form Work 1,560.00 13,635 - 15,195
3 Steel Work 2,880 136,000 - - 138,880
4 Concrete 160 93,500 6,375 - 100,035
5 Ducting - - - 6,000+ 16,000
10,000
Total 4,600 243,135 6,375 25,000 279,110
Example (1) - Solution
4. Recapping Sheet
Item Calculation Total
LC 4,600*1.16 5,336
MC 243,135*1.1 267,448
EC 6,375*1.0 6,375
S/C 25,000*1.0 25,000
Total Direct Cost 304,159
• Construction Cost = (304,159+70,000) = 374,159
• Contract price= CC/(GOH+Investment+profit)
= 374,159/(1-0.33) = 558,446.
Cost Estimate (Cost Plus contract agreement)
Cost Estimate
Shop
RFI Execution Equipment
Drawing
Self
Take-Off S/C
Execution
Method of
Installation
Contract Statement MAR Labor
S/C
(MOS)
Scope of
PO’s
Work