Chapter 1

Introduction

Objectives• Upon completion of this chapter,

you will be able to:– List and briefly describe the different

functions served by estimating in the construction industry

– Briefly describe the cost planning process including the role of conceptual estimates and preliminary estimates

Objectives (cont’d.)– Describe the three main project

delivery systems—traditional design-bid-build, construction management, and design-build—and explain how conceptual, preliminary, and detailed estimates are used with each

– Identify what type of estimating is required for lump-sum, unit-price, and cost-plus contracts

Objectives (cont’d.)– Outline the detailed estimating

procedure– Recognize the need for knowledge of

Occupational Safety and Health Administration safety standards and the impact that compliance with the standards has on construction costs

Introduction• Goal of this book:

– Present a method of compiling consistently accurate construction cost estimates • In a minimum of time• Can be easily integrated with latest

technology• Intended to represent a standard or basic

core

What Is an Estimate?• Probable total cost of a future activity

– Occurs in all industries and government agencies:• Budget preparation for future expenditures• Anticipate what something will cost

– Basic approach:• Identify work items to be completed • Measure work items size • Assess likely cost of work

The Role of Estimating

Figure 1.1 Role of the Estimator in the Traditional Construction Process (Delmar/Cengage Learning)

Conceptual Estimates• Produced from owner’s notion of

the construction: – Lacks design details

• Primary factors for project feasibility:– Value and cost of development

• Cost profile embraces many constituents• Some costs are easy to establish

Preliminary Estimates and Cost Planning

• Prepared as design develops– Informs whether design meets the

budget– Provides alternative design cost

information• Value analysis: improvement justification

– Can be subdivided into prices• Groupings of building components

Preparing Construction Estimates

• Main categories:– Preliminary estimating techniques– Detailed estimating techniques

• Influential factors:– Project type– Delivery system– Nature of delivery system contracts

Figure 1.2 Types of Project and Estimating Methods (Delmar/ Cengage Learning)

Project Delivery Systems and Estimating

• Traditional (design-build) delivery– Project is fully designed before work begins

• Construction management delivery– Facilitates overlap between project stages– Allows earlier completion

• Design-build delivery– Single organization assumes responsibility

Figure 1.3

Traditional (Design- Bid- Build) Delivery System

Figure 1.4

Construction Management Delivery System

Figure 1.5

Design- Build Delivery System

Estimates for Different Types of Contracts

• Lump-sum contracts– Defined scope of work for stipulated sum

• Cost-plus contracts– Uncertain total cost of construction

• Used if work must get underway or is difficult to define

– Contract followed by costing of operations

Estimates for Different Types of Contracts

(cont’d.)• Unit-price contracts– Measurement and payment– Based on pricing schedule

• Breakdown of the work • Estimated item quantities

– Enables owner to obtain competitive prices• Some cost control

Estimates for Different Types of Contracts

(cont’d.)• Detailed estimates – Stages:

• Quantity takeoff• Recap quantities• Pricing the recap• Pricing subcontractor’s work• Pricing general expenses• Summary and bid

Estimating and Construction Safety

• Occupational Safety and Health Administration – Safety standards

• Failure to comply may result in fines or imprisonment

• Cost of poor safety on the work site– Growing awareness

• Direct and hidden costs

Summary• Estimating serves several purposes

– Preparation of bids and cost control• Conceptual estimates: project feasibility • Preliminary estimates: budget control• Detailed estimates: forecast costs

accurately

• Be aware of safety requirements– Occupational Safety and Health

Administration