2015 Toronto Section Presentation
- 1. Estimate Review / Validation Checklist Douglas W. Leo CCP CEP FAACE FRICS Saybrook Associates, Inc. Chair AACE International Estimating Sub-Committee
- 2. AACE Recommended Practices • Cost Engineers Tool Kit - – RP 10S-90 Cost Engineering Terminology – RP 18R-97 Cost Estimating Classification System – RP 21R-98 Project Code of Accounts – RP 27R-03 Schedule Classification Systems – RP 30R-03 Implementing Project Constructability – RP31R-03 Reviewing, Validating and Documenting an Estimate – RP34R-05 Basis of Estimate – RP 36R-08 Development of Cost Estimating Plans – RP 38R-06 Documenting the Schedule Basis
- 3. Review/Validation Checklist - Introduction The Project Cost Estimate that was just delivered is amazing. It is exactly what was expected, costs were immediately understandable and lower than anticipated. Management will love this. The work on this project estimate is worthy of great praise …… outstanding job!!!! Were these words ever spoken outside of someone’s dreams? …….. I think not.
- 4. Review / Validation Checklist Introduction • Project Teams universally have the desire to produce successful outcomes. • They all want their work to be seen as on time, on budget, and meeting the desire functionality. • The desire is for a completed project package that is: – Transparent – Explainable – Defendable – Acceptable to management
- 5. Review / Validation Checklist Introduction • Three main project drivers: Functionality, Schedule, Cost • Over the course of the project there is shifting importance for the three drivers but at some point costs become the main issue with regards to moving the project forward. • When costs become the main focus, a thorough understanding of the project estimate and how it was developed is the task at hand. • A review and validation takes place at multiple levels: internally by the estimating provider, by the owner client, by third party reviewers
- 6. Review / Validation Checklist Introduction Completed project estimating package should always include certain elements: • Basis of Estimate • Estimate Summary • Estimate Detail • Reconciliation Report • Historical Cost Metric Report • Estimate Deliverables Report • Risk Analysis Report
- 7. PHASE 2 SELECT from Alternatives Clearly Frame Goal Test for Strategic Fit Preliminary Overall Plan Preliminary Assessment ~1 % Engr. AACE Class 5 Cost Estimate PHASE 1 IDENTIFY & Assess Opportunity Fully Define Scope Develop Detailed Execution Plans Refine Estimate Submit Funding for Approval ~25 % Engr. AACE Class 3 Cost Estimate Generate Alternatives Preliminary Development of Alternatives Develop Expected Value Identify Preferred Alternative AACE Class 4 Cost Estimate Operate Asset Monitor & Evaluate Performance Identify New Opportunities PHASE 3 DEVELOP Preferred Alternative PHASE 4 EXECUTE (Detail EPC) PHASE 5 OPERATE & Evaluate Implement Execution Plan Minimize Changes Finalize Operating Plan Business Plan for Phase 5 Project Review 1 2 3 4 5 AFE Various Cost Estimates Are Prepared During the Project Development Process
- 8. Process Industry Classification Matrix Primary Characteristic Secondary Characteristics LEVEL OF PROJECT DEFINITION END USAGE METHODOLOGY ACCURACY RANGE PREPARATION EFFORT ESTIMATE CLASS Expressed as % of complete definition Typical purpose of estimate Typical Estimating Method Typical variation in low and high ranges (a) Typical degree of effort relative to least cost indice of 1 (b) 5 0% to 2% Concept Screening Capacity Factored, Parametric Models, Judgement, or Analogy -20% to -50% +30% to +100% 1 4 1% to 15% Study or Feasability Equipment Factored, or Parametric Models -15% to -30% +20% to +50% 2 to 4 3 10% to 40% Budget, Authorization, or Control Semi-Detailed Unit Costs w/ Assembly Level Line Items -10% to -20% +10% to +30% 3 to 10 2 30% to 70% Control or Bid/Tender Detailed Unit Cost w/ Forced Detailed Takeoff -5% to -15% +5% to +20% 4 to 20 1 50% to 100% Check Estimate or Bid/Tender Detailed Unit Cost w/ Detailed Takeoff -3% to -10% +3% to +15% 5 to 100 Notes: a) The state of process technology and availability of applicable reference cost data affect the range markedly. The +/- value represents typical percentage variation of actual costs from the cost estimate after application of contingency (typically at a 50% level of confidence) for given scope. b) If the range indice value of "1" represents .005%, then an indice value of 100 represents 0.5% Estimate preparation effort is highly dependent upon the size of the project and the quality of estimating data and tools.
- 9. Estimate Input Checklist and Maturity Matrix Estimate Classification CLASS 5 CLASS 4 CLASS 3 CLASS 2 CLASS 1 General Project Data Project Scope Description General Preliminary Defined Defined Defined Plant Production/Facility Capacity Assumed Preliminary Defined Defined Defined Plant Location General Approximate Specific Specific Specific Soils & Hydrology None Preliminary Defined Defined Defined Integrated Project Plan None Preliminary Defined Defined Defined Project Master Schedule None Preliminary Defined Defined Defined Escalation Strategy None Preliminary Defined Defined Defined Work Breakdown Structure None Preliminary Defined Defined Defined Project Code of Accounts None Preliminary Defined Defined Defined Contracting Strategy Assumed Assumed Preliminary Defined Defined Engineering Deliverables Block Flow Diagrams S/P P/C C C C Plot Plans S P/C C C Process Flow Diagrams (PFD's) S/P P/C C C Utility Flow Diagrams (UFD's) S/P P/C C C Piping & Instrument Diagrams (P&ID's) S P/C C C Heat & Material Balances S P/C C C Process Equipment List S/P P/C C C Utility Equipment List S/P P/C C C Electrical One-Line Drawings S/P P/C C C Specifications & Datasheets S P/C C C General Equipment Arrangement Drawings S P/C C C Spare Parts Listings S/P P C Mechanical Discipline Drawings S P P/C Electrical Discipline Drawings S P P/C Instrumentation/Control System Discipline Drawings S P P/C Civi/Structural/Site Discipline Drawings S P P/C
- 10. Estimate Review / Validation Checklist • Total Engineering Completeness - (%) at the time of MTO creation – primary determination of accuracy and estimate classification • Project Estimating Plan – developed, reviewed, agreed upon by all parties, signed off before start of estimate • Basis of Estimate – prepared by estimating provider, reflecting the completed estimate
- 11. Estimate Review / Validation Checklist • Estimate Summary – with a defined WBS / COA structure • Estimate Detail – transparent and easily followed that is in-line with the estimate summary • Estimate Cost Metrics – how closely are estimated costs in-line with defendable historical cost metrics (from established actual costs not estimated costs)
- 12. Estimate Review / Validation Checklist • Estimate Reconciliation – differences and similarities between Previous estimates for this project or similar projects • Estimate Deliverables Checklist – what were the deliverables utilized to produce the estimate. Who produced them & when were they available to estimating (Primary indicator of completeness of scope) • Project Risk Analysis and Risk Logs – how was contingency developed and its statistical significance? How was risk identified and mitigated?
- 13. Estimate Review / Validation Checklist • Material Take Offs – how were MTOs created, by whom and when in the process? How were updates handled? Trace MTOs from creation to the estimate • Equipment pricing – how much is equipment pricing is from quotes, from historical data or allowances? • Equipment Bid Tabs – What is the project philosophy regarding the selection of equipment pricing? Are the costs in the estimate traceable to quotes? • Change Management Plan and Change Logs – how is scope being managed?
- 14. Conclusions • Utilizing the Checklist a reviewer will understand the development of the project cost and their completeness and degree of accuracy • Any items not available will indicate areas of concern and places to focus greater attention • But most importantly the checklist, if utilized by estimating providers and project teams as a guide during the complete project process, will produce project costs that will be better understood and manageable to all project stakeholders.