Course details

Overview ?

The Course

The decision to proceed with a project is often based almost exclusively on early conceptual costestimates, and these estimates provide the basis for the cash flow projections and budget forecasts used during the project feasibility study. Unreliable cost estimates can result in significant cost overruns later in the project life when it is too late to contain them. As potential projects are considered, management not only requires costs estimates of high accuracy, they seek opportunities to reduce life-cycle costs, improve budget accuracy and optimize whole-life project value.

Determining which estimation method to use, at each stage of project development, depends on theinformation available at the time of preparation and its desired accuracy. Besides, decisions regardingoptimising project costs without sacrificing quality or functionality are highly dependent on the use of a set of systematic and logical procedures and techniques to enhance the whole-life project value.This course will provide the delegates with the necessary skills needed for accurately estimating the total cost of their proposed projects, eliminating unnecessary costs, linking cost estimates to selectedprocurement methods, and enhancing the overall value of project delivery. The course offers a series of estimating techniques and processes to forecast accurately the anticipated costs of projects with a focus on budget estimates, estimates for pre-construction services, estimating contractor and sub-contractor work, estimating general conditions, pricing self-performed work, estimating negotiated contracts, and performing lump-sum and unit-price estimates.

The course also presents the value engineering methodology which emphasizes the return-on-investment aspect of decision-making in terms of lifecycle costs during project planning, procurement and execution. This methodology can be used to identify alternative ideas/solutions at any project phase to produce the client’s best value requirements. Within the project management context this course significantly enhances cost estimating, budgeting, creative thinking, problem solving, and informed decision-making skills.

The Structure

Module 1 - Project Cost Estimating Skills

Module 2 - Value Engineering Skills

The Goals

The primary objectives of the programme are to help delegates to:

Gain knowledge of techniques used in project estimating, from the conceptual stage to the final detailed estimate
Understand the different types of estimates used to accurately and progressively estimate project costs
Understand the different types of contracts based on the distribution of risk between contracting parties
Effectively apply incentive arrangements to get the best results from the contract
Understand the fundamental concepts of Value Engineering and Analysis
Understand how value engineering supports effective project management by providing a continuous thread of good practice throughout the project development process
Appreciate the level and nature of the information needed to develop a project scope
Gather and organize information and cost relevant to key elements of the project
Learn how to capture and incorporate stakeholders’ input in the development of the project charter
Report effectively to top management and project stakeholders in the context of proposing alternatives that improve the overall project value
Demonstrate proficiency in applying life-cycle costing principles

Objectively present a convincing case in support of certain project alternatives.

The Delegates

This course is designed for all those responsible for making significant decisions concerning costs, plans and budgets for large and complex projects. Project managers, project cost estimators, cost controllers, project planners, contract professionals, and project procurement staff will find this course highly relevant.

The course should also be of interest to anyone involved in project initiation, project estimating and budgeting, and development as well as critical assessment of project cost proposals in client and contracting companies.

The Process

The course is a mixture of speaker input, case studies and practice exercises which will be used to facilitate group discussion. Delegates will gain detailed knowledge of estimating and value engineering concepts and techniques by active participation in the exercise/training sessions. Through lectures, case studies and practical exercises, delegates will focus on the relevant key concepts, terms, and principles necessary for realistically estimating and optimizing project costs.

The Benefits

Organizations will be better prepared in relation to how they:

Apply a consistent and streamlined project cost management process according to best practices
Utilize information from previous projects and industry standards to estimate costs for a new project.
Master the application of cost estimating tools and techniques in order to improve all levels of project estimating and control in the organization.
Effectively incorporate risk in cost estimation to provide a more realistic cost baseline which will be used to monitor cost performance during project execution.
Form and instill common understanding among multi-disciplinary teams,
Focus the efforts on the purposes behind the project.
Adopt and apply a structured approach, tested and successful procedures that are directed toward achieving success in meeting the purposes for the "project" by all involved.

The Results

Delegates attending this course will be able to:

Integrate all relevant project elements into a cohesive and comprehensive cost estimate
Prepare budget estimates that will enable the owner-organization to make informed decisions as to the feasibility of a potential project
Compare the costs of alternative strategies or technical approaches to ensure the most economical project at the desired level of quality
Structure the contract compensation arrangement to provide the highest level of incentives to complete the project on schedule and within the determined budget
Keep accurate control of the progressive budgeting process based on the various stages of design
Prepare accurate budget estimates through the programming phase, the schematic design phase, and finally the design development phase
Compare the costs of alternatives to ensure the most economical project at the desired level of quality
Understanding the most appropriate contracting structure to ensure the desired project results
Apply proper risk analysis to effectively mitigate risks at minimal costs, and to determine appropriate contingencies for residual risks
Obtain the skills required to prepare and manage the bidding process
Prepare lump-sum, unit-price, cost plus, and time-and-materials estimates and contracts
Keep accurate control of the progressive budgeting process based on the various stages of design
Manage the interface between many value-adding project phases and management expectations
Apply systematic and innovative methodology with multi-disciplinary approach to achieve better value and cost optimization for projects.

The Core Competencies

Delegates attending this course will enhance their competencies in the following areas:

Skill and confidence to estimate project costs accurately and ability to sidestep the most common cost estimating pitfalls and problems.
Developing an initial project budget for the owner
Determining project feasibility
Preparing bids and cost proposals
Determining the cost impacts of change orders
Preparing a Schedule of Values
Creating historical cost databases to improve future estimating accuracy
Bringing Value Engineering into the organization’s project initiation and planning processes
Evaluating alternatives based on their cost and true value throughout the project life-cycle.
Identifying major roadblocks to thinking creatively about project challenges, and ways to mitigate them
Evaluating the results of a brainstorming session to develop the best value-adding scenario for theproject.

The Programme Content

Module 1: Project Cost Estimating Skills

Cost Estimating Basics

The estimating life cycle
Phases of the Design Process
- Programming phase
- Schematic design
- Design development
- Construction documents
Estimating accuracy by phase
Conceptual Cost Estimates
Rough Order of Magnitude Estimates (Broad Scope Estimates)
Assemblies cost estimates
Cost indices
Semi-detailed Estimates (Narrow Scope Estimates)
Definitive Estimates (Detailed Scope Estimates)
Basic procedures
Lump-sum contracts
Unit-price contracts
Cost-plus contracts
Cost-plus contract with guaranteed maximum price (GMP)
Time-and-materials contracts
Bid method
Negotiated method
Quantity take-off
Types of construction contracts
Procurement methods
Pre-construction services
Risk analysis and contingencies

Broad Scope Cost Estimating Techniques

Adjustments to Project Cost for Broad Scope Estimates
PERT Project Cost Analysis
- PERT Unit Cost Estimates
  - Formulae for Cost Estimating
  - The Normal Distribution Curve
  - Z-Value Table
  - The Probability of Project Completion within Budget
  - Estimating Project Unit Cost by Using the Standard Deviation
  - Estimating the Project Unit Cost at a Required Probability
  - The Probability of Completing the Project at a Required Cost
  - PERT vs. Standard Deviation & Z-Values
  - Adjustments to Estimates Based on Previous Projects
- Adjustments for Time
- Review: Future Value of Money
- Review: Present Value of Money
- Equivalent Annual Interest Rate
- Index to Adjust for Time
- Equivalent Compound Interest
- Location Index for Construction
- Adjustments for Location
- Adjustments for Size
- Combined Adjustments
- Economic Price Adjustment
- Estimating Durations based on the Learning Curve Effect
- Estimating Costs based on the Learning Curve Effect
- Unit-Cost Adjustments
- Learning Curves

Budget Estimating Process

Estimating by design phase
- Programming budget estimates
- Schematic design budget estimates
- Design development budget estimates
Estimating pre-construction services
Request for proposal
Development of pre-construction services estimate
Pre-construction services contract
Budget control log

Bid Contract Estimating Process

Pre-estimate activities
- Estimating process
- Solicitation of lump-sum bids
- Order-of-Magnitude estimates
- Work Breakdown Structure
- Estimating team
- Scheduling the estimating work
- Subcontractors and major suppliers
- Estimating forms
- Accuracy and error prevention
Pricing self-performed work
Recap sheet
Materials
Labour
Applying pricing factors
Summary recap
Subcontractor work
Project summary schedule
Alternative techniques
Elements of the general conditions estimate
Final document review
Completing the bid summary
Final mark-ups
Sales tax
Validating the estimate
Estimating subcontractor work
Estimating General Conditions
Completing the estimate

Unit Price Estimates

Unit price bid forms
Direct cost estimation
- Materials
- Labour
- Indirect labour
- Subcontractors
- Recap summary sheet
- Direct-to-indirect cost factor
Mark-up determination
Variation-in-quantity contract provision
Risk analysis
Bid finalisation

Negotiated Contract Estimating

Guaranteed Maximum Price Estimates
- Contract procurement process
- Documents
- Strategies
- Estimating process
- Contingencies
Fee determination for negotiated contracts
Reimbursable versus Non-reimbursable costs
Home office overhead
Risk evaluation
Fee structure
Cost savings split
Strategies for responding to the Request for Proposal
Documents to be included with the Request for Proposal
General Contractor interview and selection process
Negotiated subcontracts
Cost proposals for negotiated contracts

Contract Types and Compensation Arrangements

Risk distribution in contracting
Project risk profiles
Contract types according to risk distribution
Fixed Price Contracts
- Firm Fixed Price
- Fixed Price with Economic Adjustment
Incentive Contracts
Fixed Price Incentive
Cost Plus Incentive
Cost Reimbursement
Cost Plus Award Fee
Cost Plus Fixed Fee
Cost-Plus Contracts
Time-and-Materials

Narrow Scope Cost Estimating Techniques

Power-sizing techniques (Capacity Ratios)
Factor estimates
Cost estimating relationships (CER)
Design-to-cost-estimates
Target cost estimates
Adjusting for Project Type and Quality Level
Features Determining the Quality Level (Grade) of a Structure
Adjusting for Quality Level by Using a Costing Publication
Economic Constraints
Parametric Cost Estimating
Analysis of Estimating Accuracy

Module 2:Value Engineering Skills

Framework for Applying Value Engineering in Projects

What is Value Engineering? Why is it important?
Defining Value Engineering concepts and principles
Purpose of Value Engineering and Value Analysis
Strengths and Weaknesses of Value Engineering
How and When is Value Engineering applied?
Project definition and initiation
Project scope and charter development
Life-cycle costing techniques
Project stakeholders analysis and management
Identifying relationships between Value, Cost and Worth
Initiating Value Engineering Process
Overview of Different Value Engineering Phases
The Information Phase – steps and procedures
Developing Value Engineering Job Plan

The Function Analysis Phase - Expressing Project Functional Needs and Constraints

The need for Function Analysis in projects
Defining project constraints – relationships and tradeoffs
Conceptual project cost estimating techniques
Function-Cost-Worth Analysis
Developing FAST Diagrams to identify critical project components
The Technical FAST Model to perform project value analysis
Case Study
Cross-Functional Project Team Approach

The Creative Phase - Inspiring Creativity in Your Project Team

Creativity and Creative thinking within the project environment
Individual vs. Group thinking to improve the quality of project decisions
Creativity techniques as applied to optimize project value
Blocks to creativity within the project team
Brainstorm project solutions
Reaching consensus and leveraging the power of project team collaboration
Project risk perception and identification
Project prioritization process using the Delphi technique
The use of Force-field analysis in project problem solving
Output of the Creative Phase

The Evaluation Phase -Making Informed Project Decisions

Project ideas screening
Project evaluation methods
Quantitative evaluation using objective data
Subjective evaluation – project-related criteria weighting
Revisiting project life-cycle costing analysis
Incorporating inflation in project economic analysis
Performing project risk and scenario analyses
Risk Life-cycle simulation modelling - best and worst project cost scenarios
Pitfalls associated with the use of existing economic models
Incremental benefit-cost analysis for project evaluation
Effective Decision-making in project environment
Output of the Evaluation Phase

The Planning and Reporting Phases -Getting Results through Effective Communication

Develop and assess VE proposals to optimize project value
Develop action plans and assign project roles and responsibilities
Reporting VE findings to Senior Management and project stakeholders
Mastering oral presentation techniques & interpersonal skills
Strategies for project plan execution
Incorporating VE into the early project phases
Integrating VE with Continuous Improvement Techniques
Wrap-up

Day 1

Day 2

Day 3

Day 4

Day 5

Training Methodology

Project Cost Estimating, Budgeting and Value Engineering Skills

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