The National Academies Press

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From page 39... ... Figure 6.1 provides an overview of the cost estimation practice and cost estimation management processes used to prepare baseline project estimates for priority programming and the STIP. The basic steps of the cost estimation process are the same during programming and preliminary design. Read the entire page →
From page 40... ... * represents the dynamic nature of the milestone dependant on the practices of the state highway agency Macro Environment To Final Design STIP = statewide transportation improvement plan Project Development Process Figure 6.1. Read the entire page →
From page 41... ... . Methodology This chapter addresses cost estimation practice and cost estimation management practices as applicable to the programming and preliminary design phase of project development. Read the entire page →
From page 42... ... If the budget control method is not followed, then there may be a reduced level of funds for other projects in the program. Tools B1.2 Constrained Budget B1.3 Standardized Estimation and Cost Management Procedures 42 Strategies Cost Escalation Factors M an ag em en t Sc o pe an d Sc he du le O ffPr ism Is su es Ri sk D el iv er y an d Pr oc u re m en t D oc u m en t Q ua lit y Es tim at e Qu al ity In te gr ity Section 6.1 6.2 6.3 6.4 6.5 6.6 6.7 6.8 Bias √ √ Delivery and Procurement Approach √ √ √ √ Project Schedule Changes √ √ √ √ Engineering and Construction Complexities √ √ √ √ √ Scope Changes √ √ √ √ Scope Creep √ √ √ Poor Estimation √ √ √ √ √ Inconsistent Application of Contingencies √ √ Faulty Execution √ √ √ Ambiguous Contract Provisions √ In te rn al Contract Document Conflicts Local Concerns and Requirements √ √ √ √ √ Effects of Inflation √ √ √ √ Scope Changes √ √ √ Scope Creep √ √ Market Conditions √ √ √ √ √ Unforeseen Events √ Ex te rn al Unforeseen Conditions √ Table 6.1. Read the entire page →
From page 43... ... B1.5 Variance Reports on Cost and Schedule Communication C1.1 Communication of Importance C1.2 Communication of Uncertainty C1.3 Communication within State Highway Agency C1.4 Definitive Management Plan C1.5 Proactive Conveyance of Information to the Public C1.7 Year-of-Construction Costs Computer Software C2.1 Agency Estimation Software C2.2 Commercial Estimation Software Consistency C4.1 Cradle-to-Grave Estimators C4.2 Estimation Checklist C4.3 Estimation Manual (Guidelines) C4.4 Estimator Training C4.5 Major Project Estimation Guidance C4.6 Standardized Estimation and Cost Management Procedures C4.7 State Estimation Section Gated Process G1.2 Cost Containment Table Recognition of Project Complexity R1.1 Complexity Definitions Table 6.2. Read the entire page →
From page 44... ... Tools C1.1 Communication of Importance C1.2 Communication of Uncertainty C1.3 Communication within State Highway Agency C1.4 Definitive Management Plan C1.5 Proactive Conveyance of Information to the Public C1.7 Year-of-Construction Costs 6.1.3 Computer Software Why? The estimation process at the programming and preliminary design phase uses a variety of estimation approaches. Read the entire page →
From page 45... ... Consistency in cost estimation management is essential to bridge the gap between these different project participants and to integrate the flow of information during project development. Although consistency is likely more important for complex projects, it is certainly still important for smaller and less complex projects because the number of these types of projects is generally high within state highway agencies. Read the entire page →
From page 46... ... Changes related to complexity should be noted and communicated as they become apparent. Tool R1.1 Complexity Definitions 6.2 Strategy: Scope and Schedule Controlling project scope and schedule changes requires sound cost estimation practice and cost estimation management methods. Read the entire page →
From page 47... ... Tools C1.2 Communication of Uncertainty C1.3 Communication within State Highway Agency C1.4 Definitive Management Plan C1.7 Year-of-Construction Costs 6.2.3 Creation of Project Baseline Why? To properly track cost and the impact of changes due to better definition of project conditions, all projects must be 47 SCOPE AND SCHEDULE STRATEGY Formulate definitive processes for controlling project scope and schedule changes Cost Estimation Management Cost Estimation Practice Buffers Constructability B2.1 Board Approvals C5.1 Constructability Reviews B2.2 Constrained Budget B2.3 Management Approvals Communication Value Engineering C1.2 Communication of Uncertainty V2.1 Value Engineering C1.3 Communication within State Highway Agency C1.4 Definitive Management Plan C1.7 Year-of-Construction Costs Creation of Project Baseline C6.1 Cost Containment Table C6.2 Estimation Scorecard C6.3 Scope Change Form C6.4 Scoping Documents Delivery and Procurement Method D1.2 Delivery Decision Support Identification of Changes I1.1 Cost Containment Table I1.2 Estimation Scorecard I1.3 Project Baseline I1.4 Scope Change Form Table 6.3. Read the entire page →
From page 48... ... Every project should have an established baseline for both scope and cost. The project baseline scope and cost estimate is used to measure performance throughout project development and construction. Read the entire page →
From page 49... ... . Project Complexity Establishing reliable baseline definitions of scope and cost in the early stages of project development for large projects is difficult, primarily because of the many unknowns at that point in time. Read the entire page →
From page 50... ... The communication method influences the "communicate approval" step in Figure 6.1. 50 OFF-PRISM STRATEGY Use proactive methods for engaging external participants and assessing the macroenvironmental conditions that can influence project costs Cost Estimation Management Cost Estimation Practice Communication Estimate Review -- Internal C1.1 Communication of Importance E3.2 Off-Prism Evaluation C1.2 Communication of Uncertainty C1.3 Communication within State Highway Agency Right-of-Way Identifying Off-Prism Issues R2.5 Right-of-Way Estimator Training I3.1 Environmental Assessment R2.6 Separate Right-of-Way Estimators I3.2 Percentage of Total Project Cost Public Involvement P3.1 Meetings Table 6.4. Read the entire page →
From page 51... ... Early involvement of the public may help prevent future modifications to project scope. This would decrease the impact that scope creep or scope changes have on project costs. Read the entire page →
From page 52... ... Tools I3.1 Environmental Assessment I3.2 Percentage of Total Project Cost 6.4 Strategy: Risk When effectively applied during programming and preliminary design, risk may be the single most important strategy that will help control project cost escalation. Many different approaches to account for risk are used by state highway agencies. Read the entire page →
From page 53... ... Risks must be continuously reassessed during 53 RISK STRATEGY Identify risks, quantify their impact on cost, and take actions to mitigate the impact of risks as the project scope is developed Cost Estimation Management Cost Estimation Practice Communication Risk Analysis C1.2 Communication of Uncertainty R3.1 Analysis of Risk and Uncertainty C1.3 Communication within State Highway Agency R3.2 Contingency -- Identified R3.4 Estimate Ranges R3.5 Programmatic Cost Risk Analysis Identification of Risk Delivery and Procurement Method I2.1 Red Flag Items D1.1 Contract Packaging I2.2 Risk Charter D1.2 Delivery Decision Support Right-of-Way R2.1 Acres for Interchange R2.2 Advance Purchase (Right-of-Way Preservation) R2.3 Condemnation R2.4 Relocation Costs Table 6.5. Read the entire page →
From page 54... ... Risk analysis also supports risk mitigation of identified risks. This risk analysis must start during programming and continue throughout project development. Read the entire page →
From page 55... ... With design-build project delivery, the design-build contractor takes on increased risk and will price this risk based on the level of scope definition, understanding of proposed contract terms and conditions, and project complexity. The impact of risks the design-build contractor is expected to carry must be covered in the state highway agency's cost estimate. Read the entire page →
From page 56... ... . Project Complexity With increased project complexity, there is an increased need to document adjustments and alternative evaluations as 56 DELIVERY AND PROCUREMENT STRATEGY Apply appropriate delivery methods to better manage cost because project delivery influences both project risk and cost Cost Estimation Management Cost Estimation Practice Delivery and Procurement Method D1.1 Contract Packaging D1.2 Delivery Decision Support Table 6.6. Read the entire page →
From page 57... ... This is perhaps more important as preliminary design progresses and the plans and specifications 57 DOCUMENT QUALITY STRATEGY Promote cost estimate accuracy and consistency through improved project documents Cost Estimation Management Cost Estimation Practice Computer Software Constructability C2.1 Agency Estimation Software C2.2 Commercial Estimation Software C5.1 Constructability Reviews C2.4 Simple Spreadsheet Estimate/Document Review E1.1 Estimate/Document Review -- External E1.2 Estimate/Document Review -- Internal Table 6.7. Programming and preliminary design phase document quality strategy: Methods and tools. Read the entire page →
From page 58... ... Tools E1.1 Estimate/Document Review -- External E1.2 Estimate/Document Review -- Internal 6.7 Strategy: Estimate Quality Both cost estimation management and cost estimation practices are critical to achieving accurate and consistent cost estimates during the programming and preliminary design phase. Agencies should seek to implement the methods identified in Table 6.8. Read the entire page →
From page 59... ... Tools C4.1 Cradle-to-Grave Estimators C4.2 Estimation Checklist C4.3 Estimation Manual (Guidelines) C4.4 Estimator Training C4.6 Standardized Estimation and Cost Management Procedures C4.7 State Estimation Section 59 ESTIMATE QUALITY STRATEGY Use qualified personnel and uniform approaches to achieve improved estimate consistency and accuracy Cost Estimation Management Cost Estimation Practice Computer Software Communication C2.1 Agency Estimation Software C1.7 Year-of-Construction Costs C2.2 Commercial Estimation Software C2.3 In-House Conceptual/Parametric Estimation Software Consistency Design Estimation C4.1 Cradle-to-Grave Estimators D2.1 Analogous or Similar Project C4.2 Estimation Checklist D2.2 Agency Estimation Software C4.3 Estimation Manual (Guidelines) Read the entire page →
From page 60... ... The cost estimation practice and cost estimation management processes depicted in Figure 6.1 must coincide with gates in the project development process. Project Complexity Complex projects involve many components that may easily be overlooked as the estimate is developed. Read the entire page →
From page 61... ... Tool C1.7 Year-of-Construction Costs 6.7.7 Design Estimation Why? Project scope definition is continuously refined during the programming and preliminary design phase. Read the entire page →
From page 62... ... . Project Complexity The formality of a project estimate review and the depth of the review at this stage in project development will vary depending on the type of project and project complexity. Read the entire page →
From page 63... ... Agencies should institute cost estimation management and cost estimation practices as identified in Table 6.9 to ensure estimate integrity. Eight methods are applicable to the integrity strategy described in Table 6.9 for use during the programming and preliminary design phase of project development. Read the entire page →
From page 64... ... Proper communication of estimate information is critical to maintaining stakeholder support. Further, proper communication of changes in project costs and the reasons for these changes is needed to ensure the credibility of the agency with respect to cost estimation management for large and complex projects. Read the entire page →
From page 65... ... Projects less than this cost should follow standard procedures related to cost estimation management and cost estimation practices. Tips for Success Training and education about the procedures and/or guidelines being adopted for every project is mandatory for all project team participants. Read the entire page →
From page 66... ... This fact, in addition to lack of specialized personnel within a state highway agency, may necessitate consulting with external subject matter experts regarding project estimates or cost management practices. External expert reviews can be used to validate internal reviews. Read the entire page →
From page 67... ... Ensuring that all elements included in work packages are covered in cost estimates is more time consuming and more difficult to achieve on large projects, especially during the programming and preliminary design phase, when project scope is evolving. Tips for Success A key to successful use of this method is the careful consideration of all critical elements that are shown on the checklist during the cost estimation process and ensuring that the impact of these elements is accurately captured in the estimate. Read the entire page →
From page 68... ... C4.4 Estimator Training C4.5 Major Project Estimation Guidance C4.6 Standardized Estimation and Cost Management Procedures C4.7 State Estimation Section Constructability C5.1 Constructability Reviews Creation of Project Baseline C6.1 Cost Containment Table C6.2 Estimation Scorecard C6.3 Scope Change Form C6.4 Scoping Documents Delivery and Procurement Method D1.1 Contract Packaging D1.2 Delivery Decision Support Design Estimation D2.1 Analogous or Similar Project D2.2 Agency Estimation Software D2.3 Cost Based, Bottom Up D2.4 Historical Bid Based D2.5 Historical Percentages D2.6 Major Cost Items using Standardized Sections D2.7 Parametric Estimation D2.8 Spreadsheet Template D2.9 Trns•port Design to Mandated Budget D3.1 Design to Cost Document Estimate Basis and Assumptions D4.1 Project Estimation File Estimate/Document Review E1.1 Estimate/Document Review -- External E1.2 Estimate/Document Review -- Internal Estimate Review -- External E2.1 Expert Team Estimate Review -- Internal E3.1 Formal Committee E3.2 Off-Prism Evaluation E3.3 In-House/Peer E3.4 Round Table E3.5 Year-of-Construction Costs Gated Process G1.1 Checklists G1.2 Cost Containment Table Identification of Changes I1.1 Cost Containment Table I1.2 Estimation Scorecard I1.3 Project Baseline I1.4 Scope Change Form Identification of Risk I2.1 Red Flag Items I2.2 Risk Charter Identifying Off-Prism Issues I3.1 Environmental Assessment I3.2 Percentage of Total Project Cost Project Scoping P2.1 Estimation Checklist P2.2 Scoping Document P2.3 Work Breakdown Structure Public Involvement P3.1 Meetings Recognition of Project Complexity R1.1 Complexity Definitions Right-of-Way R2.1 Acres for Interchange R2.2 Advance Purchase (Right-of-Way Preservation) R2.3 Condemnation R2.4 Relocation Costs R2.5 Right-of-Way Estimator Training R2.6 Separate Right-of-Way Estimators Risk Analysis R3.1 Analysis of Risk and Uncertainty R3.2 Contingency -- Identified R3.4 Estimate Ranges R3.5 Programmatic Cost Risk Analysis Validate Costs V1.1 Estimation Software Value Engineering V2.1 Value Engineering Verify Scope Completeness V3.1 Estimation Checklist Method/Tool Table 6.10. Read the entire page →

From page 39...

... Figure 6.1 provides an overview of the cost estimation practice and cost estimation management processes used to prepare baseline project estimates for priority programming and the STIP. The basic steps of the cost estimation process are the same during programming and preliminary design.