Archdiocese of Tuguegarao

LYCEUM OF APARRI
Aparri, Cagayan
COLLEGE OF ENGINEERING
Module in CE Elec 3 (Construction Cost Engineering)
WEEK 1 - 2:
CONSTRUCTION COST ENGINEERING

Introduction:
Cost Engineering is the engineering practice devoted to the management of project cost, involving such
activities as estimating, cost control, cost forecasting, investment appraisal and risk analysis. Cost Engineers
budget, plan and monitoring investment projects. They seek the optimum balance between cost, quality and
time requirements.

Skills and knowledge of cost engineers are similar to those of quantity surveyors. In may industries, cost
engineering is synonymous with projects controls.

A cost engineer is “an engineer whose judgment and experience are utilized in the application of scientific
principles and techniques to problems of estimation, cost control, business planning and management
science, profitability analysis, project management, and planning and scheduling.

LESSON 1: CONSTRUCTION COST ESTIMATE

Construction Cost Estimate is an approximate computation of the probable costs of a project. Cost estimate
will help dictate the scope of work of the project during the Pre-design phase, Design phase, Bidding phase
and Construction phase enabling the Owner and the Contractor to come up with a realizable project.

The type of estimate to be prepared as well as the accuracy of an estimate depends upon the following:

 Information available
 Time available
 Intended use of the estimate

Estimates related to both the overall budget and to the preliminary allocations of budget to the various
systems are periodically prepared. These cost estimates are successfully revised and refined as working
drawings to each system are developed. Estimating is the basic of financial control, planning and procurement
of resources throughout the project. An accurate estimate can also helps the contractor in a successful tender.

An accurate estimate is helpful in four key areas of activity:

 Planning
 Financing
 Tendering
 Constructing

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 PLANNING: Planning a contract includes studying the project resources as cash, labour, materials
and equipment. The project duration, project costs are determined based on the results of the estimate.
Planning facilities:
 time ordering of project resources
 project control
 preparation of cash flow analysis

 FINANCING: These are several outside sources that contractors can use to help with its cash
management aside from their working capital. The principal source is the bank loan or bank draft. When
preparing loan request, an estimate of the financial requirements at the different stages of the project shall be
submitted to the institution lending the money.

 TENDERING: Contractors compete to be awarded the contract. The more accurate the estimate, the
better the contractor’s chances of winning the contract and executing it successfully. A good tender sum is the
lowest possible and still allows the project to be executed with a reasonable profit margin. The tender sum
consist of the following components:

Example: Proposal for the provision and installation of a Dry Ceiling System

Material Cost = P 450, 000.00

Direct Cost (DC) Labor Cost = 135, 000.00

Cost of Equipment = 5, 000.00

Total Direct Cost (DC) 590, 000.00

Indirect Cost (DC) Overhead (5% of DC) = 29, 500.00

Profit (5% of DC) = 88, 500.00

Total Indirect Cost (IC) 118, 000.00

Total DC & IC 708, 000.00

Taxes 42, 480.00

VAT (6% of DC + IC) =

TENDER SUM = 750, 480.00

 CONSTRUCTING: During construction the contractor’s target is to follow the project cost and project
duration. This means controlling and programming the expenditure as well as the physical progress of work.
The estimates on materials, labor, and equipment are regularly monitored and compared to the original cost.
Expenditures and incoming payments are compared with those predicted in the cash flow analysis which was
also based from the estimating stage.

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LESSON 1.1: ESTIMATING METHODS

A. GENERAL ESTIMATING GUIDELINES

 Do not round-off quantities until the final summary.

 Mark drawings with different colors as items are taken off.
 Keep similar items together, different items separate.
 Identify location and drawing numbers to aid in future checking for completeness.
 Measure or list everything on the drawings or mentioned in the specifications.
 Use indicated dimensions rather that dimensions measured off directly from drawings.
 It may be necessary to list items not called for to make the job complete.
 Be alert for notes on plans such as
o Not to scale
o Changes the scale throughout the drawings
o Reduced size drawings
o Discrepancies between the specifications and the drawings.
 Develop a consistent pattern of performing an estimate, for example:
o Start the quantity take-off at the lower floor and move tio the next higher floor.
o Proceed from the main section of the building to the wings.
o Proceed from south to north or vice-versa, clockwise, or counter clockwise.
o Take-off floor quantities first, elevations next, and then detail drawings.
 List all gross dimensions that can be either used again for different quantities, or used as a
rough check of other quantities for verification (exterior perimeter, gross floor area,
individual floor areas, etc.)
 Utilize design symmetry or repetition (repetitive floors, repetitive wings, symmetrical design
around the center line, similar room, lay-outs, etc.)
NOTE: Extreme cautions is needed here so as not to omit or duplicate an area.
 Do not convert until the final total is obtained. For instance, when estimating reinforcing bars,
take off itemized units according to bar size, then summarize and convert to kilos or tons.
 When figuring alternates, it is best to total all items involved in the basic system, then total all
items involved in the alternates. Thus you work with positive numbers in all cases. When adds
and deducts are used, it is often confusing whether to add or subtract a portion of an item,
especially on a complicated or involved alternate.

B. COST ESTIMATING STAGES

The method of estimating varies with the stage of development of the project.

 BUDGETARY ESTIMATE The estimate is prepared in response to a demonstrate need.

Accordingly, it should best be related to square meter to be built, number of people to be served, units
to be reproduced, or functions to be accomplished. The best source is prior experience. The Engineer
must build up its own data from every project that he builds aside from what is available in the
industry.

 SCHEMATIC DESIGN ESTIMATE At the schematic and design phase the spatial design has been
committed to a plan and few elevations. There should be a site plan available. To a large degree, this
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 phase utilizes square-meter costs, but parametric and modular costs can become much more practical.
It is also possible to segregate certain areas and provide detailed cost-breakdown analyses.

 DESIGN DEVELOPMENT ESTIMATE The design development estimate is based upon drawings which
are evolution of the schematic design drawings. They are often a full size larger and therefore accurate
quantity take-off is possible. The spatial solution for the buildings has been completed, and so the
architectural and structural take-off is substantially accurate. At this stage, the mechanical, electrical,
heating and ventilating systems, are just coming into focus. The estimating approach is usually
combined, since a quantity take-off is possible only for architectural and structural and parametric or
square-meter costs must be used for the mechanical and electrical systems.

 CONTRACT DOCUMENTS ESTIMATE At this stage of project development, a tremendous

amount of detail work in progress. Estimates can be made on quantity take-off basis for all areas. The
designer will be doing a quantity survey type estimate, but once the drawings and specifications have
been released to the contractors, one of the principal methods of developing a cost bid is to solicit
price quotations from sub-contractors or suppliers.

 CONSTRUCTION AND BIDDING ESTIMATE Estimates during the construction are based on reality. The
accrual cost of work in place can be used as a guideline in estimating extra work or changes in scope.
Quantity survey methods are used y contractors in estimating the project savings in space which would
result from accepted value-incentive programs.

C. ESTIMATING METHODS

Estimating the cost of the project or a portion of a project is basically a two-step process:

- Defining the project component to which cost can be applied.

- Assigning unit cost in order to arrive at a component cost.

Estimating procedures vary considerably from industry to industry and many special approaches have been
developed. The following is not all-inclusive but does not describe the basic well-known approaches.

- ESTIMATING BY USER UNITS METHODS

The facility to be designed or constructed is defined in terms of its capacity to serve. In some cases, a
using agency which builds the same types of structure many times has a well-developed historical file on cost
and use requirements. An estimate developed on this type of data can be quite accurate.

- ESTIMATING BY SQUARE METER METHOD

Square meter costs are found by multiplying the area of space times a cost factor. The cost factor is
usually available from the historical cost filer of past projects. This is the method commonly used by
Engineers.
Space Factor to be used in Estimating by Area: In order to arrive at an accurate cost per
square meter of building spaces and its appendages should be converted into their equivalent values
in relation to the predominant enclosed space.

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- CUBIC METER METHOD
This approach is very similar to the square meter procedure except that the cubage provides the basis
for cost. The cubic meter method is normally used in earthwork, civil construction, and air conditioning.

There are two times when square and cubic meter cost are useful. The first is in schematic design stage
when no details available, when, meter costs and cubic meter costs make useful starting point. The
second is after the bids are in and the costs can be worked back into their appropriate units for
information purposes. As soon as details become available in the project design, the square meter or cubic
meter approach should be discontinued and the project priced by its particular components.

- ESTIMATING BY PARAMETRIC METHOD

This procedure involved identifying the major scope of work which make-up the building and then
applying costs to each system based upon historical data or examples of similar buildings.

In a situation in which the project is made up of repetitious modules such as housing units, apartments,
hospital rooms or suites accurate cost is developed for one unit and extrapolated by the total number of
units and their specific characteristics.

- COMBINED METHOD
The combined approach is used when the project is only partially defined. A detailed bill of materials
type take-off is performed for those portions which are defined, and square meter costs are used for
undefined systems. Most usually, the square meter costs are applied to the electrical, mechanical and
plumbing sections of the building which are the last to be defined.

LESSON 1.2: DETAILED ESTIMATES BY QUANTITY TAKE-OFF METHOD

This is the description of a complete take-off of all materials in the project. Unit prices are applied to each of
material and the results extended and summed up provide a total cost. This method is widely regarded as the
most accurate in estimating.

METHODS AND PROCEDURES

 Develop the construction estimate in three separate but interlocking parts:
- Take-off
- Pricing
- Sub-Bids

 Before starting to take-off the quantities for estimate, attend to some preliminary chores if the
estimate is to go on with the minimum of difficulty.

Prerequisite to estimate:
- Complete set of Construction Drawings
- Complete set of Technical Specifications
- Project Site Examination and Inventory
- Others

Note: The more detailed these items are, the more accurate the estimated become.

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 THE QUANTITY TAKE-OFF (QUANTITY SURVEY)

 Every construction estimated is based on a quantity survey. This is the extraction from the
drawing and specifications of all the labor and materials required for the structures. An estimator
must be able to work accurately, quickly and methodically in preparing the quantity take-off.
There are many “tricks of the trade” that will save time, reduce errors and improve the accuracy;
there are no shortcuts, however, that can be taken at the expense of accuracy.

 Before starting to take-off the quantities, examine the drawings. Take a quick look through the
entire set of drawings for an idea of the following:
- Layout, type of building
- Number of floors
- General design
- Order of the drawings

 There are three basic rules for taking off quantities:

- Measure everything as it shows. Take-off quantities as it shows on the drawings.
- Do the take-off on everything that can you see. Do not deliberately leave out anything
you will undoubtedly make mistakes, we all do, but in order to reduce the possibility of
errors and so minimize the risk inherent in any bid, do not take-off on all items you can
see.
- If it is different, keep it separate. Separate items that will require different unit prices
(e.g. separate slabs on fill from suspended slabs).

ORDER OF THE QUANTITY TAKE-OFF

 Study the floor plan carefully. On the floor plans, number of spaces, moving clockwise from the
upper left hand corner. Designate each wall with a letter, also moving in a clockwise direction.
 Prepare specification take-off, for each space, to summarize data from plans and specifications.
One sheet per page.
 Proceed with the take-off in definite pattern not only by trade but also item by item within teach
trade. Compute roof separately.

Note: Excavation should not be taken off first. The suggested order of take-off is:
- Concrete - Substructure
- Superstructure
- Finishes

- Masonry - Exterior
- Interior

- Carpentry - Rough
- Finishing Trades -
- Excavation - Building Site
- Sitework, Alternates and Others

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  Summarize quantities on long pad.
 Recalculate quantity take-off and enter in corresponding in column.

PRICING THE ESTIMATE

 Pricing the estimate is always a difficult matter but a good take-off will reduce the difficulties. If
the take-off is correct and complete, the estimates can be priced with confidence. Errors in the
take-off, however, have to be swallowed; there is no adjustment possible once the bid has been
submitted..
 Make a site analysis. The following will affect your costings:
o Labor
- Wages scales for the locality (present and future)
- Fringe benefits
- Special working rules
- Travel and others
- Labor problems (e.g. shortage of tradesman)
- Availability of construction work in the area
- Quality of work of local craftsmen
- Attitudes and reactions toward “outside” contractors
- Current market trends
o Materials
- Availability and costs of local materials
- Cost and transport of not locally available materials
- Distance from suppliers and fabricators

 Tabulate unit prices under respective columns.

Exercises /Learning Activities:

RESEARCH AND PREPARE A SAMPLE OF “BILL OF MATERIALS” OF A RESIDENTIAL BUILDING.

Prepared by: Recommending Approval: Approved by:

Engr. Dennis T. Flores Engr. Joel C. Canonizado Evelyn L. Pascua, Ph.D CESO III
Instructor Dean VP-Academics

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