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: (866)-493-4944 enquiry@quantity-takeoff.com
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: (866)-493-4944

A Consistent Approach to Cost Estimating Policies in Washington

A Consistent Approach to Cost Estimating Policies in WashingtonTo accurately generate an estimate of the construction costs for a project, an estimator must understand that each project is unique and all the activities necessary to complete it vary and besides they must have the knowledge for transportation design and construction as well.

 

Washington State Department of Transportation (WSDOT) refers to various factors that help estimators to stay shielded from pressures to keep estimates within expected amounts based on funding availability. The cost estimating policies also allow estimators to establish what they consider to be a reasonable estimate based on the scope and schedule of the project and the bidding conditions (i.e., local and global market conditions) that are anticipated.

 

A consistent approach to cost estimating procedures and policies includes estimate quantification, estimate documentation, estimating pricing, estimate review, estimate communication, and management of estimate data. The project cost estimates are applied to all levels of project delivery, beginning from the planning level estimate and ending with the project design and plan, specification, and estimate (PS&E) level. And each level of estimate requires different estimating inputs, techniques, methods, and tools. The cost estimating processes followed in Washington are as follows:

 

 

  • Determining Estimate Basis: The activity primarily focuses on attaining project information, including all the earlier developed project scope and schedule details and data, from which a project cost estimate can be prepared. The level of scope detail fluctuates on the basis of the project phase, project type, and project complexity, but would comprise of the design matrix and criteria, all assumptions and pertinent scope details
  • Preparing Base Estimate: This activity covers the development of estimated costs for all components of a project, excluding future escalation. An estimate of these components can be developed through different techniques based on the level of scope definition and the size and complexity of the project. The number and detail of components estimated may vary depending on the project development phase
  • Reviewing Base Estimate: This activity is important for ensuring:
    • Assumptions and basis are appropriate for the project
    • The base cost estimate is an accurate reflection of the project’s scope of work
    • Scope, schedule, and cost items are calculated properly and required components are not missing or double counted
    • Historical data, the cost based estimate data, or other data that was used reasonably reflects project scope and site conditions. Internal specialty groups and/or Subject Matter Experts (SMEs) must participate in reviewing the Base Estimate.
  • Determining Risks and Set Contingency: This activity is an integral component of project management planning and is a part of creating a risk management plan for a project. Risk management is an active and continuing process of increasing the probability and consequences of positive risk events (opportunities) and reducing the probability and consequences of negative risk events (threats) to the project objectives. In the context of cost estimating, the cost impact of project risks (favorable or unfavorable) must be included to derive a total project cost. If necessary, internal and/or external specialists are involved in a workshop format to validate the Base Estimate, provide input on specific issues such as construction staging, and elicit risks for modeling purposes. Formal risk assessment at WSDOT typically occurs in workshops such as Cost Risk Assessment (CRA) and Cost Estimate Validation Process (CEVP) workshops.
  • Determining Estimate Communication Approach: Cost estimate data is communicated to internal as well as external constituencies. The communication approach determines what estimate information should be communicated, who should receive this information, how the information should be communicated, and when the information should be communicated. Cost estimate information should be included when the communication plan is developed as part of the project management process. The Basis of Estimate document should be employed effectively as a communication tool to convey key information about the project to others.
  • Conducting Independent Review and Obtaining Management Endorsement: All estimates should receive an independent review and then be reconciled and revised as required to respond to independent reviewer comments. After the satisfactory incorporation of independent review comments, estimates should be presented to management staff for approval. Management approval of estimates developed for initial budgeting or baseline definition is a defined step in the project management process. Revised estimates, should also be reviewed by management staff, revised as necessary to present management comments, and then approved. Each revised estimates shall then be incorporated into project cost baselines through the established project change management process.
  • Documentation/Basis of Estimate: The estimate file should be a well organized, easy to follow history from the first estimate at the beginning of the planning phase through preparation of the final estimate. The Basis of Estimate document contains recommended organization, topics and format. Each estimate should track changes from the previous estimate, updating the scope, assumptions, quantity and price calculations, and risks from the previous estimate. At each update the variation between the previous estimate and the current estimate should be highlighted. This contributes to transparency and accountability in estimating and promotes the consistency between estimates. Clear documentation is essential as the project passes from one group to another, or as team member’s change. The project estimate file should follow the project through the various stages so that each new estimate can be easily tied to the previous one.
  • Techniques: To ensure clear documentation it is recommended that estimating be specifically scheduled in the project management plan for each phase of the project. This ensures that adequate time and resources are allotted for performing the estimate. As part of the estimate review process, someone external to the project team should perform a review of the estimate file as this review ensures that the estimator has clearly recorded the assumptions and decisions made in the estimating process.
  • Basis of Estimate (BOE): The BOE is a documented record of relevant communications that have occurred and agreements that have been made between the estimator and other project stakeholders. It is characterized as the one deliverable that defines the scope of the project, and finally becomes the basis for change management. A correctly prepared BOE can be used by customers to comprehend and assess the estimate, independent of any other supporting documentation. A well-written BOE achieves these goals by clearly stating the purpose of the prepared estimate (i.e., cost study, project options, benefit/cost study, funding, etc.), the project scope, pricing basis, allowances, assumptions, exclusions, cost risks and opportunities, and any deviations from standard practices. A well prepared Basis of Estimate will:
    • Document the overall project scope
    • Document the items that are excluded from the project scope
    • Document the key project assumptions
    • Communicate the estimator’s knowledge of the project by demonstrating an understanding of scope and schedule as it relates to cost
    • Alert the project team to potential cost risks and opportunities
    • Provide a record of key communications made during estimate preparation
    • Provide a record of all documents used to prepare the estimate
    • Act as a source of support during dispute resolutions and for bid analysis
    • Establish the initial baseline for scope, quantities and cost for use in cost trend evaluation throughout the project
    • Provide the historical relationships between estimates throughout the project lifecycle
    • Facilitate the review and validation of the cost estimate

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