Civil Engineering Project Management (4th Edition)
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Payment arrangements, risks and project cost estimating 37<br />
The reference costs need to be accompanied by data, such as project size, project<br />
components and distinctive features, dates of construction, and whether<br />
the price includes land, legal and engineering costs. Inflation factors may<br />
have to be applied to update the costs. By comparing the principal features of<br />
the proposed project with those for which past costs are available, a probable<br />
order of magnitude total cost may be derived.<br />
The second method is the most reliable. Even before a feasibility study is<br />
undertaken it should be possible to sketch out the proposed project on some<br />
notional site if the actual site is not yet decided, so the layout and sizes of the<br />
various components required can be judged. The components can be roughly<br />
sized so that their possible cost can be estimated by comparison with price<br />
data held for similar structures. This procedure can also reveal costs for items<br />
which might otherwise have been missed.<br />
The third method, using published cost curves, is not very reliable, because<br />
the data on which such curves are based is so frequently absent, and virtually<br />
every civil engineering project has some unique feature substantially affecting<br />
its cost. Hence costs expressed per unit of size or output can vary greatly.<br />
However, a cost curve can be used to show whether costs developed by the<br />
other methods seem realistic.<br />
While any of the above methods will involve uncertainty, they can be useful<br />
in comparing different options for a scheme, provided uniform parameters are<br />
used. The final estimate of cost drawn up by the engineer should be based on<br />
current prices and include a substantial contingency sum. It need not include<br />
for possible future inflation of prices, because this is a matter for the employer’s<br />
financial advisers to deal with, but the basis of the estimate should be clear. The<br />
possible range of the cost should be shown; but whether the employer chooses<br />
to quote the highest or lowest estimate is up to him. Many a major project<br />
providing a major benefit (including the Channel Tunnel) would probably not<br />
have been built if the initial estimate quoted for it by the employer had not erred<br />
on the optimistic side.<br />
3.5 Estimating the cost of a project at design stage<br />
As the design of a project is developed a more accurate estimate of cost is<br />
possible, based on cost parameters derived from analysis of recent priced<br />
contracts for similar work. The designs should show the layout and sizes of<br />
component works required. For each such component it should be possible<br />
to make an approximate estimate of the quantities of the key structural operations<br />
required, such as bulk excavation, main concrete in framework and<br />
floors, wall areas, and roof areas. Examination of recent priced contracts can<br />
then produce cost parameters that can be applied to the estimated quantities<br />
for the proposed structure.<br />
For example, using a past priced contract, the total concrete costs (inclusive<br />
of formwork, reinforcement, finishes, joints, etc.) can be divided by the volume