Post on 03-Aug-2015
Estimate Review / Validation Checklist
Douglas W. Leo CCP CEP FAACE FRICSSaybrook Associates, Inc.
Chair AACE International Estimating Sub-Committee
AACE Recommended Practices
• Cost Engineers Tool Kit -– RP 10S-90 Cost Engineering Terminology– RP 18R-97 Cost Estimating Classification System– RP 21R-98 Project Code of Accounts– RP 27R-03 Schedule Classification Systems– RP 30R-03 Implementing Project Constructability– RP31R-03 Reviewing, Validating and Documenting an
Estimate– RP34R-05 Basis of Estimate– RP 36R-08 Development of Cost Estimating Plans– RP 38R-06 Documenting the Schedule Basis
Review/Validation Checklist - Introduction
The Project Cost Estimate that was just delivered is amazing. It is exactly what was expected, costs were immediately understandable and lower than anticipated. Management will love this. The work on this project estimate is worthy of great praise …… outstanding job!!!!
Were these words ever spoken outside of someone’s dreams? …….. I think not.
Review / Validation Checklist Introduction
• Project Teams universally have the desire to produce successful outcomes.
• They all want their work to be seen as on time, on budget, and meeting the desire functionality.
• The desire is for a completed project package that is:– Transparent– Explainable– Defendable– Acceptable to management
Review / Validation Checklist Introduction
• Three main project drivers: Functionality, Schedule, Cost• Over the course of the project there is shifting
importance for the three drivers but at some point costs become the main issue with regards to moving the project forward.
• When costs become the main focus, a thorough understanding of the project estimate and how it was developed is the task at hand.
• A review and validation takes place at multiple levels: internally by the estimating provider, by the owner client, by third party reviewers
Review / Validation Checklist Introduction
Completed project estimating package should always include certain elements: • Basis of Estimate• Estimate Summary• Estimate Detail• Reconciliation Report• Historical Cost Metric Report• Estimate Deliverables Report• Risk Analysis Report
PHASE 2SELECT from Alternatives
Clearly Frame Goal
Test for Strategic Fit
Preliminary Overall Plan
Preliminary Assessment
~1 % Engr.
AACE Class 5 Cost Estimate
PHASE 1IDENTIFY & Assess
Opportunity
Fully Define Scope
Develop Detailed Execution Plans
Refine Estimate
Submit Funding for Approval
~25 % Engr.
AACE Class 3 Cost Estimate
Generate Alternatives
Preliminary Development of Alternatives
Develop Expected Value
Identify Preferred Alternative
AACE Class 4 Cost Estimate
Operate Asset
Monitor & Evaluate Performance
Identify New Opportunities
PHASE 3DEVELOP Preferred
Alternative
PHASE 4EXECUTE
(Detail EPC)
PHASE 5OPERATE &
Evaluate
Implement Execution Plan
Minimize Changes
Finalize Operating Plan
Business Plan for Phase 5
Project Review
1 2 3 4 5
AFE
Various Cost Estimates Are PreparedDuring the Project Development Process
Process Industry Classification Matrix
Primary Characteristic Secondary CharacteristicsLEVEL OF PROJECT
DEFINITIONEND USAGE METHODOLOGY ACCURACY RANGE
PREPARATION EFFORT
ESTIMATE CLASS
Expressed as % of complete definition
Typical purpose of estimate
Typical Estimating Method
Typical variation in low and high ranges (a)
Typical degree of effort relative to least cost
indice of 1 (b)
5 0% to 2% Concept ScreeningCapacity Factored, Parametric Models,
Judgement, or Analogy
-20% to -50% +30% to +100%
1
4 1% to 15% Study or FeasabilityEquipment Factored, or
Parametric Models-15% to -30%
+20% to +50%2 to 4
3 10% to 40%Budget, Authorization,
or Control
Semi-Detailed Unit Costs w/ Assembly
Level Line Items
-10% to -20% +10% to +30%
3 to 10
2 30% to 70% Control or Bid/TenderDetailed Unit Cost w/
Forced Detailed Takeoff-5% to -15%
+5% to +20%4 to 20
1 50% to 100%Check Estimate or
Bid/TenderDetailed Unit Cost w/
Detailed Takeoff-3% to -10%
+3% to +15%5 to 100
Notes: a) The state of process technology and availability of applicable reference cost data affect the range markedly. The +/- value represents typical percentage variation of actual costs from the cost estimate after application of contingency (typically at a 50% level of confidence) for given scope.b) If the range indice value of "1" represents .005%, then an indice value of 100 represents 0.5% Estimate preparation effort is highly dependent upon the size of the project and the quality of estimating data and tools.
Estimate Input Checklist and Maturity Matrix
Estimate Classification
CLASS 5 CLASS 4 CLASS 3 CLASS 2 CLASS 1General Project Data
Project Scope Description General Preliminary Defined Defined DefinedPlant Production/Facility Capacity Assumed Preliminary Defined Defined DefinedPlant Location General Approximate Specific Specific SpecificSoils & Hydrology None Preliminary Defined Defined DefinedIntegrated Project Plan None Preliminary Defined Defined DefinedProject Master Schedule None Preliminary Defined Defined DefinedEscalation Strategy None Preliminary Defined Defined DefinedWork Breakdown Structure None Preliminary Defined Defined DefinedProject Code of Accounts None Preliminary Defined Defined DefinedContracting Strategy Assumed Assumed Preliminary Defined Defined
Engineering DeliverablesBlock Flow Diagrams S/P P/C C C CPlot Plans S P/C C CProcess Flow Diagrams (PFD's) S/P P/C C CUtility Flow Diagrams (UFD's) S/P P/C C CPiping & Instrument Diagrams (P&ID's) S P/C C CHeat & Material Balances S P/C C CProcess Equipment List S/P P/C C CUtility Equipment List S/P P/C C CElectrical One-Line Drawings S/P P/C C CSpecifications & Datasheets S P/C C CGeneral Equipment Arrangement Drawings S P/C C CSpare Parts Listings S/P P CMechanical Discipline Drawings S P P/CElectrical Discipline Drawings S P P/CInstrumentation/Control System Discipline Drawings S P P/CCivi/Structural/Site Discipline Drawings S P P/C
Estimate Review / Validation Checklist
• Total Engineering Completeness - (%) at the time of MTO creation – primary determination of accuracy and estimate classification
• Project Estimating Plan – developed, reviewed, agreed upon by all parties, signed off before start of estimate
• Basis of Estimate – prepared by estimating provider, reflecting the completed estimate
Estimate Review / Validation Checklist
• Estimate Summary – with a defined WBS / COA structure
• Estimate Detail – transparent and easily followed that is in-line with the estimate summary
• Estimate Cost Metrics – how closely are estimated costs in-line with defendable historical cost metrics (from established actual costs not estimated costs)
Estimate Review / Validation Checklist
• Estimate Reconciliation – differences and similarities between Previous estimates for this project or similar projects
• Estimate Deliverables Checklist – what were the deliverables utilized to produce the estimate. Who produced them & when were they available to estimating (Primary indicator of completeness of scope)
• Project Risk Analysis and Risk Logs – how was contingency developed and its statistical significance? How was risk identified and mitigated?
Estimate Review / Validation Checklist
• Material Take Offs – how were MTOs created, by whom and when in the process? How were updates handled? Trace MTOs from creation to the estimate
• Equipment pricing – how much is equipment pricing is from quotes, from historical data or allowances?
• Equipment Bid Tabs – What is the project philosophy regarding the selection of equipment pricing? Are the costs in the estimate traceable to quotes?
• Change Management Plan and Change Logs – how is scope being managed?
Conclusions
• Utilizing the Checklist a reviewer will understand the development of the project cost and their completeness and degree of accuracy
• Any items not available will indicate areas of concern and places to focus greater attention
• But most importantly the checklist, if utilized by estimating providers and project teams as a guide during the complete project process, will produce project costs that will be better understood and manageable to all project stakeholders.