2015 Toronto Section Presentation

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


• 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


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.


Generate Alternatives

Preliminary Development of Alternatives

Develop Expected Value

Identify Preferred Alternative


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


• 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 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 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?


• 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.

2015 Toronto Section Presentation

Documents

Transcript of 2015 Toronto Section Presentation