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August 2013

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Aug 13 | UTAH CONSTRUCTION & DESIGN | 41

> UDOT Cost-Based Estimating

40 | UTAH CONSTRUCTION & DESIGN | Aug 13

Founded by Pete Honnen in 1963

and celebrating its 50th year in business,

Honnen Equipment is one of the largest and

oldest dealers of John Deere commercial

construction and forestry equipment in

North America. From its Commerce City,

Colorado headquarters outside Denver,

Honnen already had decades of strong

growth behind them when they entered

the Utah market by purchasing Scott

Machinery in 2009. The purchase gave

Honnen locations in Salt Lake, Ogden and

St. George as well as Idaho Falls, Idaho.

And, on the occasion of a half century of

operations in the Rocky Mountain West,

the company announced plans to build a

new Salt Lake City dealership and service

center on a 12-acre site at California Ave.

and Bangerter Highway.

Company President Mark Honnen says

he sees great potential for growth in Utah.

“We feel good about the outlook

for the Rocky Mountain region and Utah

specifically,” said Honnen. “We are excited

about this new location. I think it shows

our commitment to the Wasatch Font.” He

said the building will be approximately

55,000 SF and will give the firm broader

service capability and a larger parts

inventory along with the space needed

to serve an expanding local market. The

company plans to break ground for the

new facility this fall and open by the

summer of 2014.

In addition to the John Deere line of

equipment, in Utah the company is also

the authorized dealer for John Deere

Commercial Worksite Products, Hitachi

and the Wirtgen Group product line that

includes Wirtgen Mills, Vogele Pavers

and Hamm Rollers. Honnen locations in

Colorado also carry Manitowoc, Grove and

National Cranes, JLG Telehandlers and Lull

Forklifts.

Cameron Preston is Honnen’s senior

sales manager for Utah overseeing 70-plus

employees. He says the company has been

seeing sales growth in two key markets.

“We are excited with the housing

market picking up, not just in the Salt Lake

area but in Ogden and St. George. There are

new subdivisions being developed for the

first time in a while. Those light commercial

and residential builders are our core

business and they are as optimistic as they

have been since 2006-07.” said Preston.

“We’ve also had success lately with mid-

size loaders selling to the aggregate

producers.”

Preston said his service team in Utah

is in the final stages of preparations to

support the new Tier 4 emission standards.

“It has been a big undertaking,” he

said. “We have been gearing up to support

the new standards across our whole

product line. We are investing a lot in

the equipment and training we need to

support our customers in the field.”

Honnen said during the past 50 years

the company has tried to remain focused

on customer support and investment in

their employees.

“We have a great group of employees;

they are our greatest asset,” said Honnen.

“I think our company today is small

enough to give personal attention to our

customers but large enough to have the

resources necessary to support them.”

Honnen also has long-established

operations in Grand Junction and Durango,

as well as Gillette, Rock Springs and Casper,

Wyoming. n

Honnen Equipment Marks 50 years in Intermountain Region

Anniversary Profile

Mark Honnen is the President of Honnen Equipment, which is planning on building a new dealership in Utah.

The Utah Department of Transportation is

realizing benefits from using cost-based

estimating as a key part of the project

delivery process. Those benefits include

designs that address constructability and

reduce change orders, bid estimates that

are closer to actual bids, and a review

process to negotiate the best price for

change orders during construction.

Traditionally, state governments have

used historical averages to estimate project

costs. The average cost of everything from

granular borrow to sign removal is amassed

in the databases of state DOTs. While easy

to access, the data does not provide reliable

information on which to base the most

accurate estimates.

“Most, if not all DOTs, use historical

information, but it’s inherently flawed,”

stated George Lukes, the engineer who

manages UDOT’s Estimate Support Team.

Until 2005, UDOT used historic costs with

good success. But market volatility caused

prices to shift quickly, and historic costs

ceased to reflect reality. During that time,

some bids exceeded available funding and

some projects were delayed or scoped back.

UDOT needed a way to maintain the

reliability of the project delivery process. A

look to private sector contractors, who have

experience pricing and bidding for projects,

offered a better way. By taking a cost-based

approach, Lukes’ team is successfully

choreographing a departure from exclusive

use of historic costs at UDOT.

Paying it forward through

design, bid and construction

During design, UDOT’s Estimate

Support Team produces a reliable fair

market value estimate by examining the

core constituents of cost-based estimating,

including material costs,

labor rates and production

rates. Other elements,

including constructability,

accuracy of quantities, risks

to contractors, and risks

to UDOT are thoroughly

examined as well. The

real-world process builds

substantial value into project

delivery by reducing change

orders and other surprises to the contractor

and to UDOT.

Most engineering and design decisions

are based on cost, so a reliable cost

estimate gives designers the information

they need to make informed design

decisions that result in a high-quality built

project. “The better the design, the better

the cost estimate, and the more likely we

are to get a fair product at the end of the

day,” says Lukes. Bidding and construction

phases go more smoothly as well.

A reliable cost estimate during the

bidding process helps UDOT manage

funds more effectively. If project costs are

overestimated, unused funds set aside for the

project are held in reserve. That money can

lose value at the same rate that construction

costs climb – an average of 9 percent recently.

Before bids are awarded, cost-

estimators also review the bids to identify

potential risks.

During construction, cost estimators

step in on request to help negotiate the

price of change orders. Every overestimated

dollar is a dollar lost, so accurate cost

estimates are crucial during construction.

Numbers do the talking

UDOT has realized the following

savings as a result of using a systematic

cost-based approach during the past year:

Improving designs to reduce change

orders and risk to UDOT: $11.4 million.

Conducting bid award reviews to

identify potentially costly and risky bids:

$700,000.

Helping construction personnel

negotiate fair market costs for change

orders: $800,000.

Adding cost-based estimating and

contractor experience to the UDOT project

delivery process improves design quality

and manages costs throughout the life

cycle of a project, and delivers projects

more efficiently and at a lower cost than

using only historical based estimating. The

success of using the cost-based process

serves as an example of UDOT’s innovative

spirit and responsible stewardship of public

funds. n

Catherine Higgins has worked at

UDOT for five years and has 17 years of

communications experience for county

and state governments. She has a B.S. in

Political Science from the University of Utah.

Jason Henrie, PE, has worked for Salt Lake-

based Stanley Consultants for 16 years, and

currently manages UDOT’s Estimate Support

Services. He is pursuing certification as a

Certified Cost Engineer. Henrie graduated

from BYU with an MS in Civil Engineering.

More for the Money: Cost-Based Estimates Help UDOT Be More Efficient By Catherine Higgins and Jason Henrie

Catherine Higgins Jason Henrie