Page 52 - Civil Engineering Project Management, Fourth Edition

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Payment arrangements, risks and project cost estimating
The reference costs need to be accompanied by data, such as project size, pro-
ject components and distinctive features, dates of construction, and whether
the price includes land, legal and engineering costs. Inflation factors may
have to be applied to update the costs. By comparing the principal features of
the proposed project with those for which past costs are available, a probable
order of magnitude total cost may be derived.
The second method is the most reliable. Even before a feasibility study is
undertaken it should be possible to sketch out the proposed project on some
notional site if the actual site is not yet decided, so the layout and sizes of the
various components required can be judged. The components can be roughly
sized so that their possible cost can be estimated by comparison with price
data held for similar structures. This procedure can also reveal costs for items
which might otherwise have been missed.
The third method, using published cost curves, is not very reliable, because
the data on which such curves are based is so frequently absent, and virtually
every civil engineering project has some unique feature substantially affecting
its cost. Hence costs expressed per unit of size or output can vary greatly.
However, a cost curve can be used to show whether costs developed by the
other methods seem realistic.
While any of the above methods will involve uncertainty, they can be useful
in comparing different options for a scheme, provided uniform parameters are
used. The final estimate of cost drawn up by the engineer should be based on
current prices and include a substantial contingency sum. It need not include
for possible future inflation of prices, because this is a matter for the employer’s
financial advisers to deal with, but the basis of the estimate should be clear. The
possible range of the cost should be shown; but whether the employer chooses
to quote the highest or lowest estimate is up to him. Many a major project
providing a major benefit (including the Channel Tunnel) would probably not
have been built if the initial estimate quoted for it by the employer had not erred
on the optimistic side.

3.5 Estimating the cost of a project at design stage

As the design of a project is developed a more accurate estimate of cost is
possible, based on cost parameters derived from analysis of recent priced
contracts for similar work. The designs should show the layout and sizes of
component works required. For each such component it should be possible
to make an approximate estimate of the quantities of the key structural oper-
ations required, such as bulk excavation, main concrete in framework and
floors, wall areas, and roof areas. Examination of recent priced contracts can
then produce cost parameters that can be applied to the estimated quantities
for the proposed structure.
For example, using a past priced contract, the total concrete costs (inclusive
of formwork, reinforcement, finishes, joints, etc.) can be divided by the volume