LADOTD COST

ESTIMATING PROCESS

Charles Nickel, P.E.

Value Engineering &
Cost Estimate Director
Office: (225) 379-1078
E-mail: Charles.Nickel@la.gov
 Project Management Body of
Knowledge (PMBOK)

Cost Management Involves 3 Processes:

1) Cost Estimating
2) Cost Budgeting
3) Cost Control
 Project Management Body of
Knowledge (PMBOK)

Cost Management Processes:

1) Cost Estimating
2) Cost Budgeting
3) Cost Control
 Cost Estimating Process

Types of Project Cost Estimates:

1.) Engineering
2.) Construction
3.) Right-of-Way
4.) Utilities
5.) Environmental (Mitigation, Documents, etc.)
 Cost Estimating Process

Types of Project Cost Estimates:

1.) Engineering
2.) Construction
3.) Right-of-Way
4.) Utilities
5.) Environmental (Mitigation, Documents, etc.)
 Cost Estimating Process
GOAL:

To provide guidance in developing

and maintaining accurate, consistent,
and reliable project cost estimates.
 Cost Estimating Process
Some common methods of Cost Estimating:

 Historical Bid Based

 Cost Based
 Parametric
 Risk Based
Historical Bid Based Estimating
 Uses previous bid data as a basis for cost
estimating.
 Items with little or no bid history can not
be estimated with this method.
 It is LADOTD’s most common method of
estimating.
 Cost Based Estimating
 Breaks down items of work into individual
basic components such as material,
equipment, labor, time, overhead, and
profit.
 Uses current costs of these components to
estimate the total cost of each item of
work.
 Requires significantly more in terms of
effort, time, and skill than the Historical
Bid Based method.
 Parametric Based Estimating
 Uses costs of similar components of work
from similar projects recently bid.
 Typically generates a cost per lane mile or
cost per square foot.
 Commonly used during early project
development when very little detail
information is available.
 Risk Based Estimating
 Identifies and Analyzes Risks associated
with a project.
 Determines an impact and probability of
occurrence for each risk.
 Based on impacts and probabilities, a cost
is associated to each risk.
 These costs are considered contingencies
and added to the project cost estimate.
Historical Bid Based Estimating

 Long Range Estimates

 Detailed Estimates
 Historical Bid Based
Long Range Estimating

Estimating Using
Major Item Cost Groups
 Historical Bid Based:
Long Range Estimating
Cost groups are based on line items
classified into major item categories such
as:
 Asphalt  Gates & Fences

 Base  Guiderail

 Concrete  Landscaping

 Drainage  Mobilization

 Earthwork  Pavement marking

 Erosion Control  etc.

 Historical Bid Based:
Long Range Estimating

Item Group Cost = XX% Project Cost

Project Cost = Item Group Cost / XX%

 Historical Bid Based:
Long Range Estimating
For example, for a particular type of
roadway project, historically;

Asphalt Items: 58% of Project Cost

Base Items: 12% of Project Cost
Mobilization: 10% of Project Cost
Other Items: 20% of Project Cost
 Historical Bid Based:
Long Range Estimating

Item Group Cost = Quantity ∙ Unit Price

 Historical Bid Based:
Long Range Estimating
Quantities for cost groups can be
estimated based on early project
measurements such as:

Length of roadway
Width of roadway

Depth of pavement

Number of intersections

Etc.
 Historical Bid Based:
Long Range Estimating
Once the quantities are estimated, Unit
Prices can be determined based on
historical bid data.
 Historical Bid Based:
Long Range Estimating
Estimate of Asphalt Group: $1.5 M
Estimate of Base Group: $1.2 M
$2.7 M

$2.7 M / (58% + 12%) = $3.8 M

Construction Cost = $3.8 M + contingencies

Detailed Estimates
 Historical Bid Based:
Detail Estimating

Involves past item level relationships

between the unit price and other
measurable parameters of the item such
as:
 Quantity  Location

 Letting Date  Size

 Number of Bidders  Type of Work

 Etc., Etc., Etc., …
 Historical Bid Based:
Detail Estimating

Modeling Unit Price relationships

Simple Linear Regressions

Not so Simple Linear Regressions

 Historical Bid Based:
Detail Estimating
 Simple Linear Regression Models

For example:

Unit Price = β0 + β1 ∙ (Bid Date)

Log(Unit Price) = β0 + β1 ∙ Log(Quantity)

 Historical Bid Based:
Detail Estimating
 More Complex Linear Regression Models

For example:

Log(Unit Price) =
β0 + β1 ∙ Log(Quantity) + β2 ∙ (Bid Date)
 Historical Bid Based:
Detail Estimating
Adjust the bid points to reflect only one
relationship at a time.
 Historical Bid Based:
Detail Estimating
The more relationships that can be
identified and modeled, the closer the
adjusted bid points will be to the trend
lines.

The amount of time and resources spent

identifying and modeling these relationships
will determine the level of accuracy
achievable.
 Estimating Tools:
ExcelSpreadsheets
Access Database Applications

Trns*port CES

All these tools rely on the EXPERIENCE of

the ESTIMATOR to use them wisely to
develop the Construction Cost Estimate.
QUESTIONS?
Charles Nickel, P.E.
Value Engineering &
Cost Estimate Director
Office: (225) 379-1078
E-mail: charles.nickel@la.gov
 CES
CES is a client-server estimating tool
providing a full range of estimating
capabilities from long range estimating to
detailed estimating.