COST BLOWOUT A TSUNAMI ON THE WAY THE REAL VALUE OF AN ACCURATE - - PowerPoint PPT Presentation

SEMINAR SERIES

COST BLOWOUT

A TSUNAMI ON THE WAY

THE REAL VALUE OF AN ACCURATE ESTIMATE

Presented By Peter Steele B.Engineering (civil), Engineering Associate, Doab Enterprises

QLD CHAPTER

ACES QUEENSLAND CHAPTER Proposed Technical Agenda for Late February Presentation Session 1 Cost Blow Outs – A Tsunami on the way! 40 min Demonstrating the Tsunami (Points 1-3)

• 1. Graphic 1 Showing Project values form Metro Tunnel Melbourne

$348b of Projects in the next ten years

• 2. Grattan Report key findings for estimation issues;
• a. The biggest culprit of overruns was premature announcement of

projects and budgets

• b. 63%of the value of overruns occur before construction starts
• c. Contractors deliberately low ball bids in lean times
• d. Overrun projects did not have an early bottom up estimate
• e. Poor accounting for unknown risks
• 3. Therefore $84b of cost overruns on the way in the next ten
• years. At 1% of that value as being the cost estimator’s slice

that’s $84m per year for ten years!

• a. We’re all in work
• b. How can we add value to the project process?
• c. We should get more comfortable with the process of peer review

Putting Estimation into Perspective 4. Why we need to care? a. Estimates underpin the project business case b. Private Companies this means profit viability and shareholder vale c. Public Ventures, Ratepayer/taxpayer value for money. d. The right project at the right time for the right money

• 5. Estimating Clearly Defined?

a. A cohesive integration of real and relevant data b. Costs c. Quantities d. Risk e. Bias f. Unknowns

• 6. Foundations of a Quality Estimate?

a. Maturity b. Experience c. Discipline d. Knowledge Estimation Considerations

• 7. The importance of Project Charter and Project Scope

a. Provide clarity of outcome b. Provides guide to deal with change c. Helps all bring decisions back to the desired outcome rather than personal bias. d. Sets quality, budget, time and success factors.

• 8. The role of the Estimator and the engineer and the key

collaborations early in projects.

• a. Both vital and it’s a side by side event
• b. Allows early identification of risk
• c. Allows rapid evaluation of options
• d. No one person knows all!!
• 9. Spreadsheet vs Database
• a. Age old argument Spreadsheets and databases are 25 to 30 years
• ld!
• b. Spreadsheet quick to develop but hard to maintain
• c. Spreadsheet can be easily changed by the uninformed
• d. Database slower to develop but more robust and reliable
• e. Database not able to be messed with!
• 10. People vs Technology
• a. Where is the “Cost Estimate” button?!
• b. People can interpret their world on limited data
• c. Technology is data hungry and can get to a halt without all it needs
• d. Even AI requires people in the background
• e. No Silver Bullet yet
• f. Collaboration between people and Technology
• 11. Top Down versus Bottom up
• a. Top down factored approaches prone to error
• b. Bottom up slow – Unless you have a historical database…

• c. Then bottom up with allowance for unknowns becomes more robust

form the get go.

• d. How to get variations approved lots of small line items!
• 12. Project Development Processes
• a. Study Phases
• b. Role of each phase
• c. Keeping it real

Session 2 Getting it right ! 40 min This is planned to be a session with Mike Doab on stage for discussion purposes, Jayson Tiu to show how D’est can provide the solution for discussion points and Peter Steele facilitating the session. 1.The Real Estimate Solution: a. Use a structured robust reliable database tool for collating data – D’est b. Use mature, experienced, knowledgeable staff exercising discipline c. Set the goal posts (Project Charter/Scope Definition) d. Combine Engineering/Estimating & Scheduling from beginning

• 2. Questioning Existing Practices - Y” with all the knowledge we

have, do we persist with Studies, Pre-feasibility, Feasibility, Bankable & Execution Estimates. a. If it is a simple routine project, much can be done through the estimator b. If it is complex and routine, much can be done by the estimator c. If it is simple and innovative, engineering collaboration with estimator d. If it is complex and innovative, engineering collaboration with estimator e. Study phasing is a function of project complexity and innovation.

• 3. Sequence to Professional Estimates:
• a. Define Scope
• b. Determine capability against Time & Available Personnel
• c. Determine Estimate Viability (Internal) against client envisagement

i.e.:

• d. Class 1 to 5, inclusive of +-0% to +-50%

• e. Combine Engineering, Estimation & Scheduling Resources
• f. Allocate Resources
• g. Prepare (EBS) Estimate Base Structure
• h. Execute Estimate
• i. Determine Labour Rates
• j. Calculate Productivity Factor Requirements
• k. Prepare Programme if Required
• l. Include Cash Flow if required
• m. Execute Risk Analysis
• n. Execute FACP's (Fees, Allowances, Contingency & Profit)
• . Review Estimate - Numerous Personnel

`MIKE DOAB Managing Director PETER STEELE BS Civil Engineering Engineering Associate JAYSON TIU Estimating and Programme Management Associate Michael Doab has 47 years’ experience in Project and Construction Management, Scheduling and Estimating within Engineering Infrastructure, Mineral Processing, Ore Handling and Petro-chemical Projects throughout Australia for contractors, consultants and client organisations. As Managing Director of Doab Enterprises, Mike leads the company and remains hands-

• n, at all times, to ensure the

best possible outcome for each and every client. Peter has over 20 years’ experience in the civil engineering and project management fields. His skills include project managing large scale multidisciplinary projects, including varying levels of community and environmental

• interactions. Peter also has

significant experience as a professional design engineer in both private practice and local government sectors including design and documentation in mining infrastructure, major roads, local government and subdivision works giving him a broad and detailed level of understanding in every project. Jayson has a Civil Engineering background and has been working in the construction industry for more than a decade. He has extensive experience in Project Management and Estimating, particularly in the field

• f earthworks, civil and building
• construction. He continues to

expand his knowledge under the tutelage of Michael Doab. Jayson is also a Product Facilitator for Doab Enterprises’ internal estimating software D’est.