[PPT] - Owner Cost Estimate Topics The estimate Life Cycle inside the owners PowerPoint Presentation

SLIDE 1

CONSTRUCTION COST ESTIMATING

Michael Dyer, CCM, CPE, AVS Port of Seattle

SEPTEMBER 2017

Mike Myette, PE MM Construction Consulting, LLC

SLIDE 2

Owner Cost Estimate Topics

The estimate Life Cycle inside the owner’s upper

management business process – slides

How to hire an estimating consultant
Handout tool reviews of the following:
New project estimate checklist
Sample capital planning estimating template
Soft costs Included?
Estimate assumptions and qualifications
When to Bid Matrix

SLIDE 3

Estimate Process

Estimates are made up of 3 components

Known Scope – Facility concept/plans /final product / business
bjective
Contingency - know changes will occur but cannot quantify
Items that will be defined as design progresses
Risk - unknowns market conditions, subsurface conditions,

labor quality and availability The ideal estimate would have a balance of these three components and be to predict the final project cost at any stage of the life cycle

SLIDE 4

SLIDE 5

Business Plan Prospective

Scope at concept level
Contingency and risk at maximums

Investment committee

Scope may be more advanced from Business Plan Perspective
Contingency and risk still high

Request design funds from Upper Management

Scope is defined a preliminary design level
Contingency better quantified as the defined building parameters

definition increases

Risk being reduced as the more the scope is defined

Estimating Life Cycle Time Line

SLIDE 6

SLIDE 7

How to Hire an Estimating Consultant

What to put in your RFQ
How to interview and select an estimating

consultant

Once hired, when should the estimating

consultant work on what stage of the project.

SLIDE 8

New Project Estimate Checklist
Sample Capital Planning Estimating template
Soft Costs Included?
Estimate Assumptions and Qualifications
When to bid Matrix

Interactive Discussion of Handout Tools

SLIDE 9

MYSTIQUE OF CONTRACTING

WHAT IS HAPPENING IN THEIR OFFICES?

8/27/2018 MM Construction Consulting LLC Mike Myette President

9

SLIDE 10

Contractors the Misunderstood?

Contractors-are we misunderstood or do we create

an air of misunderstanding?

Why are we secretive and to what end
Should we be transparent
What should we expect from the Owner/Consultant
Should they be transparent
Same goals
Goals of a project from Owner/Contractor/Designer

8/27/2018 MM Construction Consulting LLC Mike Myette President

10

SLIDE 11

8/27/2018 MM Construction Consulting LLC Mike Myette President

11

Why we appear Tense and Uptight!

Work Long days
Have deadlines with the threat of LD’s
Concerns about bonding
Concerns about Insurance losses/No Insurance
Concerns about lines of credit
Concerns about meeting production rates
Concerns about unknown conditions

SLIDE 12

8/27/2018 MM Construction Consulting LLC Mike Myette President

12

Why we appear Tense and Uptight!

Concerns about Equipment breakdowns
Staffing/Unions/Non-Unions/Training Programs
Notice Provisions and making owners upset
Provide safe work environment for employees &

subcontractors

Meeting Minority/DBE subcontracting

requirements

SLIDE 13

The Process For Bid-The Sources

The Daily Journal of Commerce
Construction Business Journals
Contacts From Our Industry
Trade Magazines
Plan Centers
Websites/Marketing
Networking With Associates and Industry Experts

8/27/2018 MM Construction Consulting LLC Mike Myette President

13

SLIDE 14

“Go/No Go” Decision Does this project fit our company?

Definition of a construction contract:

“A TRANSFER OF RISK FOR AN AGREED FEE”

How do you determine what risk is realistic/perceived, acceptable, and

manageable?

Can it be defined and quantified?
Does the client view the risk the same way? Are we looking at it from a

similar vantage?

Is the risk worth taking on, and for what fee; or are we just gambling?
Do we have the experience and foresight to manage this risk?
Owner, our experience with him and his attitude  Yes

8/27/2018 MM Construction Consulting LLC Mike Myette President 14

SLIDE 15

“Go/No Go” Decision

Project size and value, managerial complexity
Regional market conditions
Current and projected workload
Type of client
Type of project.

8/27/2018 MM Construction Consulting LLC Mike Myette President 15

SLIDE 16

“A Go Decision”

Plan/Item Review for Resources. Calls to Prospective Subcontractors. Call to Prospective Material Suppliers.

WAIT FOR REPLIES(Week or Two Depending on Size of Project.)

8/27/2018 MM Construction Consulting LLC Mike Myette President

16

SLIDE 17

8/27/2018 MM Construction Consulting LLC Mike Myette President

17

The Construction Team Size of Project determines Team.

Project Manager/Estimator
Project Manager/Estimator/Quantity Determinations.
Office Assistance (Bonding/Insurance)
Project Specific Personal(Subs, Material Quotes, Material

Suppliers, Other

Team Assembles As Material Resources are Obtained.

SLIDE 18

8/27/2018 MM Construction Consulting LLC Mike Myette President

18

Project Assignments for Team.

Project Manager Site Visit (Mandatory) Subcontractor Contacts (Bonding) Construction Team Building Construction Work Plan Project Schedule Analysis Project Engineer/Estimator

SLIDE 19

8/27/2018 MM Construction Consulting LLC Mike Myette President

19

Project Assignments for Team.

Site Visits Supplier/Vendor Contacts Spread Sheets Bid Book Read Documents Underlining and Outlining Unique Problems Geotechnical Reports

SLIDE 20

Construction Team Meeting

 Assembling of Construction Bid Documents  Review of Appropriate Bid Documents  Review of Deadlines and Drop Dead Dates  Discussions of Pinch Points or Problems Areas  Discussions of Specialty Contractors  Special Construction Techniques  Schedule Analysis  Special Considerations( Access, Traffic, Interferences, Other Contractors, Fish Windows, Utility Delays/Windows)  Insurance/Bonding/Tax-Discussions

8/27/2018 MM Construction Consulting LLC Mike Myette President

20

SLIDE 21

8/27/2018 MM Construction Consulting LLC Mike Myette President

21

Construction Bid Documents IMPORTANT”

 Schedules  Restrictions  Special Conditions  Utility Conflicts  DBE Requirements  Other Projects  Staged Construction Sequencing  Long Lead Items  Owner Supplied Items

SLIDE 22

Bid Advert TIME PERIOD Task Task Task

Week 1 Bid Advertized Order Plans Provide to Bonding/Ins/L egal(if necessary) Plan Week1/2 NO GO TALK Call to or From Prospective Subs and Material Suppliers Subcontractor, Material Supply(Bid Data) Visit Project Site(Require) Spread Sheet/Data

Entry. Take-Offs

by Suppliers and Understanding by Subs(Same Procedures by Them> Week 3 Receiving Data Spread Sheet, Calls to Above Beginning of Data Entry Production Rate Analysis Week 4 Assemble Team for Bid Bid Assembled Production Rate Analysis Confusion, Cuts, Rationalization, Submit Bid.

8/27/2018 MM Construction Consulting LLC Mike Myette President

22

SLIDE 23

8/27/2018 MM Construction Consulting LLC Mike Myette President 23

RCW 39.04.340

Bidder Responsibility (Mandatory)
Bidder Responsibility (Supplemental)

Basis for evaluation/deadline for appeal CPARB created RCW 39.10.220 suggested guidelines to assist state and municipalities in developing supplemental criteria Contractor’s Toughest Criteria already in place and very restrictive for contractors (BONDING AND INSURANCE)

SLIDE 24

8/27/2018 MM Construction Consulting LLC—Mike Myette P.E. President

24

What it takes to “ask” for a bond?

 (Bond Prequalification)

 The last 3 years of your CPA produced financial statements. Preferably reviewed. (This statement can cost anywhere from $8K to $35K. This may not be required for jobs under $500K.)  Current in house financial statement year to date. Balance Sheet/ Income Statement.  Corresponding Work In Progress statement.  Resumes of owners and key personnel.  Bid Request Form.

SLIDE 25

8/27/2018 MM Construction Consulting LLC—Mike Myette P.E. President

25

What it takes to “ask” for a bond?  Personal financial statement, accompanied by the willingness of you and your spouse to indemnify (guarantee) that the said insurance company will never have to pay out, and if they do…..your stuff is their stuff.  Bank Information {A BANKLINE OF CREDIT MAY BE NEEDED}

SLIDE 26

8/27/2018 MM Construction Consulting LLC—Mike Myette P.E. President

26

What it takes to “ask” for a bond?  After the above is completed the surety still will not guarantee that you will be awarded a bond if you ask. This simply means that you qualify to apply. This information is digested by an underwriting team whose job is to view each case individually and with an open mind, but still maintain a zero loss ratio. {CHARACTER/CAPACITY/CAPITAL}  Much of these underwriting decisions can be streamlined and heavily influenced by having a qualified broker that is an expert in the process represent you.

SLIDE 27

Bonding Projects

Sources of Bonding{Construction Broker}
Types of Bonding {Bid/P&P/Release of

Retention/Release of Lien/Supply Bond

Bond Calculation
When To Apply {Very Early}

8/27/2018 MM Construction Consulting LLC—Mike Myette P.E. President

27

SLIDE 28

Insurance 2nd or 3rd largest Overhead Items

Sources of Insurance (Where to go for insurance)
Contractors can work with either a captive agent or

independent broker. Captive agents only represent one company while an independent broker represents you to multiple companies. Qualifications to look for:

Look for representatives who insure other contractors

and have industry experience,

educational credentials such as the CPCU/CRIS/EHH

8/27/2018 MM Construction Consulting LLC—Mike Myette P.E. President

28

SLIDE 29

Insurance

 Types of Insurance – At a minimum Commercial General Liability is required. In addition the General Liability policy typically must include the following forms to be compliant with contractual specifications. Additional Insured Status (for both on-going & completed operations). Waiver of Subrogation

8/27/2018 MM Construction Consulting LLC—Mike Myette P.E. President

29

SLIDE 30

Insurance

Primary & Non-Contributory Language Also, contracts may require: {All Separate Policies} Pollution or Professional liability Excess or Umbrella Liability Special case work comp coverage such as USL&H. Builder’s Risk

8/27/2018 MM Construction Consulting LLC—Mike Myette P.E. President

30

SLIDE 31

Insurance

 Underwriting – Contractors typically must show the following to be acceptable risks: Industry Experience Sound financials Active safety and quality control policies for both job site and commercial fleet operations. Good loss history (past 3- 5 year review at a minimum). Use of contractual risk transfer to subcontractors performing work on their behalf. Receive positive marks from periodic loss control inspections.

8/27/2018 MM Construction Consulting LLC—Mike Myette P.E. President

31

SLIDE 32

8/27/2018 MM Construction Consulting LLC—Mike Myette P.E. President

32

Pricing

Base Rate - Decided by the insurance industries overall experience with a specific classification of business to which the carrier adds their overhead and profit. All rates must be justified to, and approved by the Office of the Insurance Commissioner if an admitted carrier. Non- admitted carriers are not subject to approval. Experience Rating -A ratio applied to the base rate of losses & reserves divided by premium.

Insurance

SLIDE 33

8/27/2018 MM Construction Consulting LLC—Mike Myette P.E. President

33

 Pricing Scheduled Rating – Discretionary debits or credits applied by the underwriter to the rate based upon impression of the contractors safety programs, management attitude and commitment to safety, maintenance and housekeeping. Policy Limits – Coverage limits stipulated in the contract will affect insurance charges to the project. Specific policies like Builder’s Risk will often be a direct cost to the project. Understand what you are requesting.

Insurance

SLIDE 34

8/27/2018 MM Construction Consulting LLC Mike Myette President

34

The Thought-The Plan-The Bid

Unit Item and Lump Sum Items
Incidentals
Fixed Price Contracts-
If using lump sum items adequate information must be

provided in the contract documents for the contractor to quantify the work, IE: topo information for lump sum earthwork or other type Lump Sum Items.

Please be informative (Tell us your concerns and your

limitations)

SLIDE 35

Bid Ingredients

Labor/Equipment/Material/subs/bonding/insurance

Project Labor Agreements
Apprenticeship Requirements
Planned Equipment for Project
Establishing Equipment Rates for Work
Rental Equipment
Material Vendors
Specialty Contractors
Subcontractors
Bonding
Insurance

8/27/2018 MM Construction Consulting LLC Mike Myette President

35

SLIDE 36

Wage Development

Single most important Item in Bid

Review the existing prevailing wage requirements
Union wages
Non Union Wages
Supplier wage requirements

8/27/2018 MM Construction Consulting LLC Mike Myette President

36

SLIDE 37

Equipment Rate Development

In-House Rates-normally not with a fuel

factor

Developed rates –types of work (Hard vs.

Easy)

Availability of equipment
Do with less-
Adjust at bid time (Cuts are usually made

in this items)

8/27/2018 MM Construction Consulting LLC Mike Myette President

37

SLIDE 38

8/27/2018 MM Construction Consulting LLC Mike Myette President

38

Material and Supplier Quotes

How were their numbers developed
Do they match the units in the contract (Ton vs. Cy)
Are there stipulations and/or limitations for their use

(Embankment in place in bid

Payment requirements
Delivery time schedule
Local Supplier
Minority/DBE requirements: Is there a premium to meet

these?

SLIDE 39

8/27/2018 MM Construction Consulting LLC Mike Myette President

39

Subcontractor Quotes

Returning your calls (Did they do it in time)
What are their scopes (Are they full work or partial work)
Are they clear on exclusions and inclusions
Time schedules to do the work
Bonding/Insurance
******Familiarity with them and their work
History in doing the type of work they are quoting
Are they financial secure with a bond and Insurance
Minority/DBE requirements: Is there a premium to meet these?

SLIDE 40

Building the bid

Analysis of Construction Items
Availability of Personnel
Experience Factors for Crewing
Supporting our Subs
Supporting our Vendors
Lay Down Areas
Support from Outside of Onsite Office

8/27/2018 MM Construction Consulting LLC Mike Myette President

40

SLIDE 41

WHAT IS OUR FAVORITE MEHTOD OF BIDDING?

Unit Price
Lump Sum
Cost not to Exceed
Cost plus a Fee Price
Guaranteed Maximum Price
Worst method- FA-Bad for Owner/Contractor

8/27/2018 MM Construction Consulting LLC Mike Myette President 41

SLIDE 42

Review of items

Look at big tickets items-What controls bid
Incidentals (Price incidentals)-maybe/maybe not
Check Owners/Designers Quantities
Hard work/Easier Work
Weighted averages for Pricing
What can we self-Perform?

8/27/2018 MM Construction Consulting LLC Mike Myette President 42

SLIDE 43

Production analysis

Historical-Similar projects only
Means/Cat/Euclid handbook/Civil Handbook
Other sources-( PW published data)
Example of project-Data from project

documents (Geo-report/notices of estimators)

Staff input
Project field review and sample testing

8/27/2018 MM Construction Consulting LLC Mike Myette President 43

SLIDE 44

Bidding the Project

Item analysis-
Production Analysis
Production analysis-sets ingredients
Labor/Equipment/Materials/Subs/taxe

s

Spread sheets/other bidding forms
Overhead and Profit ??????

8/27/2018 MM Construction Consulting LLC Mike Myette President

44

SLIDE 45

Productivity a guess or a fact! transparency

Productivity is the leading risk factor in a

construction estimate

Historical Data
No two projects the same/Not

current/Accurate data from job site/inefficiencies are included

8/27/2018 MM Construction Consulting LLC Mike Myette President

45

SLIDE 46

Productivity a guess or a fact! transparency

Work Study
Select the work to be studied
Break work down (PRODUCTIVE AND NON-

PRODUCTIVE)

Record Facts(EXAMINE THE FACTS CRITICALL)
Develop new methods

8/27/2018 MM Construction Consulting LLC Mike Myette President

46

SLIDE 47

Productivity the key for the Estimate

DETERMINE THE QUANTITY OF WORK
SELF-PERFORMING OF WORK
IDENTIFY THE PRODUCTIVITY RATES TO BE USED
CALCULATE THE UNIT COST OF THE RESOURCES
FACTORS IMPACTING PRODUCTION
Climate
Schedule-tight schedules foster low productivity as

progress trumps efficiency

8/27/2018 MM Construction Consulting LLC Mike Myette President

47

SLIDE 48

Productivity is the key to the estimate

JOB LOCATION
SUPERVISION
ACCESS TO SITE
GEOTECHNICAL DATA
EQUIPMENT/CREW EXPERIENCE
HOURS OF WORK –WEIGHTED AVERAGES $/HOUR
SELF –PERFORMING WORK

8/27/2018 MM Construction Consulting LLC Mike Myette President

48

SLIDE 49

Productivity is the key to the estimate

BID SHEET (Takes many forms)

QUANTITY/PRODUCTION RATE/CREW/EQUIPMENT

COSTS

WAGES/HOURS WORKED/TAXES/O AND P
MATERIAL COSTS/SUBCONTRACTORS-O AND P
TAXES

8/27/2018 MM Construction Consulting LLC Mike Myette President

49

SLIDE 50

8/27/2018 MM Construction Consulting LLC Mike Myette President

50

EXHIBIT A

Review and Analysis of Work Plans 800lf/day Page 1 NISQUALLY TO PARADISE ROAD PAHSE 1

Catepillar Performance Handbook Edition 42 Source Document ** Beginning work station 25+80 Plan Sheets End work station 346+00 Length of project 32, 020 by station Length of trench by Bid item 32,700 Source Station of dump site 190+00 construction inspector report 3/17/2014 Cycle time Analysis cycle time at excavation site ** 42-203 Distance Sec Min Hard digging and asphalt removal Load bucket **8 Ft/sec swing **0.1 MPH paved 15mph 22.5 dump **0.1 MPH Gravel 10mph 15 swing **0.1 Within Site 5mph 8 To 190+00 16,420 729.7778 731 12 25+80 to 190+00 in Gravel to dump 1500 100 100 2 in Travel within Site 400 slow 50 1

ut

dump Stopped and dump 120 2 Travel within Site 400 slow 50 1 Gravel to 190 1500 100 2 190 to excavation 16440 731 12 total

41

total project length bid item 32,700 Depth of trench 3.5 24" HD 2 Cy in trench 8500 bank cy bcy/lineal ft. 0.26 Cy/lineal ft. 800LF/DAY 208 CY/day One truck cy/day use 8lcy/truck 8hours/day 480 min load/day/truck 12 96 lcy/truck/ day Contractor work plan 800 lf/day lCy/day Trucks/haul Contractor work plan 208 bcy 250 2.604167 say 3 trucks on excavation 20% May consider (1) spar 4 trucks Contractor work plan 4 trucks As we move through out the site trucks are either added or removed based on proximity to dump area-Exhibit A page 2 The contractor approximated in Work Plan 4 solo's. The cycle time study above indicates 3 trucks with a normally planned spare.

SLIDE 51

8/27/2018 MM Construction Consulting LLC Mike Myette President 51 Bid Item Quanity Unit Duration Unit Production Roadway Excavation 6000 cy Neat line 5 days Shift 8 hrs/day 66.66667 Load 2 min 1000 ft Equipment # Shifts # of shifts Rate Amount Haul 2 min 10 miles/hour Backhoe 1 8 5 100.00 $ 4,000.00 $ Dump 3 min 15 ft/sec Compactor 1 8 5 55.00 $ 2,200.00 $ Haul 2 min Tks 2 8 5 45.00 $ 1,800.00 $ 9 min/load 7 use 7 Grader 1 8 5 85.00 $ 3,400.00 $ 7trips/hr/tr cat 2 8 5 65.00 $ 2,600.00 $ Truck 12 Pick-up 2 8 5 20.00 $ 800.00 $ Trips 7 84 cy/hr/tr 14,800.00 $ Truck 672 Labor 2truck 1344 Operators 6 8 5 65.00 $ 2,600.00 $ Overhead/Profit ????? Grade Checker 1 8 5 50.00 $ 2,000.00 $ Foreman 1 8 5 75.00 $ 3,000.00 $ teamsters 2 8 5 75.00 $ 3,000.00 $ 10,600.00 $ Unit price 4.23 $

SLIDE 52

Another look at - do we bid?

ANALYSIS OF ITEMS
LABOR/EQUIP/SUBS/MATERIALS WITHOUT MARKUPS
HOW MUCH DO I GIVE TO OTHERS?
HOW MUCH DO I TAKE HOME?
IS MY LABOR REASONABLE BASED ON THE TOTAL?
IS MY EQUIPMENT REASONABLE BASED ON THE TOTAL?

8/27/2018 MM Construction Consulting LLC Mike Myette President 52

SLIDE 53

Another look at - do we bid?

ANALYSIS OF ITEMS

HOW DO I DO BETTER? (SUBS/MATERIAL QUOTES)
DO I RECALL TO GET THEIR FINAL NUMBERS?
DO I RELOOK AT PRODUCTION RATES?
REMEMBER THIS IS A GUESS CARRIED TO TWO PLACES
WHERE DO I CUT FOR MY FINAL NUMBER?

8/27/2018 MM Construction Consulting LLC Mike Myette President 53

SLIDE 54

Handouts

When to Bid Matrix
Constructions Cost Estimate Qualifications Exclusions
New Project Estimate Checklist
Owner’s Total Project Cost Estimate Summary Checklist
SPM_ Managed Historical Percentage 2008-2015

Handouts available in native format upon request.

SLIDE 55

Questions? Contact…

Michael Dyer CCM, CPE, AVS Capital Project Estimator Port of Seattle Phone: 206-787-3839 Email: dyer.m@portseattle.org Mike Myette President MM Construction Consulting, LLC Phone: 206-510-6536 Email: goblueguy@outlook.com