14th Nov

Be smart: reuse what you already have

To estimate the costs of a large and complex project you need to have some level of knowledge and experience about that particular kind of project, its main pieces of equipment and other factors that need to be taken into account. However, most often there is already a lot of knowledge available within an organization, without the estimators being aware of it. So how do you make use of the value that existing knowledge has?

Historic projects

Especially in somewhat larger companies, there are often many projects that have been completed before. Those projects can form a perfect basis for so-called capacity factored estimating. This means that after adjusting those projects for inflation and exceptional circumstances, you can perform a regression analysis on the relation between the capacity or size of those projects and their cost. The regression function that follows, can then directly be used to forecast future projects based on its required capacity.

Previous quotes

Offer the course of many previous projects, there were probably many more quotations received for all kinds of materials and equipment. Those quotations are truly valuable assets even after their validation date has expired. Adjusted for inflation, they can be a source for cost models in which several parameters can determine prices of equipment needed in future projects. For example, the capacity, size, material type and operating pressure of a pump are all influencing its price. If you have gathered multiple quotations for pumps, you can use an analysis tool to determine how those parameters are individually affecting the total costs.

Productivity and location factors

A somewhat less tangible and less directly usable form of knowledge are productivity and location factors influencing the cost of a project. You can imagine that working in a congested area or having to walk a mile every time you need another tool or equipment has a major impact on your productivity. This is also true for location; labor rates may be lower, but productivity as well. Other examples of location-related aspects that influence the costs of a project are soil type and climate. You can’t exactly turn them into a one-size-fits-all model, but you can gain knowledge and experience from analyzing those factors and improve the quality of your estimates by using them wisely.

Industry standards

A somewhat special type of historic knowledge that you can use are industry standards. It’s not company-specific, so you won’t find it in historic projects within your organization, but there are companies that develop those industry standards based on large databases of projects, up-to-date market prices and other sources. One example is the DACE labor norms. The DACE has set the standard amount of time one needs to install a piece of equipment or to make a weld on a pipe of a particular size.

A large amount of data from many different sources is bundled together in the Cost Engineering Standard Knowledgebases (CESK). Those databases can be used directly to create estimates of project costs.

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