22nd Feb

The hidden costs of engineering – what many estimators overlook

To estimate the costs of a large, complex project is a major task. There are many aspects of the project to take into account, so it’s no surprise some things tend to get overlooked. Luckily, most of these things will be noticed using the four eyes principle, where someone else reviews the estimate for possible gaps. Here are a few things many estimators forget when making a project cost estimate.

Project specific factors

In all phases of design, from FEED to detailed, there’s always more to a project than the drawings, diagrams and material lists tell you. Those are the project specific circumstances that you can estimate by simply attached a price to all elements on a list or diagram. For example, the fact that workers lose a significant amount of time due to a large distance between two facilities. That has a major impact on overall productivity and thus the amount of hours needed to finish the job. However, that kind of information can’t be found on that Material Take-off sheet. So be aware of those factors.

The importance of contingency

Even when every aspect of the project is taken into account, including project and location specific factors, that’s still not all. What about the so-called known unknowns? Every project has a number of risks attached to it, some more than others. A special cost section of your estimate, called contingency, accounts for the costs of those risks. In order to valuate every individual risk, multiply the chance of occurrence of an event by the costs that are associated in case the event does take place. If you add up all of those values, you get the amount of contingency needed for the project.

Structure is key

Adding a well thought of structure to your estimate is essential to ensure the entire scope of the project is covered, the assumptions that were made and to allow others to check and validate the estimate. It also simplifies making alterations when the project scope is changed. Furthermore it helps to accurately calculate cost items that are dependent of others; i.e. a contingency item that is based on a percentage of the costs of certain piece of equipment or all stainless steel components.

If you have a question, or want to know more about CESK data, please feel free to contact us.