Guidelines for Construction Cost Estimating for Dam ...

1 United States Society on DamsGuidelines for ConstructionCost Estimating forDam Engineers and OwnersMay 2012 United States Society on DamsGuidelines for ConstructionCost Estimating forDam Engineers and OwnersMay 2012 The information contained in this report regarding commercial products or firms may not be used foradvertising or promotional purposes and may not be construed as an endorsement of any product or firm bythe United States Society on Dams. USSD accepts no responsibility for the statements made or the opinionsexpressed in this 2012 U. S. Society on DamsPrinted in the United States of AmericaISBN 978-1-884575-Library of Congress Control Number Society on Dams1616 Seventeenth Street, #483 Denver, CO 80202 Telephone: 303-628-5430 Fax: 303-628-5431E-mail: Society on DamsVisionTo be the nation's leading organization of professionals dedicated to advancing therole of dams for the benefit of USSD is dedicated to: Advancing the knowledge of dam engineering, Construction , planning,operation, performance, rehabilitation, decommissioning, maintenance,security and safety; Fostering dam technology for socially, environmentally and financiallysustainable water resources systems; Providing public awareness of the role of dams in the management of thenation's water resources; Enhancing practices to meet current and future challenges on dams; and Representing the United States as an active member of the InternationalCommission on Large Dams (ICOLD).

2 I FOREWORD Guidelines for Construction Cost Estimating for Dam Engineers and Owners was prepared by the USSD Committee on Construction and Rehabilitation. The White Paper provides support for responsible cost Estimating for new dams and dam rehabilitation projects. It has been written for engineers and owners engaged in the planning, design and Construction of dam-related engineering projects anticipated to cost up to $100 million. This represents the collaborative effort of representatives from federal agencies, public utilities, private engineering companies and Construction contractors. Stages of project design and associated estimates, the development of a work breakdown structure, direct and indirect project costs, overhead, contingency, profit, and other owner costs are addressed as they relate to responsible cost Estimating . Examples of Work Breakdown Structures for various sized projects are also presented. USSD Committee on Construction and Rehabilitation Daniel L.

3 Johnson, Chair Samuel M. Planck, Vice Chair Horst Aschenbroich Randall P. Bass Thomas A. Brown Woodrow W. Crouch Timothy P. Dolen Frederick Ehat William R. Fiedler Kenneth D. Hansen Sara J. Heinlien Daniel J. Hertel Paul Krumm Michael J. Miller James Ray Obermeyer David B. Paul Warren J. Paul Dietmar Scheel Paul G. Schweiger Del A. Shannon John D. Smart Steven D. Summy Daniel L. Wade White Paper Sub-Committee David B. Paul, Chairman Kenneth D. Hansen Daniel J. Hertel Daniel L. Johnson Michael J. Miller Warren J. Paul Samuel M. Planck Del A. Shannon The Committee on Construction and Rehabilitation would like to acknowledge and thank the following individuals, agencies and corporations for their invaluable contributions to this paper: Susan Penner, Kim Callum Paula Boren, Dan Maag, Bob Baumgarten, Ed O Connor, Robert Resch, Luis Casta eda, Matthew Wigle, Army Corps of Engineers, Bureau of Reclamation, Denver Water, Barnard Construction Company, Inc.

4 , URS Corporation, HDR Engineering, Inc., ASI Constructors, Inc., Tetra Tech, Inc. and ii TABLE OF CONTENTS SCOPE AND PURPOSE ..1 STAGES OF PROJECT DESIGN AND ASSOCIATED ESTIMATES ..3 Introduction ..3 Association for the Advancement of Cost Engineering (AACE) International ..4 The United States Bureau of Reclamation ..5 The United States Army Corps of Engineers ..6 Other Organizations ..9 USSD Committee on Construction and Rehabilitation ..10 Summary ..10 DEVELOPMENT OF WORK BREAKDOWN STRUCTURE ..12 Introduction ..12 Work Breakdown Structure ..12 Developing the Cost Estimate ..13 Pay Items / Bid Schedule ..14 Summary.

5 15 DIRECT PROJECT COSTS ..16 Introduction ..16 Labor Costs ..16 Equipment Costs ..17 Material Costs ..20 Subcontractor Costs ..22 Production Rates ..23 Summary ..23 INDIRECT PROJECT Introduction ..24 Bonds ..24 Safety Program ..26 Quality Control Program ..26 Contractor and Resident Engineer Job Staff ..26 Mobilization and Demobilization ..27 Job Offices and Facilities ..28 Indirect Equipment Costs ..29 General and Miscellaneous ..29 Environmental Program ..29 Construction Surveying and Staking ..30 Insurance and Warranty Costs ..30 Taxes ..31 Summary ..32 iii CORPORATE OVERHEAD.

6 34 Introduction ..34 Home Office / G&A Cost Items ..34 Cost Types ..35 Suggested Corporate Overhead Cost ..35 Summary ..35 CONTINGENCY ..36 Introduction ..36 Building an Engineer s Estimate with Contingency ..37 Major Sources of Uncertainty Contingency Cost ..39 Reducing Risk to Reduce Contingency ..42 Contingency at Each Level of Project Development ..42 Summary ..45 PROFIT ..46 Introduction ..46 Market Conditions / Bidding Climate ..46 Number of Qualified Bidders ..48 Prequalification of Contractors ..48 Profit ..48 Summary ..49 OTHER OWNER COSTS ..50 Introduction ..50 Project Financing ..50 Revenue Loss Due to Service Interruption ..52 Owner s Project Management.

7 53 Legal Environmental Rights-of-Way / Land Engineering ..53 Public Outreach ..54 Construction Management ..54 Operation and Maintenance ..54 Operator Training ..55 Summary ..55 APPENDIX A. Cost Estimating Templates .. 56 Embankment Dam Master Template ..57 RCC Dam Master Concrete Cutoff Wall in an Embankment Dam WBS Template ..65 1 SCOPE AND PURPOSE These Guidelines have been developed to encourage and support responsible cost Estimating for new dams and dam rehabilitation projects. This guidance is not intended to serve as a how-to manual for cost estimators or others. Rather, the information provided offers a structured reminder of the items that Engineers, Owners, and cost Estimating professionals must address when preparing an estimate of expected project costs.

8 Preparation of the various types and levels of cost estimates requires professional experience and sound engineering judgment. More detailed data, such as cost curves, computer programs, contract terms and conditions, etc., that estimators use in the development of cost estimates are not included because of their variable nature and proprietary considerations. A major factor in Project go/no go decisions is the economic benefit of the project compared to the overall project cost. Market volatility, particularly between 2000 and 2010, highlights the importance of reliable Construction cost estimates during design and project development. USSD decided to address this topic in a paper after noting that in recent years several dam projects have experienced contractor bids that greatly exceeded budgets based on Engineers Estimates, causing delay and/or cancellation of these much-needed projects after significant up-front costs had been expended.

9 This document reflects the collaborative effort of representatives from throughout the industry, including input from federal agencies, public utilities, private engineering companies and Construction contractors. To begin, a cost estimate is a prediction of the probable costs of a project or program within a documented scope, to be completed at a defined location and specific future time. An estimate refers to the development of a judgment or opinion regarding the approximate project cost at the time of completion. Therefore, an estimate has an inherent uncertainty or expected level of error. The actual cost of the project at completion will differ from the predicted cost due to this inherent uncertainty and other unknown considerations or errors. The objective of the estimator is to be comprehensive in approach to the estimate and thorough in its development. All parties involved in a project must be keenly aware of this when referencing and discussing cost estimates.

10 Because of the inherent uncertainty associated with cost Estimating , adequate risk management and quality control of the Estimating process can improve the likelihood of an adequately funded and successfully completed project. Therefore, consideration should be given by the estimator-in-charge to performing some type of risk analysis on the cost estimate, and including the cost of this in the budget for preparing the estimate. Project risks are uncertain events or conditions that, if they occur, will have an impact on the objective, either positive or negative. History has proven that a greater probability exists that costs will increase rather decrease. Risk analysis can provide management with an understanding of the probability of over-running (or under-running) a cost estimate. 2 In addition to all the items discussed in this report that need to be considered in preparation of a responsible cost estimate, general economic conditions can have a major effect on the accuracy of a cost estimate.