Cstm 460 Construction Cost Management s1

CstM 460 – Construction Cost Management THE TASK REBUDGET

Once your Project Budget for a newly awarded project has been submitted to corporate management, the far right column of your Budget document will reveal work tasks where the budget you are requesting for the tasks is significantly over or under the amount that was originally estimated for the tasks. Note: This is YOUR CALL TO MAKE AS THE PROJECT MANAGER. We no longer care how much the Estimators thought the job would cost. WE CARE WHAT YOU THINK THE JOB WILL COST. If you do now significantly disagree with the originally-estimated cost for these tasks upper management of a good company will want to know this, and you will now double-check your budget and explain why you think the task will cost a lot more (or less) than the number used in the estimate.

Since the estimate was used to prepare your bid (which is now your contract amount) any differences between your Estimate and your Budget will either increase or decrease the projected amount of Margin you believe will be produced by the job as compared with your “as- bid” margin. Knowing and understanding this difference, if any, is critical to corporate management and anyone else having a financial interest in how well the company does on this project (your bank, your company owners, your board of directors, your bonding company, etc.)

There are many reasons why your Budget may be significantly different than the bid day cost Estimate and the Task Rebudget will investigate these differences in detail. 1. The Estimators may have made a mistake when preparing the bid. Maybe simply leaving something out (a “hole” in the bid), maybe covering the same cost (say grouting of door frames) in two different places in the Budget (a “double-up”) showing the probable cost twice. 2. You may have made a mistake that your “level one filter” did not catch when you prepared the Budget. Remember, the “level one filter” only checked if you though the Budgeted cost is “possible”, not how accurate it is.

A good company will require that you “re-budget” any task that has a significant Estimate v. Budget cost variance in order to identify the reason for, and extent of, any significant cost variance. At Times 12 we request that Project Managers “rebudget” any task that (1) has a significant variance (say 10% or more), (2) is a self-performed task, and (3) has significant labor and/or material costs associated with the work.

You will use the “Task Rebudget” format provided to you for this purpose. Some of the key parts of that format are:

“Notes” A brief description of the magnitude of the task. “Exterior Wall Framing” doesn’t tell us much in the way of understanding the task. “Wood, 10’ high, 2x6, 16” o.c., double top plates, no shear” gives whoever is reading your Rebudget an adequate feeling for the nature of the task.

“Test Quantity” A portion of the Total Task Quantity small enough to visualize in terms of how long it should take a crew to complete. i.e. No one can visualize how long it should take a crew to frame 5,590 l.f. of wall. But an experienced person (like you) can visualize how about long it should take a typical crew to frame 100 l.f. of that wall because they can visualize it, step by step, being done by a typical framing crew. Most of your Rebudget work will be done using

1 2 the Test Quantity, then extrapolating the results to the larger Total Quantity.

“Subtasks” A detailed, step-by-step description of everything, in order, that needs to be done in order to complete the task, and the man hours, by crew member, required for each step, for the Test Quantity.

“Materials Detail” A complete, detailed materials-take off for the Test Quantity. The column headings and units of measurement are to be determined by you and would be different for a concrete task than for a wood framing task. i.e. BFK (Board Foot Constant) would not be an appropriate column heading for a concrete placement task, just like CY would not be an appropriate unit of measurement for a framing task. NOTE: It is highly probable that this will probably be the first time a detailed materials take-off will be done for this task, so it must be accurate, and it may produce some revealing Estimate v. Budget variance explanations.

“Total Element Predicted Cost” This would be the total of the Rebudgeted labor, material, equipment and “other” costs, divided by the Test Quantity unit (say l.f.), times the actual quantity for the Total Task.

“Reality Check Unit Cost” In real life this would be the historical cost (say per LF) for this work based upon the historical cost data for your company. This would require your review of your company’s cost reports on prior projects having similar tasks. For this assignment, since we have no prior Times 12 cost data, you will use a published cost guide. i.e. RS Means, Saylor, NCE, etc.

“% Over (Under) Check” How much difference (in % terms) is there between the Reality Check and your Rebudgeted cost?

“Predicted Cost v. Rebudget”Your judgment regarding the importance of any significant Reality Check v. Rebudget % difference. NOTE: If the difference is significant one of two conclusions must be drawn: (1) There is an error in your rebudget, and you must go back and correct it before submitting it, or (2) You used faulty (apples-to-oranges) Reality Check historical cost data, and you must explain the nature of any “oranges” on this task, on the Rebudget form.

“% Over (Under) Current Budget” How much difference (in % terms) is there between the Rebudget and your Budget for the task?

“Current Budget v. Rebudget” Your judgment regarding the importance of any significant Rebudget v. Budget % difference. If there is a significant % difference it is probable that your Rebudget number is more accurate than your Budget number because the Rebudget process is usually much more detailed than the Budget process for the same task. However, a small variance could be due to extrapolation error, using data based on a small Test Quantity and extrapolating it to a much larger Actual Quantity when you did the Rebudget, so. Most of the time, if the Rebudget checked out with the Reality Check historical cost data, and any difference between the Rebudget and the Budget is small, you would probably “accept” the Budget rather than “chasing the small difference” that could be due to extrapolation in the re-budgeting process.