Introduction to Estimating for Construction Students and professionals encountering estimating for the fi rst time need an approach- able introduction to its principles and techniques, which is up to date with current practice. This textbook explains both the traditional techniques and best practice in early contractor involvement situations, within the framework of modern construction procurement. As well as introducing different estimating techniques, it includes: • the nature of costs in construction from a cost of resources approach; • modern tendering procedures, and the stages of development of construction projects; • how to convert an estimate into a formal tender and then into a contract; • simple numerical examples of estimates; • estimating and cost analysis during the construction project; • summaries and discussion questions in every chapter. This is an easy-to-read introduction to building estimating for undergraduate students, or anyone working in a quantity surveying or construction commercial management role who needs a quick reference. Brian Greenhalgh FRICS FCIOB FQSi is a contract manager currently engaged by a major client organisation in the MENA region. He was formerly a principal lecturer in quantity surveying and construction project management at Liverpool John Moores University with responsibility for postgraduate programmes in quantity surveying and construction project management. Introduction to Estimating for Construction Brian Greenhalgh First published 2013 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon, OX14 4RN Simultaneously published in the USA and Canada by Routledge 711 Third Avenue, New York, NY 10017 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2013 Brian Greenhalgh The right of Brian Greenhalgh to be identifi ed as author of this work has been asserted by him in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identifi cation and explanation without intent to infringe. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data Greenhalgh, Brian. Introduction to estimating for construction / Brian Greenhalgh. p. cm. Includes bibliographical references and index. 1. Building—Estimates. I. Title. TH435.G665 2013 692'.5—dc23 2012021438 ISBN13: 978-0-415-50986-2 (hbk) ISBN13: 978-0-415-50987-9 (pbk) ISBN13: 978-0-203-08006-1 (ebk) Typeset in Sabon by Keystroke, Station Road, Codsall, Wolverhampton To Sheila, Neil & Kara, Simon and Steph – and of course Bobby Contents List of fi gures ix List of tables xi List of abbreviations xiii Foreword xvii Acknowledgements xix 1 Introduction to estimating construction work 1 2 The nature of costs in construction 26 3 Early contractor involvement in tendering procedures 61 4 The stages of development of construction projects 83 5 Estimating techniques at inception and design stages 97 6 Estimating techniques at design completion stage 117 7 Conversion of a contractor’s estimate 140 8 The construction stage 162 9 Other costs applicable to construction work 177 References and further reading 186 Index 188 List of fi gures 1.1 Example of a weighted scoring matrix for contractor prequalifi cation 7 1.2 Example of a pre-tender programme 20 1.3 Example of a pre-tender method statement 22 2.1 Fixed costs 27 2.2 Variable costs 28 4.1 Stages of the design process with cost estimates and decision points 84 4.2 Hierarchy of estimating data 85 5.1 Initial formal cost plan 106 5.2 Time-cost-quality trade-off 108 5.3 Estimating accuracy through the design stage 109 5.4 Elemental cost plan proforma 111 5.5 Final cost plan/pre-tender estimate proforma 115 6.1 Pareto curve of design completion against time 118 6.2 Tender programme with labour resource histogram 127 6.3 Contractor’s plant schedule 131 6.4 Example page from a bill of quantities 131 6.5 Worked example of calculation of all-in rate for craftsman 133 6.6 Contractor’s extended bill of quantities 135 6.7 PC and provisional sums 137 8.1 Standard payment delays in UK contracts 163 8.2 Standard payment delays where contractor’s invoice required 164 8.3 Typical S-curves of income and costs on a project 167 List of tables 2.1 Worked example – total budgeted income 57 2.2 Worked example – total budgeted contribution to head offi ce overheads 57 4.1 The RICS formal cost estimating and cost planning stages in context with the RIBA Plan of Work and OGC Gateways 86 4.2 The RIBA Plan of Work stages and format of cost estimates 87 4.3 The OGC Gateway project stages and format of cost estimates 90 5.1 Functional unit areas and unit costs 100 5.2 Regional variation of tender prices (UK) 100 5.3 Index of tender prices for UK construction 101 5.4 Index of building costs for UK construction 101 5.5 Uniclass building elements and work sections 104 6.1 Generic method statement 122 6.2 Project-specifi c method statement 123 7.1 Summary of project labour costs 142 7.2 Summary of project plant and equipment costs 143 7.3 Summary of project materials costs 144 7.4 Risk matrix 146 7.5 Tender summary of project 150 8.1 Cash fl ow budget for a simple project 165 8.2 Terminology and defi nitions used in EVM 171 8.3 Summary cost analysis form 174 List of abbreviations BAFO Best and Final Offer BCE baseline cost estimate BCIS Building Cost Information Service BIM Building Information Modeling BLS baseline schedule BOQ bill of quantities BPS baseline project schedule CAR Contractor’s All Risks (Insurance) CAWS Common Arrangement of Work Sections CDM Construction (Design and Management) Regulations CESMM(4) Civil Engineering Standard Method of Measurement (fourth edition) CIJC Construction Industry Joint Council CIOB Chartered Institute of Building CIS Construction Industry Scheme CITB Construction Industry Training Board COSHH Control of Substances Hazardous to Health CSI Construction Specifi cations Institute CV Curriculum Vitae CVR cost value reconciliation ECI early contractor involvement EMC estimated maximum cost EPC engineer, procure, construct EPCM engineer, procure, construction management EPIC engineer, procure, install, commission EUR element unit rate EVA earned value analysis EVM earned value management FEED front-end engineering and design FFE fi ttings, furniture and equipment FIDIC International Federation of Consulting Engineers GFA gross fl oor area GIFA gross internal fl oor area HR human resources HSE health, safety and environment, or Health and Safety Executive xiv List of abbreviations HVAC heating, ventilation and air conditioning ICC Infrastructure Conditions of Contract ICE Institution of Civil Engineers ICV in-country value IRS information release schedule ISO International Standards Organisation IT information technology ITT invitation to tender JCT Joint Contracts Tribunal JIT just in time JV joint venture JV-MC joint venture main contractor KISS keep it simple sweetheart KPI key performance indicator LCC life cycle costing MCD main contractor’s discount MEAT most economically advantageous tender MENA Middle East & North Africa MEP mechanical, electrical and plumbing (installations) MGP maximum guaranteed price MOU Memorandum of Understanding NEC New Engineering Contract NJCC National Joint Consultative Committee NRM New Rules of Measurement NWR National Working Rule OFT Offi ce of Fair Trading OGC Offi ce of Government Commerce OJEU Offi cial Journal of the European Union PC prime cost PCSA Pre-Construction Services Agreement PFI private fi nance initiative POMI Principles of Measurement International PPC Project Partnering Contract PPE personal protective equipment PSC Professional Services Contract PTE pre-tender estimate QA quality assurance QM quality management QS quantity surveyor RFI request for information RFP request for proposal RIBA Royal Institute of British Architects RICS Royal Institution of Chartered Surveyors SCM supply chain management SMM(7) Standard Method of Measurement (seventh edition) SWMP site waste management plan TPCS total project cost summary VAT Value Added Tax List of abbreviations xv VE value engineering WBS work breakdown structure WLC whole life costing WRA Working Rule Agreement Foreword In January 2011, the sister book Introduction to Building Procurement was published by Routledge, which I co-authored with Dr Graham Squires of the University of the West of England. As Danny Myers quite correctly pointed out in the Foreword to that book, it had gone through a long period of gestation, but the fi nal product was a notable contribution from someone in the twilight of his career! I take this as a compliment as it is everybody’s duty at this stage in their career to pass on any acquired knowledge, learning and, dare I say, wisdom. A lot happened following publication of that book. In February 2011 I was engaged by an international consultancy on the new Tripoli International Airport project in Libya, when a major ‘civil commotion’ broke out which was well documented in the international media. After almost two days of tense waiting, we were fi nally evacuated by the British government.