COST ESTIMATING OVERVIEW

1. COST ESTIMATING OVERVIEW Agenda Methods Estimate Types Costs estimates during the life of project Key Cost Elements Factors that affect the Estimate Estimating Tools This slide is meant as an introduction to the topics you�re going to cover in the Cost Estimating Overview portion of the training. As a suggested lead in you could share with the group the below basic estimating philosophy�. Estimating Philosophy: Cost estimates should be prepared as though the government were a prudent contractor estimating the project. Therefore all costs which a prudent, experienced contractor would expect to incur should be included in the cost estimate. This philosophy prevails throughout the entire project cycle � from programming through completion of construction. Each estimate should be developed as accurately as possible, in as much detail as possible, based on the best available project information. After giving them the general philosophy you could continue by saying� �So I�m going to talk about the different estimating methods, estimating types to help achieve this philosophy. Also, I want to talk about the different estimates that are developed during the project life and the accuracy of those estimates along with key project elements that need to be considered in the estimates. Also, I�ll discuss the many factors that affect the accuracy and detail of those estimates, and finally I�ll introduce some of the tools that are used to develop costs estimates�. This slide is meant as an introduction to the topics you�re going to cover in the Cost Estimating Overview portion of the training. As a suggested lead in you could share with the group the below basic estimating philosophy�. Estimating Philosophy: Cost estimates should be prepared as though the government were a prudent contractor estimating the project. Therefore all costs which a prudent, experienced contractor would expect to incur should be included in the cost estimate. This philosophy prevails throughout the entire project cycle � from programming through completion of construction. Each estimate should be developed as accurately as possible, in as much detail as possible, based on the best available project information. After giving them the general philosophy you could continue by saying� �So I�m going to talk about the different estimating methods, estimating types to help achieve this philosophy. Also, I want to talk about the different estimates that are developed during the project life and the accuracy of those estimates along with key project elements that need to be considered in the estimates. Also, I�ll discuss the many factors that affect the accuracy and detail of those estimates, and finally I�ll introduce some of the tools that are used to develop costs estimates�.

2. COST ESTIMATING OVERVIEWESTIMATING METHODS Parametric Estimating Parametric estimating can be defined as identifying major task cost drivers, applying associated relationships and/or factors to them to develop project costs. Parametric estimating typically employs the use of parametric models. A parametric cost model is a group of cost estimating relationships, used together to estimate an entire or several tasks Primary Purpose: Provide a defensible budget estimate at early stages with little known design criteria One of the estimating methods used to develop preliminary/ budget type estimates is called Parametric Estimating. There are various tools and techniques that can be used for this estimating method which I�ll discuss later. Parametric estimating in a nutshell� usually refers to an estimate where the costs are based on using available design parameters (either known or assumed), and applying them to cost models or using some other type of cost estimating relationships/factors. Parametric cost models and their estimating relationships are based on historical costs. Parametric models focus more on the major cost drivers of a task and not so much on the miscellaneous details. The estimator must know or make assumptions to answer parameters within each model to get a cost. These cost drivers (or parameters) have the predominant effect on the estimate cost. A simple example of this is� estimating the cost of groundwater extraction wells. Assuming a few of the basic parameters such as the number of wells, well depth, and well diameter, these assumptions can be used in the costs models to generate a cost of the extraction wells. Again, when your using parametric methods your not concerned with knowing all the details at this point and time. The models are designed to account for these detail items through cost engineering relationships and assembly items to hopefully give the estimator a good representative cost.One of the estimating methods used to develop preliminary/ budget type estimates is called Parametric Estimating. There are various tools and techniques that can be used for this estimating method which I�ll discuss later. Parametric estimating in a nutshell� usually refers to an estimate where the costs are based on using available design parameters (either known or assumed), and applying them to cost models or using some other type of cost estimating relationships/factors. Parametric cost models and their estimating relationships are based on historical costs. Parametric models focus more on the major cost drivers of a task and not so much on the miscellaneous details. The estimator must know or make assumptions to answer parameters within each model to get a cost. These cost drivers (or parameters) have the predominant effect on the estimate cost. A simple example of this is� estimating the cost of groundwater extraction wells. Assuming a few of the basic parameters such as the number of wells, well depth, and well diameter, these assumptions can be used in the costs models to generate a cost of the extraction wells. Again, when your using parametric methods your not concerned with knowing all the details at this point and time. The models are designed to account for these detail items through cost engineering relationships and assembly items to hopefully give the estimator a good representative cost.

3. COST ESTIMATING OVERVIEWESTIMATING METHODS Detailed Estimating Detailed estimates are �bottoms-up� made from very defined engineering data Detailed quantity take-offs are developed to support labor, material and equipment prices These estimates are the most comprehensive and are labor intensive to prepare The other method typically used when design and scopes are complete is Detailed Estimating. Detailed estimating is basically a process where the cost engineer develops quantity takeoffs from scopes, plans and specs. These quantities are applied to labor, equipment, and material priced item to build the estimate. Crews and productivities are also developed to aid in developing accurate cost along with vendor quotes. Unlike parametric estimating you are concerned with the details of the project because the estimates are built form the bottom up. The term �bottoms-up� refers to the process of making the estimate�determining the quantity take-off, applying labor, equipment, and material prices to each line item in the estimate, which is the lowest level of the estimate and then finally rolling all the costs elements up to the total cost of the project. An example of this would be.. Say you want to estimate foundation and footings for a building. The estimator would make detailed quantity takeoff for how much concrete, reinforcing, formwork, etc is required to construct the footing and foundation system based on the size. In a detailed estimate, each item would be shown and priced out separately in the estimate. (This very different from parametric estimating) This method to create this type of estimate is very labor intensive. Because this method is so labor intensive to develop the estimate it is not normally used in the early stages. It can be� but you spending a lot of time and effort making gross assumptions at the early stages� not much value added.The other method typically used when design and scopes are complete is Detailed Estimating. Detailed estimating is basically a process where the cost engineer develops quantity takeoffs from scopes, plans and specs. These quantities are applied to labor, equipment, and material priced item to build the estimate. Crews and productivities are also developed to aid in developing accurate cost along with vendor quotes. Unlike parametric estimating you are concerned with the details of the project because the estimates are built form the bottom up. The term �bottoms-up� refers to the process of making the estimate�determining the quantity take-off, applying labor, equipment, and material prices to each line item in the estimate, which is the lowest level of the estimate and then finally rolling all the costs elements up to the total cost of the project. An example of this would be.. Say you want to estimate foundation and footings for a building. The estimator would make detailed quantity takeoff for how much concrete, reinforcing, formwork, etc is required to construct the footing and foundation system based on the size. In a detailed estimate, each item would be shown and priced out separately in the estimate. (This very different from parametric estimating) This method to create this type of estimate is very labor intensive. Because this method is so labor intensive to develop the estimate it is not normally used in the early stages. It can be� but you spending a lot of time and effort making gross assumptions at the early stages� not much value added.

4. COST ESTIMATING OVERVIEWTYPES OF ESTIMATES Types of Estimates: Rough Order of Magnitude (ROM) Estimates Made without detailed engineering Accurate to within +50% or -30% of actual costs Factor (Benchmark) Estimating Utilizes costs from similar projects Historical cost data is normalized and scaled to fit Budget (Planning) Estimates Based on preliminary or partial engineering data Accurate to within +30% or -15% of actual costs Detailed (Definitive) Estimates Based on high level of design Accurate within +20 or � 10% of actual costs This slide is meant as a lead in to discuss each type in more detail These are the different types of estimates that are often referred to when dealing with cost estimates at certain stages of the project. The first two are used at the very beginning of the project where there is little or no design. Both might rely or a combination of historical cost, cost comparisons between similar projects, factoring, etc. Factoring or Benchmark estimating may be better classified as a technique to develop costs in that it is often used in combination with rough order of magnitude estimates and sometimes budget estimates as well. Even though the project may be at an early stage of design Benchmark estimating could be fairly detailed depending on the data being used. Budget or planning estimates are usually based on some of conceptual design and preliminary engineering data so they are a little more project specific and tighter than the other two types. All three of these types use parametric methods and tools to develop the cost estimates Again, Detailed or Definitive estimates are exactly what the name implies These estimates can usually be developed at about 60% design, but of course the more design� the better the accuracy of the estimate and less assumptions have to be made. ROM estimates are useful for the following applications: Preliminary design-phase budgets Probable costs for program-level budgets General economic feasibility Preliminary economic screening of alternatives Consequences of design decisions Updating existing ROM estimates with more detailed data ROM estimates often use scaling, factoring, or parametric techniques Budget estimates are useful for the following applications: Accurate design-phase budgets Program-level budgets Detailed economic screening of alternatives Updating existing ROM or Budget estimates with more detailed data Budget estimates typically use the same techniques as ROM estimating; however, the use of more detailed data increases the accuracy of the estimate. Definitive estimates are useful for the following applications: Independent Government Estimates (IGEs) Cost validation � ensuring that project costs (i.e., charges from a contractor) are in line with what should have been charged This slide is meant as a lead in to discuss each type in more detail These are the different types of estimates that are often referred to when dealing with cost estimates at certain stages of the project. The first two are used at the very beginning of the project where there is little or no design. Both might rely or a combination of historical cost, cost comparisons between similar projects, factoring, etc. Factoring or Benchmark estimating may be better classified as a technique to develop costs in that it is often used in combination with rough order of magnitude estimates and sometimes budget estimates as well. Even though the project may be at an early stage of design Benchmark estimating could be fairly detailed depending on the data being used. Budget or planning estimates are usually based on some of conceptual design and preliminary engineering data so they are a little more project specific and tighter than the other two types. All three of these types use parametric methods and tools to develop the cost estimates Again, Detailed or Definitive estimates are exactly what the name implies These estimates can usually be developed at about 60% design, but of course the more design� the better the accuracy of the estimate and less assumptions have to be made. ROM estimates are useful for the following applications: Preliminary design-phase budgets Probable costs for program-level budgets General economic feasibility Preliminary economic screening of alternatives Consequences of design decisions Updating existing ROM estimates with more detailed data ROM estimates often use scaling, factoring, or parametric techniques Budget estimates are useful for the following applications: Accurate design-phase budgets Program-level budgets Detailed economic screening of alternatives Updating existing ROM or Budget estimates with more detailed data Budget estimates typically use the same techniques as ROM estimating; however, the use of more detailed data increases the accuracy of the estimate. Definitive estimates are useful for the following applications: Independent Government Estimates (IGEs) Cost validation � ensuring that project costs (i.e., charges from a contractor) are in line with what should have been charged

5. COST ESTIMATING OVERVIEW TYPES OF ESTIMATES Rough Order of Magnitude (ROM) Estimates Useful in: Preliminary design-phase budget Probable costs for program-level budgets General economic feasibility Preliminary economic screening of alternatives Consequences of design decisions ROM estimates often use scaling, factoring, or parametric tools The point you want to make here is that these estimates are very preliminary. However, they are used to help narrow down treatment alternatives especially when comparing the alternatives against cost only because they are usually based on some type of historical data and pricing. Probable cost are identified, major design decisions are realized. Usually based on only descriptive elements. For example, say you have to develop an estimate to install GW Extraction wells� you may only know an assumed number of wells for a particular project. What you might not know at this time is the size, depth, flow rate, pump sizes etc. Usually many assumptions have to be made to develop the estimate Many times they are based on historical data. These estimates also use comparative and ratio techniques to develop ROM estimates. The point you want to make here is that these estimates are very preliminary. However, they are used to help narrow down treatment alternatives especially when comparing the alternatives against cost only because they are usually based on some type of historical data and pricing. Probable cost are identified, major design decisions are realized. Usually based on only descriptive elements. For example, say you have to develop an estimate to install GW Extraction wells� you may only know an assumed number of wells for a particular project. What you might not know at this time is the size, depth, flow rate, pump sizes etc. Usually many assumptions have to be made to develop the estimate Many times they are based on historical data. These estimates also use comparative and ratio techniques to develop ROM estimates.

6. COST ESTIMATING OVERVIEW TYPES OF ESTIMATES Budget (Planning) Estimates Useful in: Accurate design-phase budgets Program-level budgets Detailed economic screening of alternatives Updating existing ROM or Budget estimates with more detailed data Budget estimates typically use the same techniques as ROM estimating; however, the use of more detailed data increases the accuracy of the estimate. These estimates assist in obtaining funding for the project and are used with designing to a specific budget. These estimates are usually based on Parametric methods. One typical tool used for these estimates in the environmental remedation world is RACER� which will be discussed later These estimate supplement any previous estimates and become the baseline estimate. Again, the level of accuracy increases with these estimates but are often modified as the project scope and design become more detailed. These estimates assist in obtaining funding for the project and are used with designing to a specific budget. These estimates are usually based on Parametric methods. One typical tool used for these estimates in the environmental remedation world is RACER� which will be discussed later These estimate supplement any previous estimates and become the baseline estimate. Again, the level of accuracy increases with these estimates but are often modified as the project scope and design become more detailed.

7. COST ESTIMATING OVERVIEW TYPES OF ESTIMATES Detailed (Definitive) Estimates Useful in: Independent Government Estimates (IGEs) Cost validation/Contract negotiations � ensuring that project costs (i.e., charges from a contractor) are in line with what should have been charged Primary Purpose: Evaluate contractor bids against the government estimates Track costs throughout the project The value added in developing these estimates is to ensure the government receives a fair and reasonable price for the work contracted. These estimates are often taken into negotiations to compare contractor proposals. There are many tools on the market to do this type of estimating. The Corps uses MCACES.The value added in developing these estimates is to ensure the government receives a fair and reasonable price for the work contracted. These estimates are often taken into negotiations to compare contractor proposals. There are many tools on the market to do this type of estimating. The Corps uses MCACES.

8. COST ESTIMATING OVERVIEW TYPES OF ESTIMATES Factor (Benchmark) Estimating Useful in: Cost comparisons for similar projects Developing early budget requirements Developing a quick detailed estimates Based on cost curves, ratios, and factoring historical data Bench Mark estimating is a quick way to develop an estimate by adjusting for time, size, and location. It compares your project to similar historical projects by the use of factoring and ratios for these items. A simple example of this would be if your project involved installing cap. Maybe your cap project is similar in design to one that has already been installed but different in size. An estimator could take the estimate from the historical project and ratio the quantities to get a representative cost for the project. Also, depending on how old and where the historical project is located� the unit costs would have to adjusted for location and time by factors.Bench Mark estimating is a quick way to develop an estimate by adjusting for time, size, and location. It compares your project to similar historical projects by the use of factoring and ratios for these items. A simple example of this would be if your project involved installing cap. Maybe your cap project is similar in design to one that has already been installed but different in size. An estimator could take the estimate from the historical project and ratio the quantities to get a representative cost for the project. Also, depending on how old and where the historical project is located� the unit costs would have to adjusted for location and time by factors.

9. COST ESTIMATING OVERVIEW ESTIMATES DURING PROJECT LIFE Cost Estimating during the RI/FS stage: Design still conceptual and estimates are considered conceptual Cost engineer must make assumptions Usually includes more contingencies Estimate must include project�s life cycle costs Estimate considered to be conceptual During the RI (screening of alternatives) estimate = -50% to 100% During the FS (detailed analysis of alternatives/conceptual design) estimate = +50% to -30% Estimates are developed at various stages of the project life� one of these is during the RI/FS stage. Estimates during the FS phase is one of the nine criteria used to help make remedy selection and is critical to ensure that the preferred alternative is cost effective. Estimates developed during the RI are used to screen out disproportionately expensive alternatives and which alternatives should be kept for detailed analysis for the FS. Estimates during the FS are used for the detailed analysis to support remedy selection. These estimates are considered conceptual and are at an accuracy level of about +50% to -30%. Estimates developed during this phase are usually derived from parametric methods. Estimates are developed for each alternative for comparison purposes and must include (1) Capital costs, including both direct costs, (2) Annual O&M costs and (3) Net present value of capital and O&M costs.Estimates are developed at various stages of the project life� one of these is during the RI/FS stage. Estimates during the FS phase is one of the nine criteria used to help make remedy selection and is critical to ensure that the preferred alternative is cost effective. Estimates developed during the RI are used to screen out disproportionately expensive alternatives and which alternatives should be kept for detailed analysis for the FS. Estimates during the FS are used for the detailed analysis to support remedy selection. These estimates are considered conceptual and are at an accuracy level of about +50% to -30%. Estimates developed during this phase are usually derived from parametric methods. Estimates are developed for each alternative for comparison purposes and must include (1) Capital costs, including both direct costs, (2) Annual O&M costs and (3) Net present value of capital and O&M costs.

10. COST ESTIMATING OVERVIEW ESTIMATES DURING PROJECT LIFE Record of Decision (ROD) Estimates Cost estimate is developed during the FS for the preferred alternative Not to used to establish budgets or negotiating Superfund enforcement The subsequent estimates used for the ROD must reflect any changes The basic point here is that during the remedy selection, the preferred alternative presented in the proposed plan in all probability will undergo changes as a result of public comment or new information such as additional site characterization data. Most often the RI/FS spans more than one year and in this case the cost estimate will have to be updated. In any event, any changes must be incorporated into the final estimate used to support the ROD. Again, these estimates at the ROD stage are considered conceptual (-30% to +50%) and will change as the project moves into design. These estimates are not typically used to establish final budget requirement but rather the starting point.The basic point here is that during the remedy selection, the preferred alternative presented in the proposed plan in all probability will undergo changes as a result of public comment or new information such as additional site characterization data. Most often the RI/FS spans more than one year and in this case the cost estimate will have to be updated. In any event, any changes must be incorporated into the final estimate used to support the ROD. Again, these estimates at the ROD stage are considered conceptual (-30% to +50%) and will change as the project moves into design. These estimates are not typically used to establish final budget requirement but rather the starting point.

11. COST ESTIMATING OVERVIEW ESTIMATES DURING PROJECT LIFE Cost Estimating during the Design stage: Estimate based on detailed scope, design drawings, and specifications Estimate built from the bottom up Quotes obtained for major cost elements Uses less contingencies, if any Estimate used to evaluate contractor proposals Usually estimates are developed during this stage for each design submittal. At the design stage the estimator can usually begin to build a �bottoms up� or detailed estimate. This is a process where the estimator develops quantity take-offs for material, labor and equipment items; develops crews and productivities, and figures detailed overhead, profit, and bond costs. The estimates developed during this stage become more detailed as the design increases and the accuracy level goes up. Also, because design and specifications are tighter the cost engineer is often able to call for quotes on major systems and cost drivers which increase the accuracy of the estimate. Estimates developed during the final design are used to compare against contractor bids to ensure the government receives a fair and reasonable price for the work.Usually estimates are developed during this stage for each design submittal. At the design stage the estimator can usually begin to build a �bottoms up� or detailed estimate. This is a process where the estimator develops quantity take-offs for material, labor and equipment items; develops crews and productivities, and figures detailed overhead, profit, and bond costs. The estimates developed during this stage become more detailed as the design increases and the accuracy level goes up. Also, because design and specifications are tighter the cost engineer is often able to call for quotes on major systems and cost drivers which increase the accuracy of the estimate. Estimates developed during the final design are used to compare against contractor bids to ensure the government receives a fair and reasonable price for the work.

12. COST ESTIMATING OVERVIEWKEY COST ELEMENTS Identifying Cost Elements of the estimate Estimates should include as many cost elements as possible Estimates for HTRW projects typically use a work breakdown structure (WBS) to identify cost elements HTRW Remedial Action/Operation & Maintenance (RA/OM) WBS, Feb. 1996 Environmental Cost Elements Structure (ECES), Sept. 1999 One of the crucial items in developing a sound cost estimate, no matter at what stage is to identify the key elements that affect cost. Even though uncertainty may remain as to their unit cost and/or quantity they should still try to be accounted for in the estimate. Work breakdown structures (WBS) are available to the cost engineer to help organize and account for these elements within the estimates. These WBS�s sort of act as a checklist to ensure that all cost are captured� this is especially handy when conceptual estimates are developed. Also by using a WBS it serves as a project management tool which defines the project along activity levels that can be identified and managed. They also help in through analysis and review of project estimates as well. The HTRW RA/O&M WBS was initially developed in 1992 and updated in 1996 by an Interagency Cost Engineering Group (Air Force, Army Corps of Engineers, DOE, EPA, and Navy). The ECES evolved from the HTRW RA/OM WBS and was developed by the Environmental Cost Committee (many of the same members who developed the HTRW WBS) with slight variations in the numbering systems and list of elements. Both are meant as a comprehensive, hierarchical list of elements that may be required to accomplish an environmental project. The WBS�s were also developed with the idea in mind to collect and record costs on projects for historical purpose and use. By structuring the costs of the projects, the data is easier to assess, and more useful information to help make project decisions.One of the crucial items in developing a sound cost estimate, no matter at what stage is to identify the key elements that affect cost. Even though uncertainty may remain as to their unit cost and/or quantity they should still try to be accounted for in the estimate. Work breakdown structures (WBS) are available to the cost engineer to help organize and account for these elements within the estimates. These WBS�s sort of act as a checklist to ensure that all cost are captured� this is especially handy when conceptual estimates are developed. Also by using a WBS it serves as a project management tool which defines the project along activity levels that can be identified and managed. They also help in through analysis and review of project estimates as well. The HTRW RA/O&M WBS was initially developed in 1992 and updated in 1996 by an Interagency Cost Engineering Group (Air Force, Army Corps of Engineers, DOE, EPA, and Navy). The ECES evolved from the HTRW RA/OM WBS and was developed by the Environmental Cost Committee (many of the same members who developed the HTRW WBS) with slight variations in the numbering systems and list of elements. Both are meant as a comprehensive, hierarchical list of elements that may be required to accomplish an environmental project. The WBS�s were also developed with the idea in mind to collect and record costs on projects for historical purpose and use. By structuring the costs of the projects, the data is easier to assess, and more useful information to help make project decisions.

13. COST ESTIMATING OVERVIEW KEY COST ELEMENTS Key Elements of a HTRW Capital cost estimates Mob and Demob Monitoring, Sampling, Testing and Analysis Site Work Items Surface water collection or containment Groundwater extraction or containment Gas/vapor collection or control Soil excavation Sediments/sludge removal or containment Demolition/removal Caps or covers On-site treatment Off-site treatment or disposal Contingencies Above is a checklist of typical key elements that may be involved in a HTRW project. These are the type of items that a cost engineer would consider including when developing a capital cost estimate for a particular project. The level of detail on how you cover the elements of course would depend on the design and scope of the project. These type of elements fall with the WBS�s What is meant by �Capital Cost Estimate�? � Expenditures required to construct a remedial action. They are exclusive of costs required for O&MAbove is a checklist of typical key elements that may be involved in a HTRW project. These are the type of items that a cost engineer would consider including when developing a capital cost estimate for a particular project. The level of detail on how you cover the elements of course would depend on the design and scope of the project. These type of elements fall with the WBS�s What is meant by �Capital Cost Estimate�? � Expenditures required to construct a remedial action. They are exclusive of costs required for O&M

14. COST ESTIMATING OVERVIEW KEY COST ELEMENTS Key Elements of a O&M estimate Monitoring, Sampling, Testing, and Analysis Extraction, Containment, or Treatment Systems Off-site treatment/disposal Contingencies Professional/Technical Services Project management Technical support Institutional Controls Above is a checklist of typical key elements that may be involved in a HTRW project for Operations and Maintenance (O&M). These are the type of items that a cost engineer would consider including when developing an estimate for O&M. The level of detail on how you cover the elements of course would depend on the design and scope of the project. Again these fall in line with the WBS�s.Above is a checklist of typical key elements that may be involved in a HTRW project for Operations and Maintenance (O&M). These are the type of items that a cost engineer would consider including when developing an estimate for O&M. The level of detail on how you cover the elements of course would depend on the design and scope of the project. Again these fall in line with the WBS�s.

15. COST ESTIMATING OVERVIEW FACTORS AFFECTING ESTIMATES Characterization of Site Level of Design Detail Contract Type Escalation Cost/Inflation Bidding Climate Type of Work / Time of Year (Productivity) Labor Pool Area Specialty Equipment This slide in meant as a lead in to the slides to come. The list shows some of the factors that affect the detail and accuracy of the estimate which will be discuss in the following slidesThis slide in meant as a lead in to the slides to come. The list shows some of the factors that affect the detail and accuracy of the estimate which will be discuss in the following slides

16. COST ESTIMATING OVERVIEW FACTORS AFFECTING ESTIMATES Characterization of Site The more characterization the better the project will be defined. Lessens the chance of running over budget Creates definitive design options and technology selections The level of characterization of the site has an affect on the detail and accuracy of the budget estimates because project scopes and design are more broad in the early project stages. Characterization of defining what�s out there is the basis for the early estimates so the more characterization� usually the better budgetary estimate. Of course the trade off is more time and money is spent during the study phase. The customer and Project Management must strike a balance to ensure enough characterization is done in order to develop good scopes, and designs so a reasonable estimate can be prepared. Hopefully by doing this there will be less chances of budget bust. The level of characterization of the site has an affect on the detail and accuracy of the budget estimates because project scopes and design are more broad in the early project stages. Characterization of defining what�s out there is the basis for the early estimates so the more characterization� usually the better budgetary estimate. Of course the trade off is more time and money is spent during the study phase. The customer and Project Management must strike a balance to ensure enough characterization is done in order to develop good scopes, and designs so a reasonable estimate can be prepared. Hopefully by doing this there will be less chances of budget bust.

17. COST ESTIMATING OVERVIEWFACTORS AFFECTING ESTIMATES Level of Design Detail Detail design creates better and more accurate estimates Easier to evaluate bid proposals against the government estimate Lessen the chance of change orders during remediation Aids in negotiations of project costs The level of design has affect on the details and accuracy of the estimate prepared� the more known� the more detailed the estimate can be. One big factor with greater design or more detailed scopes is it usually equates to better bid proposals. More detailed designs are an aid in project negotiations as well� it lessens the assumptions made by both the contractor and the government estimatorThe level of design has affect on the details and accuracy of the estimate prepared� the more known� the more detailed the estimate can be. One big factor with greater design or more detailed scopes is it usually equates to better bid proposals. More detailed designs are an aid in project negotiations as well� it lessens the assumptions made by both the contractor and the government estimator

18. COST ESTIMATING OVERVIEW FACTORS AFFECTING ESTIMATES Contract Type Estimates are prepared to the standards of the agency, & design requirements Innovative contract types (design build) usually result in less detailed estimates Innovating contract types may affect the accuracy of the estimate. When estimates are developed (especially early on) the contracting method is usually not known. Estimates are generally developed based on agency standards and to the level of design. If anything, the type of contract used type depends more on the level of characterization and design which in turn affects the level and accuracy of the estimates. Sometimes innovating contracting methods make comparison of the government estimate (GE) to the contractors proposals difficult because scopes are not well defined with these types of contracts and assumptions on methods to remediate the project may be different between the GE and contractor�s estimate. When estimates are developed (especially early on) the contracting method is usually not known. Estimates are generally developed based on agency standards and to the level of design. If anything, the type of contract used type depends more on the level of characterization and design which in turn affects the level and accuracy of the estimates. Sometimes innovating contracting methods make comparison of the government estimate (GE) to the contractors proposals difficult because scopes are not well defined with these types of contracts and assumptions on methods to remediate the project may be different between the GE and contractor�s estimate.

19. COST ESTIMATING OVERVIEW FACTORS AFFECTING ESTIMATES Contingencies An allowance included in estimates to cover unknowns that are not possible to adequately evaluate from available data but must be represented in the project estimate Design Contingencies (Project) Represent project risks associated with incomplete design and are unforeseeable at the time of estimate preparation, which are likely to become known as project design proceeds. Construction Contingencies (Reserve) Represent remedial action or O&M costs at the time of bid or final estimate preparation, which are likely to become known as project construction or O&M proceeds Contingencies are basically allowances to cover unknowns. Design contingencies represent risks associated with incomplete design of the project. At the early stages of the project the design is not fully developed to identify all of the projects components, quantities, and costs so design contingencies are applied. An example of this would be� say the project involves installing a soil vapor extraction system. In the early stages you may not know pump and blower sizes, well sizes, exactly how you�re going to treat the off-gases, etc. So because of these and other uncertainties that are not designed yet, the estimator would establish contingencies to be added to the estimate. In general, design contingencies should decrease as the design progresses and should be 0% at final design. Also, you may find higher design contingencies applied for using state-of-the-art or unproven technologies. Construction contingencies or sometimes referred to reserve contingencies are risks that may occur after contract award and not in the control of the design team. They are risks that are not affected by the level of design such as quantity overruns, modifications, contractor claims during construction. Example of this would be variations in estimated quantities at the time of award, authorized scope changes, differing site conditions, etc. Construction contingencies are applied to the estimate based on the engineering judgment of the cost engineer and design team. Construction contingencies are not applied to the official GE used for bid opening or contract negotiations but need to be considered when looking at budget requirements. An example of this would be� say design is complete and project quantities are presented in the final scope and design. There still could be an uncertainty of the actual quantities presented so contingencies may be added to the estimate to ensure budget reserves are adequate. Contingencies are basically allowances to cover unknowns. Design contingencies represent risks associated with incomplete design of the project. At the early stages of the project the design is not fully developed to identify all of the projects components, quantities, and costs so design contingencies are applied. An example of this would be� say the project involves installing a soil vapor extraction system. In the early stages you may not know pump and blower sizes, well sizes, exactly how you�re going to treat the off-gases, etc. So because of these and other uncertainties that are not designed yet, the estimator would establish contingencies to be added to the estimate. In general, design contingencies should decrease as the design progresses and should be 0% at final design. Also, you may find higher design contingencies applied for using state-of-the-art or unproven technologies. Construction contingencies or sometimes referred to reserve contingencies are risks that may occur after contract award and not in the control of the design team. They are risks that are not affected by the level of design such as quantity overruns, modifications, contractor claims during construction. Example of this would be variations in estimated quantities at the time of award, authorized scope changes, differing site conditions, etc. Construction contingencies are applied to the estimate based on the engineering judgment of the cost engineer and design team. Construction contingencies are not applied to the official GE used for bid opening or contract negotiations but need to be considered when looking at budget requirements. An example of this would be� say design is complete and project quantities are presented in the final scope and design. There still could be an uncertainty of the actual quantities presented so contingencies may be added to the estimate to ensure budget reserves are adequate.

20. COST ESTIMATING OVERVIEW FACTORS AFFECTING ESTIMATES Escalation versus Inflation Escalation Reflects increases in historical prices to the present day Calculated by multiplying historical prices by a ratio of indexes Inflation Addresses future growth in costs of goods and services Calculated by applying a % factor to current $$ estimate Escalation reflects increasing historical prices to the present day. The calculation is this�. Present day costs = Historical costs x (index today / index before). An example of this would be using an estimate from year 2000 and dividing the index from today by the index in year 2000 and then multiplying the estimate by this factor to bring the year 2000 costs up to today�s cost. Inflation simply refers to future cost growth. Example�. The estimate prepared today is in current dollars� say the project duration will extend out a number of years, or maybe the project estimated today will not be funded or started for a number of years� a factor will be applied to the estimate to reflect this cost growth.Escalation reflects increasing historical prices to the present day. The calculation is this�. Present day costs = Historical costs x (index today / index before). An example of this would be using an estimate from year 2000 and dividing the index from today by the index in year 2000 and then multiplying the estimate by this factor to bring the year 2000 costs up to today�s cost. Inflation simply refers to future cost growth. Example�. The estimate prepared today is in current dollars� say the project duration will extend out a number of years, or maybe the project estimated today will not be funded or started for a number of years� a factor will be applied to the estimate to reflect this cost growth.

21. COST ESTIMATING OVERVIEWFACTORS AFFECTING ESTIMATES Bidding Climate Usually considered when developing a detailed estimate for competitive bid projects. Things that affect the bidding climate are: Size and type of project How busy the contractors are in the area Economy of the area Time of year Location One thing that does affect the estimate and cost of the project is the �bidding climate�. This terms refers to the availability of the contractors and the type of contractors available. The number of contractors able to bid on the projects affects the competition, which in turn affects the bid price. The bid proposals tend to be higher when fewer contractors bid on the project which may affect award of the project as compared to the government estimate and the GE may need to be adjusted for this. An example of this is�. For very complex or specialized projects the contractor pool in the project area may be limited because local contractors may not have the qualifications to execute the project. You may end up with contractor�s from out of the area bidding on the project which in turn usually results in higher bid prices. When the estimator is preparing the estimate he/or she may take this into consideration and assume that it is a reasonable that contractor�s from out of the area will bid the project. Because of this the estimator may include such things as per-diem, overtime, higher skilled labor, higher mob and demob costs, etc. to complete the projectOne thing that does affect the estimate and cost of the project is the �bidding climate�. This terms refers to the availability of the contractors and the type of contractors available. The number of contractors able to bid on the projects affects the competition, which in turn affects the bid price. The bid proposals tend to be higher when fewer contractors bid on the project which may affect award of the project as compared to the government estimate and the GE may need to be adjusted for this. An example of this is�. For very complex or specialized projects the contractor pool in the project area may be limited because local contractors may not have the qualifications to execute the project. You may end up with contractor�s from out of the area bidding on the project which in turn usually results in higher bid prices. When the estimator is preparing the estimate he/or she may take this into consideration and assume that it is a reasonable that contractor�s from out of the area will bid the project. Because of this the estimator may include such things as per-diem, overtime, higher skilled labor, higher mob and demob costs, etc. to complete the project

22. COST ESTIMATING OVERVIEWFACTORS AFFECTING ESTIMATES Type of Work / Time of Year Limits the number of contractors Affects the Productivity May cause extra material and overhead costs and other extraneous costs The type of work greatly affects the project cost and the estimate. The more complex or specialized the project is it usually equates to higher costs. This is the case with most HTRW type projects in that the contractor�s people have to meet certain training requirements, education levels, safety requirements, etc. which result in more skilled labor and project management over-site on the project. An example of this would be a Ordnance removal project� there is only a limited number of contractors and work force out there to do this type of work. The people involved in performing this type of work have to meet special training requirements� you cannot just use a union laborer to do this type of work. Productivity is a big cost driver on HTRW projects whether it is due to the time of year or type of work. Again most HTRW projects happen outside and are located all over the country. Some in areas where the weather is a big factor�it may be that the contractor can only work 6 months out of the year. This of course stretches out the project life or maybe overtime or double shifts need to be added to finish within a certain time frame. Projects that require the workers to be in personal protective equipment (PPE) has a great affect on decreasing productivity. Workers working in these conditions are required to take a certain amount of breaks and movements are restricted due to being in the PPE. All these things affect costs and the estimator tires to take each factor into account when developing the estimate by adding overtime or double shifts if needed. Productivity factors are applied to labor and equipment costs when dealing with projects that require PPE. The type of work greatly affects the project cost and the estimate. The more complex or specialized the project is it usually equates to higher costs. This is the case with most HTRW type projects in that the contractor�s people have to meet certain training requirements, education levels, safety requirements, etc. which result in more skilled labor and project management over-site on the project. An example of this would be a Ordnance removal project� there is only a limited number of contractors and work force out there to do this type of work. The people involved in performing this type of work have to meet special training requirements� you cannot just use a union laborer to do this type of work. Productivity is a big cost driver on HTRW projects whether it is due to the time of year or type of work. Again most HTRW projects happen outside and are located all over the country. Some in areas where the weather is a big factor�it may be that the contractor can only work 6 months out of the year. This of course stretches out the project life or maybe overtime or double shifts need to be added to finish within a certain time frame. Projects that require the workers to be in personal protective equipment (PPE) has a great affect on decreasing productivity. Workers working in these conditions are required to take a certain amount of breaks and movements are restricted due to being in the PPE. All these things affect costs and the estimator tires to take each factor into account when developing the estimate by adding overtime or double shifts if needed. Productivity factors are applied to labor and equipment costs when dealing with projects that require PPE.

23. COST ESTIMATING OVERVIEWFACTORS AFFECTING ESTIMATES Labor Pool Limited labor pool will cause an increase in contractors proposals Things that affect labor pools Amount of work in the area Type or difficulty of project (radiation type work, ordnance and explosive type work, chemical treatment, etc.) On HTRW projects many times the labor pool will not come from the local area and may result in having to use higher rates. Again, you cannot typically use union labores to do this type of work and that limits the labor pool. Most contractors have their own labor pool they draw form because they know these people have the required training and skills to perform the work. The estimator tries to take this into consideration when developing the estimate by using higher rates than normal for the area. Possibly even adding per-diem, etc.On HTRW projects many times the labor pool will not come from the local area and may result in having to use higher rates. Again, you cannot typically use union labores to do this type of work and that limits the labor pool. Most contractors have their own labor pool they draw form because they know these people have the required training and skills to perform the work. The estimator tries to take this into consideration when developing the estimate by using higher rates than normal for the area. Possibly even adding per-diem, etc.

24. COST ESTIMATING OVERVIEWFACTORS AFFECTING ESTIMATES Specialty Equipment Increase the cost of the project Equipment is not always listed in over the counter equipment manuals Prices usually obtained from vendor quotes or applying modifying factors to normal equipment prices Many HTRW projects use and need specialty equipment which increase the cost of the project. Usually this type of equipment is not found in the general equipment guides. So the cost estimator usually tries to obtain quotes for rental or purchase prices from the manufacture. Examples of these are� monitoring and sampling equipment robotics for RAD removal projects, installing blast shields for ordnance removal projects, etc.Many HTRW projects use and need specialty equipment which increase the cost of the project. Usually this type of equipment is not found in the general equipment guides. So the cost estimator usually tries to obtain quotes for rental or purchase prices from the manufacture. Examples of these are� monitoring and sampling equipment robotics for RAD removal projects, installing blast shields for ordnance removal projects, etc.

25. COST ESTIMATING OVERVIEWESTIMATING TOOLS Remedial Action Cost Engineering and Requirements (RACER) system is a parametric cost-estimating tool that accurately estimates costs for all phases of remediation: Pre-Study Study Design Removal/Interim Action Remedial Action Operations and Maintenance Long Term Monitoring Site Close-out Description: RACER is a Parametric, PC-based system originally developed in 1991 by the U.S. Air Force. Earth Tech is the contractor that maintains development of the system thru the Air Force. RACER can accommodate estimating the cost of the project from the study phase through project closeout. This tool is widely used throughout DoD (Army, Air Force, Corps of Engineers, DOE, DOI, Navy) to estimate and support the environmental liability that gets submitted for the Annual Report to Congress (ARC). RACER is free to the Government but is also available to the general industry for a purchase price. The RACER system is updated each year with enhancements and updated pricing to keep the system current. RACER is a great way to quickly develop ROM or Preliminary budget estimates. Current Version RACER 2006, Version 8.1.2http://www.afcesa.af.mil/ces/cesc/cost_engr/cesc_racerltr.asp Point of Contact K. Stuart MillardU.S. Air Force/AFCESA/CESCStuart.Millard@tyndall.af.mil850-283-6171Description: RACER is a Parametric, PC-based system originally developed in 1991 by the U.S. Air Force. Earth Tech is the contractor that maintains development of the system thru the Air Force. RACER can accommodate estimating the cost of the project from the study phase through project closeout. This tool is widely used throughout DoD (Army, Air Force, Corps of Engineers, DOE, DOI, Navy) to estimate and support the environmental liability that gets submitted for the Annual Report to Congress (ARC). RACER is free to the Government but is also available to the general industry for a purchase price. The RACER system is updated each year with enhancements and updated pricing to keep the system current. RACER is a great way to quickly develop ROM or Preliminary budget estimates. Current Version RACER 2006, Version 8.1.2http://www.afcesa.af.mil/ces/cesc/cost_engr/cesc_racerltr.asp Point of Contact K. Stuart MillardU.S. Air Force/AFCESA/CESCStuart.Millard@tyndall.af.mil850-283-6171

26. COST ESTIMATING OVERVIEWESTIMATING TOOLS How Does the RACER Estimating Methodology Work? Uses parametric cost modeling Models based on generic engineering solutions for environmental projects, technologies, and processes User inputs parameters into the model to generate the cost estimate The system allows the user to select models from a list of over 100 available technologies, define the required parameters in the selected technology, and tailor the estimate by verifying and editing secondary parameters. RACER calculates quantities for each technology; localizes unit costs for materials, equipment, and labor; adjusts unit prices for safety and productivity losses; and allows markups to account for indirect costs based on the parameter inputs by the user. RACER uses current multi-agency pricing data, and is researched and updated annually to ensure accuracy. The following slides are an example of the Capping model within RACER. The screen shots show how a model works and the level costs that are derived. Of course there is much more to getting the final cost but gives a good example of estimating within RACER. The system allows the user to select models from a list of over 100 available technologies, define the required parameters in the selected technology, and tailor the estimate by verifying and editing secondary parameters. RACER calculates quantities for each technology; localizes unit costs for materials, equipment, and labor; adjusts unit prices for safety and productivity losses; and allows markups to account for indirect costs based on the parameter inputs by the user. RACER uses current multi-agency pricing data, and is researched and updated annually to ensure accuracy. The following slides are an example of the Capping model within RACER. The screen shots show how a model works and the level costs that are derived. Of course there is much more to getting the final cost but gives a good example of estimating within RACER.

27. COST ESTIMATING OVERVIEWESTIMATING TOOLS This is an example of the parameter screens with a model that the estimator needs to answer. Notice this first tab has what is termed as Required Parameters. The estimator must answer these requirements to proceed through the model. To help answer the parameters depending on the complexity of the model they may need to seek technical advice from designers and process engineers. Also the system is equipped with a help system that aids the user in selecting and explaining parameter inputs. This is an example of the parameter screens with a model that the estimator needs to answer. Notice this first tab has what is termed as Required Parameters. The estimator must answer these requirements to proceed through the model. To help answer the parameters depending on the complexity of the model they may need to seek technical advice from designers and process engineers. Also the system is equipped with a help system that aids the user in selecting and explaining parameter inputs.

28. COST ESTIMATING OVERVIEWESTIMATING TOOLS Notice the next two slides are an example of a models Secondary Parameters. These parameters are always defaulted for the estimator with the option to be changed by the estimator. The defaults are based on the inputs made at the Required parameter screens. Notice the next two slides are an example of a models Secondary Parameters. These parameters are always defaulted for the estimator with the option to be changed by the estimator. The defaults are based on the inputs made at the Required parameter screens.

29. COST ESTIMATING OVERVIEWESTIMATING TOOLS More Secondary Parameters that are defaulted for the estimator to complete the cap estimate. More Secondary Parameters that are defaulted for the estimator to complete the cap estimate.

30. COST ESTIMATING OVERVIEWESTIMATING TOOLS This screen shows the cost of the of the cap based on the inputs at the previous Parameters screens. Through the built in logic and algorithms of the model it pulls in assembly items from the cost database and applies quantities, units of measure, material, labor and equipment costs to each assembly. When looking at the costs at this level of the RACER system you�re looking at direct costs only. These costs get overheads and profit applied to them at a different location in the system. This screen shows the cost of the of the cap based on the inputs at the previous Parameters screens. Through the built in logic and algorithms of the model it pulls in assembly items from the cost database and applies quantities, units of measure, material, labor and equipment costs to each assembly. When looking at the costs at this level of the RACER system you�re looking at direct costs only. These costs get overheads and profit applied to them at a different location in the system.

31. COST ESTIMATING OVERVIEWESTIMATING TOOLS MII (formerly known as MCACES) Detailed cost estimating software Used by the Corps of Engineers for developing bottoms up estimates for IGE�s Prices based on a government maintain unit price book , labor, and equipment books MII or formally Micro-Computer Aided Cost Estimating System (MCACES) is a multi-user Windows based software program used by the U.S. Army Corps of Engineers for the preparation of detailed construction cost estimates for military, civil works, and environmental projects. The system is support by a unit price book (UPB) national equipment and labor libraries. The supporting databases include a unit price book, crews, labor rates, equipment ownership, schedule costs, assemblies, and models. All libraries work in conjunction with each other to produce a detailed cost estimate. Basically... the user selects line items from the cost book, labor and equipment libraries to build the estimate. Pricing can be adjusted in the system for material, labor, and equipment as required to customize the estimate. The Corps uses the system to develop their independent Government Cost estimates that are used to evaluate contractor proposals and used as the basis for negotiations Current Version: MII Version�� Point of Contact: Mr. Jim NicholsU.S. Army Corps of Engineers(256) 895-1842MII or formally Micro-Computer Aided Cost Estimating System (MCACES) is a multi-user Windows based software program used by the U.S. Army Corps of Engineers for the preparation of detailed construction cost estimates for military, civil works, and environmental projects. The system is support by a unit price book (UPB) national equipment and labor libraries. The supporting databases include a unit price book, crews, labor rates, equipment ownership, schedule costs, assemblies, and models. All libraries work in conjunction with each other to produce a detailed cost estimate. Basically... the user selects line items from the cost book, labor and equipment libraries to build the estimate. Pricing can be adjusted in the system for material, labor, and equipment as required to customize the estimate. The Corps uses the system to develop their independent Government Cost estimates that are used to evaluate contractor proposals and used as the basis for negotiations Current Version: MII Version�� Point of Contact: Mr. Jim NicholsU.S. Army Corps of Engineers(256) 895-1842

32. COST ESTIMATING OVERVIEWESTIMATING TOOLS This screen shows an example of building an estimate in MII. This particular screen shows pulling a line item for the cost book into the estimate. The estimator does this for each item they want to use to build the estimate from the bottom up.This screen shows an example of building an estimate in MII. This particular screen shows pulling a line item for the cost book into the estimate. The estimator does this for each item they want to use to build the estimate from the bottom up.

33. COST ESTIMATING OVERVIEWESTIMATING TOOLS MEANS Commercially available cost database Contains line items with labor, equipment, and material pricing Also contains information on Equip Rental costs Crews Historical Cost Indexes City cost Indexes Location factors Used to develop detailed costs estimates Means is a commercial costs data base that contains line items that are used in developing a detailed costs estimate. It provides cost for labor, equipment, and materials on a national average. It also shows the type of crew and production that the labor and equipment costs are based on. Means show the costs two ways both bare costs, and also with overhead and profit. Means also provides valuable information to the estimator to customize their estimate by using the Crew information, City Indexes, Location factors, ect.Means is a commercial costs data base that contains line items that are used in developing a detailed costs estimate. It provides cost for labor, equipment, and materials on a national average. It also shows the type of crew and production that the labor and equipment costs are based on. Means show the costs two ways both bare costs, and also with overhead and profit. Means also provides valuable information to the estimator to customize their estimate by using the Crew information, City Indexes, Location factors, ect.

34. COST ESTIMATING OVERVIEWESTIMATING TOOLS This screen shows a typical page of data from the Means cost book. Means organizes their cost data by CSI MasterFormat 1995. This happens to be a screen shot from Division 2 Earthwork. Each line item has a 12 digit code based on the CSI MasterFormat classification. Notice with every line item you have the unit cost shown for labor, equip and material (if Required). But not only that� you also know what type of crew and productivity the item is based on. With that kind of detail the estimator can adjust the item more specific to their project needs.This screen shows a typical page of data from the Means cost book. Means organizes their cost data by CSI MasterFormat 1995. This happens to be a screen shot from Division 2 Earthwork. Each line item has a 12 digit code based on the CSI MasterFormat classification. Notice with every line item you have the unit cost shown for labor, equip and material (if Required). But not only that� you also know what type of crew and productivity the item is based on. With that kind of detail the estimator can adjust the item more specific to their project needs.

35. COST ESTIMATING OVERVIEWESTIMATING TOOLS Cost Risk Analytical tool for analyzing financial risk to determine the contingencies Works with RACER, stand alone estimate within Cost Risk, spreadsheet estimates Uses Crystal Ball to run the cost risk analysis One of the big questions is how much contingencies to add to an estimate� well Cost Risk is a tool that uses a probability based method to aid in establishing proper contingencies and confidence levels on a project estimate. In the typical project life cycle, cost estimates are often produced several times in the planning and design phases. Additionally, a thorough estimate should account for imperfect information, volatile market conditions, uncertain assumptions, etc Cost Risk can help do this. COSTRISK analyses are performed for two primary reasons. First, risk analyses of cost estimates provides a rational and justifiable basis for establishing contingency. Second, cost risk analyses are useful for identifying the major causes of project cost uncertainty. The COSTRISK analysis software program provides the cost engineer the capability to assess risk and uncertainty associated with any Military, Civil Works, or HTRW project cost estimate. This process of �probability based� estimating is used to revise estimates based on �confidence levels,� and can assist in the evaluation of project contingency funds. COSTRISK performs cost risk analysis on the construction cost estimates using Monte Carlo simulation techniques as the basis of its calculations. The system uses the 80 / 20 rule to assess the project by identifying 20% of the items that contain 80% of the costs. This type of analysis helps the estimator see which items or systems are driving the project and which are critical in maybe trying to get a quote on or communicating them to the designers as critical items in the design that may affect budget overruns. The COSTRISK software is designed to work with Tri-Services cost estimating programs: MCACES, RACER, and PACES. In addition to these interfaces, COSTRISK is capable of performing a cost risk analysis on any cost estimate that is developed in Microsoft Excel. Current Version: Version 2.0, June 2005 Point of Contact: Mr. Jim NicholsU.S. Army Corps of Engineers256-895-1842 One of the big questions is how much contingencies to add to an estimate� well Cost Risk is a tool that uses a probability based method to aid in establishing proper contingencies and confidence levels on a project estimate. In the typical project life cycle, cost estimates are often produced several times in the planning and design phases. Additionally, a thorough estimate should account for imperfect information, volatile market conditions, uncertain assumptions, etc Cost Risk can help do this. COSTRISK analyses are performed for two primary reasons. First, risk analyses of cost estimates provides a rational and justifiable basis for establishing contingency. Second, cost risk analyses are useful for identifying the major causes of project cost uncertainty. The COSTRISK analysis software program provides the cost engineer the capability to assess risk and uncertainty associated with any Military, Civil Works, or HTRW project cost estimate. This process of �probability based� estimating is used to revise estimates based on �confidence levels,� and can assist in the evaluation of project contingency funds. COSTRISK performs cost risk analysis on the construction cost estimates using Monte Carlo simulation techniques as the basis of its calculations. The system uses the 80 / 20 rule to assess the project by identifying 20% of the items that contain 80% of the costs. This type of analysis helps the estimator see which items or systems are driving the project and which are critical in maybe trying to get a quote on or communicating them to the designers as critical items in the design that may affect budget overruns. The COSTRISK software is designed to work with Tri-Services cost estimating programs: MCACES, RACER, and PACES. In addition to these interfaces, COSTRISK is capable of performing a cost risk analysis on any cost estimate that is developed in Microsoft Excel. Current Version: Version 2.0, June 2005 Point of Contact: Mr. Jim NicholsU.S. Army Corps of Engineers256-895-1842

36. RPM RA Management Role RPM is responsible for understanding and monitoring technical scope project budget project schedule RPM should anticipate and identify potential problems early, before they become a crisis RPM should involve appropriate level of management/expertise to resolve problems

37. Potential Problem Analysis (PPA)(risk analysis) Risk - Existing variation in the possible outcomes associated with project circumstances Risk is a property of an entire probability distribution and each component of project outcome has a separate probability Risk and probability have objective and subjective interpretations Uncertainty - Conscious awareness of risk related to project circumstances

38. PPA - Continued Remedial action risks construction related physical contractual & legal performance economic political & public

39. PPA - Continued When should PPA be conducted? During project delivery analysis/pre-design Procurement planning Construction mobilization/partnering Periodically during project Who should be engaged? Involve your whole project management team

40. COST ESTIMATING OVERVIEWSAMPLE PROJECT SHOW A SAMPLE WITH THE ELEMENTS