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05thApril
5 costs estimation techniques of Cleopatra Enterprise software

As a cost engineer looking for a software tool to create and manage estimates, one of your most important concerns is the flexibility of the system to work with many different types of estimating techniques. You probably want your software to give you a lot of freedom, while still protecting you against the typical mistakes you make in tools like Excel, e.g., deleting cells or formulas. Cleopatra Enterprise offers that flexibility and security, as well as many different types of estimating techniques.

To give a few examples of different techniques you might use, we listed 5 below:

Factor estimating

The first and most high-level estimating method available is factor estimating. It derives its name from applying derivative factors for the preparation of the investment estimate of a project. You can use this when the project is not well defined yet: the scope is incomplete and there are possibly still a number of alternatives that need to be worked out in more detail. Since many plans won’t go through anyway, it would be a waste to spend much time on preparing detailed estimates. Factor estimates provide you with that ‘quick and dirty’ number you require to base your decisions on. Common techniques include the Six-tenth rule and the Hand Factor method.

Parametric estimating

Often, companies possess a lot of historical project information that sits unused. Among this, there might be a collection of previous quotes, contract values and prices. A cost engineer can put this to use by developing parametric estimation techniques. Try to look for relationships between the specifications of previously procured materials or labor. For example, by studying how the size and material type of pumps relates to cost, you might be able to find cost estimate relationships (CERs). To do this correctly, you index all costs to one price level and make the scope comparable. This enables you to set up parametric estimation models for future projects, adding intelligence to otherwise unused procurement data. 

Quantitative factor estimating

When the project advances, the scope will gradually be defined with more detail. When you have access to a plot plan or other rough dimensions on site, the cost engineer can use quantitative estimating techniques. With this, you step away from factoring costs to using quantities to determine project costs. You might think right now: “but I don’t have drawings and full MTOs yet to determine the amounts of all labour and materials!” While this is true, this technique makes use of design standards to derive typical quantities for us to use in our estimates. It provides a more detailed estimate that is more accurate and allows us to better control scope growth. It works like this: for each type of equipment you determine the typical amount of piping, valves, instruments, supports, etc. Next time you estimate this equipment, you automatically already have the expected quantities, and thus costs, for all disciplines!

Unit-Rate estimating

After the basis of design is finalized, a more detailed estimate is possible. A unit-rate then contains the amount of costs and hours to install one unit (piece, meter, kg, etc.) of each item on an MTO. For example, a meter of 4” pipe might cost 10 Euros, weighs 2 kg and requires 1 hour to install. By multiplying all unit-rates by the quantities from all MTOs a detailed estimate of the project resources is obtained. The level of detail is good enough to later control the project and load the schedule with resources.

Resource-based estimating

When a MTO is available it makes sense to use unit-rates for your estimates. If a schedule is available then resource based estimating is also an option. With this technique you are not looking at the average number of hours you use for the installation of materials and equipment. Instead, you plan the resource you need using calendars and schedules. All hour related items in your estimate are created using their respective calendar to determine the amount of time a resource will be used throughout the duration of the work activity. By adjusting the amount of productive hours in a calendar, productivity is taken into account over the duration of the activity.

These are just examples of techniques you can use in our cost estimating software. Because of the flexibility of scripting and modelling you can basically create any method you want to calculate costs, hours and quantities. Your imagination is the limit!

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