05 Conceptual Estimates

Conceptual cost estimating is the task of predicting expected cost for a future project when the form of the final product is not completely defined

Cost estimating involves  predicting expected cost for a future project or task. Conceptual refers to a stage in a project or task with the final product is not fully defined. Specifically, during the conceptual phase, those involved focus on function more than form and do so in a high-level, abstract manner.(1)

Conceptual estimates are made in the early phases of a project to tell an owner with a contemplated project scope something about its economical feasibility.  Conceptual estimates are also made to guide decisions about project design alternatives.  Timing versus accuracy is the issue here – taking more time and effort aids accuracy, but deferred decisions delays progress.  And poorly guesstimating or simply ignoring the cost effects of multiple design alternatives because they are difficult to evaluate leads to sub-optimum design.

 

Some Examples

The Pyramids

Okay, there might not have been a money market economy for the Pharaohs.  Yet before building, someone had to count the anticipated costs in terms of manpower and stone available.  Envision  Hemiunu, the project executive presenting to his step-brother and Pharaoh Khufu:

“We will be ready soon to set the corners, but you know that the corners need to be sound so we will excavate to solid bedrock such that we can tie in new blocks in that clever new way that Sameh developed on the Red Pyramid; make sure nothing moves, ever.  That’s key.  But we need to settle on those dimensions up front, today.

We propose going for a height of 485 feet, meaning the the base will be 763 feet on each side at the 51.7 degree slope that’s proven to be stable..  Because the volume of a pyramid is base times base times height times 1/3, we will need twice the number of blocks that we had for the Red or the Bent pyramids in Saqqara, or about 2,500,000 of the 4ft x 4ft x2.5ft foot limestone core blocks.  The quarry on site can do four times that – no problem.  Manpower-wise we estimate 5,000 men for four years – but as a sensitivity, even if it takes five or ten or even twenty years it will be worth it. We have our core of 1,000 skilled men and overseers from the previous pyramids, and recruitment for additional workers has been brisk – we could get 10,000 men who want the training and the care and feeding in the builders city we give them, not to mention the glory of working on the “big one”.

See the sketches 1 through 10 on papyrus, and the 1:100 scale clay model of the entire Giza plateau.  With your okay, we are a “go”.

 

The Empire State Building

Starret brothers, the builder, was able to set their fee before the design work started, estimating a building of xxx ft3.  They  bid $600,00 and settled for $500,00 fixed fee – not based on final cost; usually fixed fee shows confidence and altruism, in this case worked for them: initial estimate for the building was $35 million, final cost $24,718,000 for the building itself . Including the property on which the building sits, the total cost for the Empire State Building was $40,948,900.  It took 7,000,000 man-hours.

 

There was a lot of skyscraper data available at that time, even most subcontractor bids were within percentage points of each other.  And Starret in particular had recent fast track skyscraper experience in Manhattan.  Plenty of recent data, in current time and location, for very similar work.  With conceptual estimating, this is more a rarity than the norm.

 

Exxon and the Module Job

Exxon had probably the greatest conceptual estimating tools ever available.  For example, they had built probably twenty crude units all over the world.  They had collected data on each, and made clever analysis: use a time factor to account for the way costs change year by year, and a location factor to account for different productivities and material costs in every location.  Then use these factors to get a project cost based on standard location – the US Gulf Coast 1974.  By looking at twenty projects at standard location, they could extract a general equation such as cost = $500 x (crude feed rate in bpd/100,000)^.6.  In other words, a 100,000 barrel per day unit will be $50 million at standard location, and for diferent feed rates, there is an exponential curve with a slope of 0.6.  This was predicted to give a plus/minus 25% estimate.

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But the Linear Low Density Polyethylene Plant, whose modules were being built in Korea, was the first of its kind for the company.  There was not a chart of twenty similar projects.  So we go to the next level: conceptual estimating of functional blocks.  There is a feed heat system similar to those found in crude units, hydrocrackers, polypropylene plants, etc.  Conceptually estimate the feed heat system on that basis.  Ditto with a distillation section.  And for the aluminum bins and silos without any Exxon equivalent, do some industry research or maybe even use a Lange factor (equipment costs times a factor, often around 4.5 to 5.5 to estimate total installed costs based only on estimates of equipment costs).

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And then the pride and joy and power of Exxon’s Estimating system: CIER, IT.  For a rate , power, and material specification for any piece of equipment, the system would pull data to estimate the cost of the equipment piece, but then go on to predict the non-equipment components: a foundation for the pump, inlet and outlet piping, along with the block valaves and control valeves, typical instrumentaion and electrical – and after specifying the types and quantities of these, predict their material cost and the labor manhours to install it all.

By the time we got to the module yard, we had a good class II CIER estimate.  So we had a good feel not only for costs but also for manhours.  A very nice baseleine.  Naturally, these were based on cenventional, “stick” construction, so we had to make adjustments for a module yard environment, but pretty effective to have, up front and early, a reliable baseline.

One might maintain that CIER is not strictly a conceptual estimate, because it requires specification of key equipment, but because it can be run for a series of potential design options to test cost and manpower predictions for each, it is a tool also available at the later conceptual stages.

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A Stochastic Improvement

Let’s revisit the first graphic.  And show the data points from which it may have been generated.  Note two lines of the same equation, but a different scatter.  seems like this would be nice to know in terms of how reliable each prediction would be.

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What if we could carry all of this information into our conceptual estimating calculations.

Enter the DIST!

 

 

 

 

 

Notes:

(1) http://cife.stanford.edu/sites/default/files/WP014.pdf  “The Conceptimator: an expert system for conceptual cost estimating of building foundations.”  CIFE: Center for integrated facility engineering.

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