INTRODUCTION

This is a course about the techniques most commonly recommended and used for budgeting and cost control of capital investments. These investments require long-term commitments of a firm's capital, labor and reputation - commitments that cannot easily be altered in the face of unexpected conditions.

Because of this, project cost estimate should be done with great care, using the best techniques and should also include an adequate analysis of project riskiness. These are the key cost estimate skill required for success in a rapidly changing and competitive world economy.

Following a broad introduction to project cost estimate concepts and data needs, this course discusses the most practical and applied cost estimating methods, data collections and projecting future escalations and contingency. The concept of cost coding, design based estimating and estimate validation techniques are stressed in this course

Considerable discussion is also given to the problem of accuracy and contingency, contingency allowances and accuracy ranges, cost control and project changes.

Dr. AlBahar, President of PROMIS, Project Management Engineering Systems, is an expert in construction contracts and claims analysis and project management tools and techniques. His recent consulting work is focusing on analysis of delay claims using CPM schedules and amicable settlement of disputes between Clients and Contractors. Dr. AlBahar is a frequent regional and international speaker on all subjects related to project management, construction contracts, tendering procedures, claims analysis and evaluation, contract administration and management, and value engineering.

Dr. AlBahar is a registered arbitrator in the Emirate of Dubai, U.A.E., the State of Kuwait, and was a full time professor at Kuwait University where he taught project management, contracts and specifications, construction management, construction methods, surveying, legal, social and ethical aspects of engineering. He was formerly a marketing and business development manager for Morrison Knudsen Corporation in San Francisco, California

Dr. AlBahar has conducted over 500 public and in-house training courses in the last 25 years on subjects related to contracts, claims, project management, PMP Exam Preparation Workshops, value engineering, budgeting and cost estimating and effective project administrative procedures. His most recent consulting agreement, and as part of team, was to review and rewrite the General Conditions of Contracts and Consultancy Agreement (both General and Particular) for Dubai Municipality and Public Works in Abu Dhabi. He is a Contract Advisor for Qatar Petroleum, Doha, Qatar.

DAY ONE

BUDGETING

Why Budget?
Budget rather than Guess!

• Introduction to Budgeting
• Problems in Budgeting before and after approval
• Budget Categories
• Budgeting Objectives
• Skills required by the Budgeter
• Types of Budgeting

Budgeting Principles

• Introduction to Cost Estimating
• Estimate Considerations
• Estimating Principles
• Direct vs. Indirect Costs
• Variable vs. Fixed Costs
• Purpose of an Estimate
• Project Cost Estimating and Project Management
• Budgeting Capital Expenditure Project

Budget and Cost Estimating Cycle

• The Cost Estimating Cycle
• Project Development Stage
• True Cost
• Variables
• Budgeting and Estimating Techniques
• Work Breakdown Structure (WBS)
• Project Schedule
• Importance of early estimates?
• Risk in initial estimates
• Initial estimates for different contract strategies
• Estimating techniques for initial estimates
• Suitability of estimating techniques for project stages
• Practical aspects of initial estimating
• Lessons Learned of previous project

COST ENGINEERING
Introduction to Cost Estimating

• Estimate Accuracy
• Estimating Approaches/Classes
• Estimating Methods
• omputerized Estimating
• Labor Productivity
• Indirect Costs
• Data Collection and Management
• Estimate Coding and Documentation
• Predicting Future Escalation
• Contingency - A Provision for Uncertainties
• Estimating a Revamp Project.

DAY TWO

CAPITAL-COST ESTIMATING AND CONTROL

• The Capital-Cost Control Cycle
• Spectrums of Cost-Estimating Methods and Purposes
• Cost Coding - A Common Language for the Project
• Project Data Coding
• Predesign Estimating
• Computerized Predesign Estimating
• Design-Based Estimating
• Adjustments to Expected Site, Price and Wage Conditions
• Adjustment to Project Conditions
• Labor Productivity - Its Prediction and Management
• Labor Productivity Analysis

DAY THREE

ESTIMATE PROJECT INDIRECT COSTS

• Indirect Project Costs - Design Engineering, Procurement Cost, and Field Construction Expenses
• Indirect Project Costs: An Update
• Startup Costs
• Accuracy and Contingencies - How Good is the Crystal Ball?
• Contingency Allowances and Accuracy Ranges
• Estimating Technique: A Typical Project
• Estimate Validation

Cost Indexes (Indices)

• What is a Cost Index?
• Purpose of Cost Indices and Their Use in Cost Estimates
• Input Cost Indices vs. Output Cost Indices
• ENR Construction and Building Cost Index
• Development of a Cost Index
• Uses and Limitations of Cost Indices

DAY FOUR

COST CONTROL DURING ENGINEERING PHASE

•  Introduction to Cost Control
• The Cost Engineer as Part of Project Management
• Cost Control During Conceptual Engineering
• Cost Control During Detailed Engineering: Introduction to the Problem
• Cost Control During Detailed Engineering: Engineering Costs
• Cost Control During Detailed Engineering: Equipment Purchases
• Cost Control During Detailed Engineering: Bulk Materials

Human Factors in Cost Estimating

• Skills and characteristics of the estimator
• Influence of experience, and key questions to ask
• Contingency margins
• Risk analysis
• Factors affecting cost estimate accuracy
• Pareto’s law (80/20 rule)
• Interpretation of cost data, and documentation of cost data
• Obtaining good cost quotes for suppliers and vendors

DAY FIVE

COST CONTROL DURING CONSTRUCTION PHASE

Project Changes

Tracking Budget

• Establish Information Reporting Requirements
  the Cost Performance Information
• Earned Value Concept (Budgeted Cost of Work Performed)
• Progress vs. Planned vs. Actual Costs Analysis
• Cost Variance Analysis (CV)
• Establish Variance Thresholds for Mandatory Reporting
• Determine Actual Cost Status
• Cost Performance Key Indicators (CPI)
• Forecasting Cost to Complete Projects
• Assess Technical Objective and Completion Status
• Analyze Short and Long Impact on Project Cost
• Identify Possible Corrective Action(s) to be Taken