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Overview:

Cost Estimating Basics

• The estimating life cycle
• Phases of the Design Process
• Programming phase
• Schematic design
• Design development
• Construction documents
• Estimating accuracy by phase
• Conceptual Cost Estimates
• Rough Order of Magnitude Estimates (Broad Scope Estimates)
• Assemblies cost estimates
• Cost indices
• Semi-detailed Estimates (Narrow Scope Estimates)
• Definitive Estimates (Detailed Scope Estimates)
• Basic procedures
• Lump-sum contracts
• Unit-price contracts
• Cost-plus contracts
• Cost-plus contract with guaranteed maximum price (GMP)
• Time-and-materials contracts
• Bid method
• Negotiated method
• Quantity take-off
• Types of construction contracts
• Procurement methods
• Pre-construction services
• Risk analysis and contingencies

Broad Scope Cost Estimating Techniques

• Adjustments to Project Cost for Broad Scope Estimates
• PERT Project Cost Analysis

• PERT Unit Cost Estimates
• Formulae for Cost Estimating
• The Normal Distribution Curve
• Z-Value Table
• The Probability of Project Completion within Budget
• Estimating Project Unit Cost by Using the Standard Deviation
• Estimating the Project Unit Cost at a Required Probability
• The Probability of Completing the Project at a Required Cost
• PERT vs. Standard Deviation & Z-Values
• Adjustments to Estimates Based on Previous Projects
• Adjustments for Time
• Review: Future Value of Money
• Review: Present Value of Money
• Equivalent Annual Interest Rate
• Index to Adjust for Time
• Equivalent Compound Interest
• Location Index for Construction
• Adjustments for Location
• Adjustments for Size
• Combined Adjustments
• Economic Price Adjustment
• Estimating Durations based on the Learning Curve Effect
• Estimating Costs based on the Learning Curve Effect
• Unit-Cost Adjustments
• Learning Curves

Budget Estimating Process

• Estimating by design phase
• Programming budget estimates
• Schematic design budget estimates
• Design development budget estimates
• Estimating pre-construction services
• Request for proposal
• Development of pre-construction services estimate
• Pre-construction services contract
• Budget control log

Bid Contract Estimating Process

• Pre-estimate activities
• Estimating process
• Solicitation of lump-sum bids
• Order-of-Magnitude estimates
• Work Breakdown Structure
• Estimating team
• Scheduling the estimating work
• Subcontractors and major suppliers
• Estimating forms
• Accuracy and error prevention
• Pricing self-performed work
• Recap sheet, Materials, Labour
• Applying pricing factors
• Summary recap
• Subcontractor work
• Project summary schedule
• Alternative techniques
• Elements of the general conditions estimate
• Final document review
• Completing the bid summary
• Final mark-ups
• Sales tax, Validating the estimate
• Estimating subcontractor work
• Estimating General Conditions
• Completing the estimate

Unit Price Estimates

• Unit price bid forms
• Direct cost estimation
• Materials
• Labour
• Indirect labour
• Subcontractors
• Recap summary sheet
• Direct-to-indirect cost factor
• Mark-up determination
• Variation-in-quantity contract provision
• Risk analysis
• Bid finalisation

Negotiated Contract Estimating

• Guaranteed Maximum Price Estimates
• Contract procurement process
• Documents
• Strategies
• Estimating process
• Contingencies
• Fee determination for negotiated contracts
• Reimbursable versus Non-reimbursable costs
• Home office overhead
• Risk evaluation
• Fee structure
• Cost savings split
• Strategies for responding to the Request for Proposal
• Documents to be included with the Request for Proposal
• General Contractor interview and selection process
• Negotiated subcontracts
• Cost proposals for negotiated contracts

Contract Types and Compensation Arrangements

• Risk distribution in contracting
• Project risk profiles
• Contract types according to risk distribution
• Fixed Price Contracts
• Firm Fixed Price
• Fixed Price with Economic Adjustment
• Incentive Contracts
• Fixed Price Incentive
• Cost Plus Incentive
• Cost Reimbursement
• Cost Plus Award Fee
• Cost Plus Fixed Fee
• Cost-Plus Contracts
• Time-and-Materials

Narrow Scope Cost Estimating Techniques

• Power-sizing techniques (Capacity Ratios)
• Factor estimates
• Cost estimating relationships (CER)
• Design-to-cost-estimates
• Target cost estimates
• Adjusting for Project Type and Quality Level
• Features Determining the Quality Level (Grade) of a Structure
• Adjusting for Quality Level by Using a Costing Publication
• Economic Constraints
• Parametric Cost Estimating
• Analysis of Estimating Accuracy

Framework for Applying Value Engineering in Projects

• What is Value Engineering? Why is it important?
• Defining Value Engineering concepts and principles
• Purpose of Value Engineering and Value Analysis
• Strengths and Weaknesses of Value Engineering
• How and When is Value Engineering applied?
• Project definition and initiation
• Project scope and charter development
• Life-cycle costing techniques
• Project stakeholders analysis and management
• Identifying relationships between Value, Cost and Worth
• Initiating Value Engineering Process
• Overview of Different Value Engineering Phases
• The Information Phase – steps and procedures
• Developing Value Engineering Job Plan

The Function Analysis Phase – Expressing Project Functional Needs and Constraints

• The need for Function Analysis in projects
• Defining project constraints – relationships and tradeoffs
• Conceptual project cost estimating techniques
• Function-Cost-Worth Analysis
• Developing FAST Diagrams to identify critical project components
• The Technical FAST Model to perform project value analysis
• Case Study
• Cross-Functional Project Team Approach

The Creative Phase – Inspiring Creativity in Your Project Team

• Creativity and Creative thinking within the project environment
• Individual vs. Group thinking to improve the quality of project decisions
• Creativity techniques as applied to optimize project value
• Blocks to creativity within the project team
• Brainstorm project solutions
• Reaching consensus and leveraging the power of project team collaboration
• Project risk perception and identification
• Project prioritization process using the Delphi technique
• The use of Force-field analysis in project problem solving
• Output of the Creative Phase

The Evaluation Phase -Making Informed Project Decisions

• Project ideas screening
• Project evaluation methods
• Quantitative evaluation using objective data
• Subjective evaluation – project-related criteria weighting
• Revisiting project life-cycle costing analysis
• Incorporating inflation in project economic analysis
• Performing project risk and scenario analyses
• Risk Life-cycle simulation modelling – best and worst project cost scenarios
• Pitfalls associated with the use of existing economic models
• Incremental benefit-cost analysis for project evaluation
• Effective Decision-making in project environment
• Output of the Evaluation Phase

The Planning and Reporting Phases -Getting Results through Effective Communication

• Develop and assess VE proposals to optimize project value
• Develop action plans and assign project roles and responsibilities
• Reporting VE findings to Senior Management and project stakeholders
• Mastering oral presentation techniques & interpersonal skills
• Strategies for project plan execution
• Incorporating VE into the early project phases
• Integrating VE with Continuous Improvement Techniques
• Wrap-up

Fundamentals of Strategic Planning

• What is strategy?
• Strategic management
• Strategic analysis
• Mission
• Objectives
• Strategic decision-making
• The strategic planning process
• Environmental analysis
• Resources analysis
• Strategic choice and strategic decision-making
• Strategic implementation
• Corporate objectives and accountability
• Forecasting financial data

Fundamentals of Financial Statements

• Financial statements
• Balance sheet
• Income statement
• Alternative asset valuation methods
• Cash flow statement
• Common size (or horizontal) trend analysis of financial statements
• Vertical trend analysis of financial statements
• Segmental analysis of financial statements
• Value added analysis of financial statements
• Understanding the cash flow cycle and the operating cycle
• Break-even and multiple product break-even analysis

Capital Structure and Leverage

• Sources of funds
• Capital cost models
• Cost of equity
• Cost of debt
• Weighted average cost of capital (WACC)
• Can we determine a company’s optimal capital structure?
• Capital structure models
• Preparing projections to determine financing needs

Capital Budgeting

• Future values, present values and DCF
• Capital budgeting principles
• Methods of evaluating capital investment projects
• Accounting rate of return (ARR) and payback
• Net present value (NPV) versus internal rate of return (IRR)
• How do you choose which method to use?
• Equivalent annual cost (EAC) method
• Capital budgeting methods
• Capital asset pricing model (CAPM) versus arbitrage pricing theory (APT)
• Does it make a difference whether we lease or buy?

Managing Financial Risks

• The value of perfect information (VOPI)
• Types of risk
• Risk management principles
• Talking to your bankers about managing risk
• How to develop the tools for your company?
• How to minimise risk?
• Insurance and hedging
• Interest rate and foreign currency exchange rate risk

The Challenge of Financial Economic Decision-Making

• The practice of financial economic analysis
• Corporate value and shareholder value
• A dynamic perspective of business Benchmarking your own strategic position/competitor analysis
• The agency problem and corporate governance
• What information and data to use?
• The nature of financial statements
• The context of financial analysis and decision-making

Assessment of Business Performance

• Ratio analysis and business performance
• Management’s point of view
• Owners’ point of view
• Lenders’ point of view
• Ratios as a system – pyramids of ratios
• Integration of financial performance analysis – the Dupont system
• Economic value added (EVA)
• Predicting financial distress

Projection of Financial Requirements

• Interrelationship of financial projections
• Operating budgets
• Standard costing and variance analysis
• Cash forecasts and cash budgets
• Sensitivity analysis
• Dynamics and growth of the business system
• Operating leverage
• Financial growth plans
• Financial modelling

 Analysis of Investment Decisions

• Applying time-adjusted measures
• Net present value (NPV) and internal rate of return (IRR)
• Strategic perspective
• EVA and NPV
• Refinements of investment analysis
• Equivalent annual cost (EAC)
• Modified internal rate of return (MIRR)
• Sensitivity analysis, scenario analysis, simulation, and NPV break-even
• Dealing with risk and changing circumstances

 Valuation and Business Performance

• Managing for shareholder value
• Shareholder value creation in perspective
• Evolution of value-based methodologies
• Creating value in restructuring and combinations
• Financial strategy in acquisitions
• Business valuation
• Business restructuring and reorganisations
• Management buy outs (MBOs) and management buy ins (MBIs)