COST BLOWOUT A TSUNAMI ON THE WAY THE REAL VALUE OF AN ACCURATE - PowerPoint PPT Presentation

SEMINAR SERIES QLD CHAPTER COST BLOWOUT A TSUNAMI ON THE WAY THE REAL VALUE OF AN ACCURATE ESTIMATE Presented By Peter Steele B.Engineering (civil) , Engineering Associate, Doab Enterprises

ACES QUEENSLAND CHAPTER Proposed Technical Agenda for Late February Presentation Session 1 Cost Blow Outs – A Tsunami on the way! 40 min Demonstrating the Tsunami (Points 1-3) 1. Graphic 1 Showing Project values form Metro Tunnel Melbourne $348b of Projects in the next ten years 2. Grattan Report key findings for estimation issues; a. The biggest culprit of overruns was premature announcement of projects and budgets b. 63%of the value of overruns occur before construction starts c. Contractors deliberately low ball bids in lean times d. Overrun projects did not have an early bottom up estimate e. Poor accounting for unknown risks 3. Therefore $84b of cost overruns on the way in the next ten years. At 1% of that value as being the cost estimator’s slice that’s $84m per year for ten years! a. We’re all in work b. How can we add value to the project process? c. We should get more comfortable with the process of peer review Putting Estimation into Perspective 4. Why we need to care? a. Estimates underpin the project business case b. Private Companies this means profit viability and shareholder vale c. Public Ventures, Ratepayer/taxpayer value for money. d. The right project at the right time for the right money 5. Estimating Clearly Defined? a. A cohesive integration of real and relevant data b. Costs c. Quantities d. Risk e. Bias f. Unknowns

6. Foundations of a Quality Estimate? a. Maturity b. Experience c. Discipline d. Knowledge Estimation Considerations 7. The importance of Project Charter and Project Scope a. Provide clarity of outcome b. Provides guide to deal with change c. Helps all bring decisions back to the desired outcome rather than personal bias. d. Sets quality, budget, time and success factors. 8. The role of the Estimator and the engineer and the key collaborations early in projects. a. Both vital and it’s a side by side event b. Allows early identification of risk c. Allows rapid evaluation of options d. No one person knows all!! 9. Spreadsheet vs Database a. Age old argument Spreadsheets and databases are 25 to 30 years old! b. Spreadsheet quick to develop but hard to maintain c. Spreadsheet can be easily changed by the uninformed d. Database slower to develop but more robust and reliable e. Database not able to be messed with! 10. People vs Technology a. Where is the “Cost Estimate” button?! b. People can interpret their world on limited data c. Technology is data hungry and can get to a halt without all it needs d. Even AI requires people in the background e. No Silver Bullet yet f. Collaboration between people and Technology 11. Top Down versus Bottom up a. Top down factored approaches prone to error b. Bottom up slow – Unless you have a historical database…

c. Then bottom up with allowance for unknowns becomes more robust form the get go. d. How to get variations approved lots of small line items! 12. Project Development Processes a. Study Phases b. Role of each phase c. Keeping it real Session 2 Getting it right ! 40 min This is planned to be a session with Mike Doab on stage for discussion purposes, Jayson Tiu to show how D’est can provide the solution for discussion points and Peter Steele facilitating the session. 1. The Real Estimate Solution : a. Use a structured robust reliable database tool for collating data – D’est b. Use mature, experienced, knowledgeable staff exercising discipline c. Set the goal posts (Project Charter/Scope Definition) d. Combine Engineering/Estimating & Scheduling from beginning 2. Questioning Existing Practices - Y” with all the knowledge we have, do we persist with Studies, Pre-feasibility, Feasibility, Bankable & Execution Estimates. a. If it is a simple routine project, much can be done through the estimator b. If it is complex and routine, much can be done by the estimator c. If it is simple and innovative, engineering collaboration with estimator d. If it is complex and innovative, engineering collaboration with estimator e. Study phasing is a function of project complexity and innovation. 3. Sequence to Professional Estimates : a. Define Scope b. Determine capability against Time & Available Personnel c. Determine Estimate Viability (Internal) against client envisagement i.e.: d. Class 1 to 5, inclusive of +-0% to +-50%

e. Combine Engineering, Estimation & Scheduling Resources f. Allocate Resources g. Prepare (EBS) Estimate Base Structure h. Execute Estimate i. Determine Labour Rates j. Calculate Productivity Factor Requirements k. Prepare Programme if Required l. Include Cash Flow if required m. Execute Risk Analysis n. Execute FACP's (Fees, Allowances, Contingency & Profit) o. Review Estimate - Numerous Personnel ` MIKE DOAB PETER STEELE JAYSON TIU Managing Director BS Civil Engineering Estimating and Programme Engineering Associate Management Associate Michael Doab has 47 years’ Peter has over 20 years’ Jayson has a Civil Engineering experience in Project and experience in the civil background and has been Construction Management, engineering and project working in the construction Scheduling and Estimating management fields. His skills industry for more than a decade. within Engineering include project managing large He has extensive experience in Infrastructure, Mineral scale multidisciplinary projects, Project Management and Processing, Ore Handling and including varying levels of Estimating, particularly in the field Petro-chemical Projects community and environmental of earthworks, civil and building throughout Australia for interactions. Peter also has construction. He continues to contractors, consultants and significant experience as a expand his knowledge under the client organisations. As professional design engineer in tutelage of Michael Doab. Jayson Managing Director of Doab both private practice and local is also a Product Facilitator for Enterprises, Mike leads the government sectors including Doab Enterprises’ internal company and remains hands- design and documentation in estimating software D’est. on, at all times, to ensure the mining infrastructure, major best possible outcome for each roads, local government and and every client. subdivision works giving him a broad and detailed level of understanding in every project.