capacity building workshop nchrp report 574 and beyond ...capacity building workshop stuart...

Capacity Building Workshop

Stuart Anderson, PhD, PETexas A&M University

Minneapolis, MinnesotaAugust 11, 2010

NCHRP Report 574 and Beyond: Where were We, Where are We, and Where are We Going?

Outline• History

• Advances

• Current Environment

• Wrap Up

• Discussion

State Highway Agencies face a major challenge is controlling project budgets over the time span between the initiation of a project and the completion of construction.

The Problem

Consistency and Accuracy

Strategic Focus Definitions

• Strategy: “a plan of action intended on accomplishing a specific goal.”

• Method: “a means or manner of procedure, especially a regular and systematic way of accomplishing something [action].”

• Tool: “something used in the performance of an operation [method].”

• Phase 1 – State of Practice Review– Comprehensive literature review– Detailed agency interviews– Potential Strategies, Methods, and

Tools (SMTs)

• Phase 2 – Guidance Document– Guidance development around SMTs– Guidance testing and validation– Implementation

DevelopmentTwo-Phase Approach

NCHRP 8-49Guidebook Results

• 18 primary cost escalation factors• 8 Strategies to address cost escalation factors• 30 implementation Methods• 90 Tool applications• 1 agency level process map• 3 generic CE/CM process maps for project development phases

1. Bias2. Delivery/Procurement Approach3. Project Schedule Changes4. Engineering and Construction Complexities5. Scope Changes6. Scope Creep7. Poor Estimating 8. Inconsistent Application of Contingencies9. Faulty Execution10. Ambiguous Contract Provisions11. Contract Document Conflicts1. Local Concerns and Requirements2. Effects of Inflation3. Scope Changes4. Scope Creep5. Market Conditions6. Unforeseen Events7. Unforeseen Conditions

Inte

rnal

Exte

rnal Cost Escalation

Factors

1. Management2. Scope/Schedule3. Off Prism4. Risk5. Project Delivery/Procurement6. Document Quality7. Estimate Quality8. Integrity


Example Strategy

Estimate Quality Strategy

Use Qualified Personnel and UniformApproaches to Achieve Improved

Estimate Accuracy

Cost Escalation Factors

Engineering and Construction ComplexitiesPoor Estimating

Example Methods in Programming (aka Scoping)

• Consistency• Document Estimate Assumptions and

Basis• Creation of a Project Baseline


Why?

Project Complexity

Tips for Success

Tool

s


Illustration

Creation of Project Baseline Method in Programming

Why – Need a cost performance benchmark

Project Complexity – Required for every project

Tips for Success – Major project elements must be defined

Tools – Project BaselineCost Containment TableScope Change Form


Example Tools in Programming• Standardized Estimating and Cost

Management Procedures• Project Estimate File• Project Baseline

Tips Resources

What is it?Why What does it do?When Examples

NCHRP 8-49Guidebook Results - Illustration

Project Baseline in Programming

What is it? – Sets basis for controlling costs

Why? – Cost management cannot be performed effectivelywithout a baseline budget

What does it do? – Provides management with a tool for makingdecisions when changes occur

When – Project is programmed

Examples – WSDOT Scoping Process

Tips – Need certain level of detail to track changes

Resources – Principled Based Project Management - Chapman

Basic Process StepsDefine Scope (Input)Estimating Process

– Determine Estimate Basis– Prepare Base Estimate– Determine Risk/Set

Contingency– Review Estimate

Basic Process StepsEstimate Management

– Obtain Approvals– Communicate– Monitor for Change– Evaluate Change– Adjust Baseline

Estimate

Cost EstimatingAnd Cost EstimateManagementduring Programming


Advances

• Minnesota DOT – Technical Reference Manual• NCHRP Report 625 – Right of Way Cost

Estimation and Management• NCHRP Report 658 – Risk Management• Texas A&M MS Thesis – Sliding Scale

Contingency Assessment• TxDOT Synthesis – Construction Unit Cost

Development• NCHRP 20-7, Task 278 – Practical Guide to

Estimating

Moving From Theory to Practice:Can We Avoid These Situations?

Image003.jpg

“Theory to Practice”

• Framework – NCHRP Report 574 and Mn/DOT Scoping Process

• Methodology with rigor• Industry involvement –

Mn/DOT Professionals• Academics with right

industry experience• Know user expectations• Deliverable – “How to”

Manual

How?

Development

Conversion

Process Model

23

Total Project Cost ComponentsTOTAL PROJECT COST ESTIMATE

ITEM

CATEGORY

ELEMENT

Project Development; State Share of Letting; Utilities; Railroads; and so on

Related Work (e.g. Excavation; Paving; Bridges; etc)

Specific Work with Unique Number (e.g. 2105607/00021: Excavation-Common

2105607/00025: Excavation-Subgrade)

GROUP

DIVISION

RAW TOTAL Total Before Inflation

Engineering, Construction and Right-of-Way

Engineering; Internal; Primary Construction; Letting; and so on.

24

Gated Process

Gn GATES

PREPARE PLANNING REPORT

APPROVED PLANNING REPORT

PERIODIC HIP PROJECT COST

UPDATES

ENTER AND CONTINUE IN

HIP

ENTER STIP

PREPARE SCOPING REPORT

APPROVED SCOPING REPORT

ANNUAL STIP PROJECT COST AMENDMENT(S)

PREPARE DESIGN

APPROVED FINAL

DESIGN PS&E

SOLICIT/ APPROVE BID PRICE

APPROVED DISTRICT DESIGN

SUBMITTAL LETTER

LETTING PHASE

CONSTRUCTION PHASE

G1

G2A

G2B

G3

G4

G5

G6

G7

G1: To Enter HIPG2: To Proceed to ScopingG3: To Enter STIPG4: To Remain in STIP/ Proceed to DesignG5: To Proceed to LettingG6: To Solicit/ Approve Bid Price

G7: To Proceed to Construction

Planning Phase HIP (Program) Scoping Phase STIP (Program) Design Phase Letting Phase Post-Letting

“Theory to Practice”Right of Way

• Framework – NCHRP Report 574

• Developing a “How To” Guide

• Interviews with ROW Experts

• Adapted CE/CM Process for ROW

• Expended ROW Tools

How?

ROWResearchResults

ProceduresGuide

Development

“Theory to Practice”Risk Management

• Framework – NCHRP Report 574 and the MnDOT TRM

• Developed “How To” Guide

• Case Studies in Risk Management

• Guidebook Format Similar to ROW Guide

• Expand Risk Management Tools

How?

Project Development Phases

Project Complexity

Cost Estimate at Any Phase

Total Project Estimate = Base + Contingency (plus inflation)

Reflects Estimated Dollars Associated with Uncertainty

Risk Management Process Framework

Assess/AnalyzeAllocate

Monitor and

ControlIdentify

MitigateandPlan

Risk Management

Process

Scalable for Project ComplexityAdaptable to Project Development Phases

Estimating

Contingency

Cost Management

Update Contingency

Pro

ject

Cos

t

Project Development Process

Planning Preliminary Design

FinalDesign

Cost Range

Programming

Contingency

Base Estimate

Contingency

Base Estimate

Contingency

Base Estimate

Base Estimate

Baseline Estimate & Total Project Cost Estimate

Cost Estimates and Contingency(w/Total Project Cost Estimate = Baseline Estimate)

“Theory to Practice”Risk Management

• NCHRP Report 658 Tool

• Test Ohio Sliding Scale Contingency Concept

• Delphi Technique• Develop Sliding Scales

for Three Levels of Project Complexity

• Tie to Risk Management Process

Idea?

Ohio DOT

Project Complexity

The Delphi Technique

Round 1 Group Response AnalysisControlled Feedback in round 2Round 2 Group Response AnalysisControlled Feedback in subsequent rounds

Moderately Complex Projects

0

10

20

30

40

50

60

70

80

1 1.5 2 2.5 3 3.5 4 4.5 5

Perc

ent C

ontin

genc

y

Phase of Project Development

Sliding Contingency Scale

Low MLEHigh

Planning Programming Design 1 Design 2 Design 3

Construction Unit CostsDatabase

Idea?

• Framework – NCHRP Report 574 CE Process Flowchart

• Tie Historic Database toEstimating Base Costs

• Survey and Interviews• Compile Results• Illustrate Different

Requirements• Proposed Unit Cost

Development Framework

Project Development Phases

Construction Unit CostsDatabase

Submitted Bids

Acquiring Unit Cost- Information Systems

- Type of Historical Bid Data

Storing Unit Cost- Information Systems- Calendar Duration

- Listing of Historical Data- Categories of Historical Data

Historical database

Accessing Unit Cost- Information Systems

Applying Unit Cost- Calendar Duration

- Statistical Technique- Number of Bids

- Factors influencing Unit Prices

General- Estimating Techniques & Tools

- Innovative Approach

Prepare Base Estimates

Determine Risk/Contingency

Unit Cost Development Framework

NCHRP 20-7, Task 278Cost Estimating Guide

• Create a National Standard Approved by AASHTO• Sponsor – AASHTO Subcommittee on Design, Technical

Committee on Cost Estimating• Focus on Key Estimating Techniques• Tie to Generic Estimating Process (Report 574)• Content

– Parametric– Risk Based– Bid Based– Cost Based

• Under Development

Current Environment

• Economic Downturn

• ARRA Projects

• Resource Constraints

• Market Conditions

Ten Key Principles

• Complete every step in the cost estimate process

• Document estimate basis• Identify risks• Anticipate external cost influences• Perform estimate reviews

Cost Estimating Practice

Ten Key Principles

• Make estimating a priority• Set a project baseline cost estimate• Create cost control mechanisms• Create estimate transparency• Protect estimators

Cost Estimate Management

Issues and Challenges

Questions, Answers, and Discussion!

capacity building workshop nchrp report 574 and beyond ...capacity building workshop stuart...

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