ch 6-1 © 2004 pearson education, inc. pearson prentice hall, pearson education, upper saddle river,...
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Ch 6-1© 2004 Pearson Education, Inc.Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management
Cost Analysis and Estimatingfor Engineering and Management
Chapter 6
Estimating Methods
Ch 6-2© 2004 Pearson Education, Inc.Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management
Overview
Introduction “Non-Analytic” Estimating Methods Cost & Time Estimating Relationships Learning Curves Proportional Relationships Using Probability and Statistics
Ch 6-3© 2004 Pearson Education, Inc.Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management
General Estimating Methods
Preliminary EstimatesLimited Information and TimeCompare AlternativesDecisions (Proceed or Discontinue)
Detailed EstimatesMore Quantitative (Solid Information)Used for Pricing
Ch 6-4© 2004 Pearson Education, Inc.Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management
Other Estimates
Broad Tolerance on AccuracyROMNTE
Effort to Estimate Proportional to Use and Information Available
Estimates Attempt to Forecast Actual Costs
Ch 6-5© 2004 Pearson Education, Inc.Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management
Universal Methods
OpinionUses Experience and Judgment
ConferenceCollective Opinion
Comparison Unit
Ch 6-6© 2004 Pearson Education, Inc.Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management
Comparison Method
Bracket Unknown with KnownKnown Cost of Similar Product/ProjectFind Cost for Upper BoundCost for a Lower Bound Is Good, too
bbaacc DCDCDC Eq 6.2
Ch 6-7© 2004 Pearson Education, Inc.Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management
Comparison Example
Ch 6-8© 2004 Pearson Education, Inc.Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management
Unit Method
Identify a Cost Driver Use Historical Data Find “Cost per…”
Square ft., pound, kW, hp, etc. Average Cost Dependent on Quality of Model
Ch 6-9© 2004 Pearson Education, Inc.Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management
Estimating Relationships
Cost (CER) or Time (TER) Math Models or Graphs Function of One or More Independent
Variables - Causality CERs are Considered Preliminary Best if Used Within Data Range
Ch 6-10© 2004 Pearson Education, Inc.Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management
Performance Time Data
Extends Time Study StandardsStandard Time Good Only for Operation(s) StudiedNot Suitable Directly for Estimating
Use Algorithm to Develop Time Study Data into PTD
Ch 6-11© 2004 Pearson Education, Inc.Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management
PTD Algorithm
Collect Data Classify Data into Common Groups Use Regression Separate into Constant and Variable Set Variable into Equation or Table Complete, Test, Publish, Implement
Ch 6-12© 2004 Pearson Education, Inc.Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management
Data
Many (12 or so) Studies Process and Arrange Data
Regression Analysis Determine Variable Elements
Ch 6-13© 2004 Pearson Education, Inc.Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management
Variable Element Test 1 Is the Element Variable? Establish a Limit - P1 (%) Check at Extremes of Range (x) Use Computed y Values “Conditionally” Variable if:
^
%100 1^
min
^
min
^
max P
y
yy
Eq 6.4
Ch 6-14© 2004 Pearson Education, Inc.Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management
Variable Element Test 2
Is the Variability of the Element Significant to the Overall Cost?
Establish Another Limit P2 (%)
Exceeds Both Test 1 & 2 = Variable
%100 2^
^
ave P
y
y
t
Eq 6.5
Ch 6-15© 2004 Pearson Education, Inc.Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management
Process the Data
Collect and Add All Constant Elements Provide Equations or Tables for Each
Variable Element Use Rules for Setting Table Divisions Include PF&D
Ch 6-16© 2004 Pearson Education, Inc.Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management
Example
Independent Values
P1 = 100% and = P2 10%
Element xmin xave xmax
1 29 65 101
2 8 18 28
3 5 24.5 44
4 3 19.5 36
5 37 71.5 106
Ch 6-17© 2004 Pearson Education, Inc.Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management
Regression Data
Element Regression Equation
1 0.0139 + 0.0027x1
2 - 0.1282 + 0.0216x2
3 0.0642 + 0.0133x3
4 - 0.1156 + 0.0608x4
5 0.1907 + 0.0014x5
Ch 6-18© 2004 Pearson Education, Inc.Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management
Calculated Valuesy ave^
y^
min y^
max
Element
1 0.092 0.189 0.287
2 0.045 0.261 0.477
3 0.131 0.390 0.649
4 0.067 1.070 2.073
5 0.243 0.291 0.339
y t^
2.201
Ch 6-19© 2004 Pearson Education, Inc.Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management
Test Results
Element Test 1 Outcome Test 2 Outcome
1 212 Variable 9 Constant
2 960 Variable 12 Constant
3 396 Variable 18 Variable
4 2995 Variable 49 Variable
5 40 Constant
Ch 6-20© 2004 Pearson Education, Inc.Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management
Constant Elements
Elements Normal Time, Min
1 0.189
2 0.261
5 0.291
Total 0.741
STD Min. with PF&D 0.872
Ch 6-21© 2004 Pearson Education, Inc.Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management
Estimating DatabaseSet Up 1.2 hr
Constant 0.87 min
Load 3rd Part
L + W + H Time (min)
5.0 0.16
9.4 0.22
15.6 0.32
19.7 0.38
No. Spots Time (min)
3 0.08
5 0.22
7 0.36
Ch 6-22© 2004 Pearson Education, Inc.Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management
Using the TER Database
Select Set-Up Time Get Constant Unit Time Determine Value of Independent x Get Time Value from Equation or Table If x Is Between Table Values
Use Higher Value
Ch 6-23© 2004 Pearson Education, Inc.Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management
Learning
Repetition Improves PerformanceDesign ImprovementsProcess ImprovementsOperator Efficiency Improvement
Improvement Is Predictable Improvement Generally Decreases
Exponentially
Ch 6-24© 2004 Pearson Education, Inc.Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management
The Learning Theory
Time/Cost Decreases by a Constant % Each Time the Quantity Doubles
Finding the “Slope”
su KNT Eq 6.6
log log log NsKTu
2 log log s 2 log
log
s
Eq 6.7
Eq 6.8 Eq 6.9
Ch 6-25© 2004 Pearson Education, Inc.Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management
The Learning Curve
Ch 6-26© 2004 Pearson Education, Inc.Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management
Logarithmic Function
Ch 6-27© 2004 Pearson Education, Inc.Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management
Expanding
Cumulative Time for N units
Average Time per Unit for N units
Eq 6.10
Eq 6.12
1
21
N
u
uNc TTTTT
1
N
T
N
T
T c
N
u
u
a
s
a KNs
T
1
1
Eq 6.11
Ch 6-28© 2004 Pearson Education, Inc.Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management
More Learning Curve Notes
Eq 6.12 Works for N > 20 Finding s from Known Times
LimitationsNot for Small Items or High Production Jobs
Eq 6.13 log log
log log
ji
ji
NN
TTs
Ch 6-29© 2004 Pearson Education, Inc.Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management
Project Estimating
Power Law and Sizing Economies of Scale
Correlating Exponent m
m
r
cr Q
QCC
i
r
cm
r
cr C
I
I
Q
QCC
1
m
r
c
r
r
c Q
Q
Q
C
Q
C
Eq 6.14 Eq 6.15 Eq 6.16
Ch 6-30© 2004 Pearson Education, Inc.Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management
Other CERs
Caution, Keep Scale within Factor of 5 Variable and Fixed Components
Multi-Variable
Eq 6.17
Eq 6.18
mKQC
f
m
r
cv CQ
QCC
smNKQC Eq 6.19
Ch 6-31© 2004 Pearson Education, Inc.Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management
Factor Method
Mostly for Major Projects Summary Model Uses Separate Factors
Includes Cost Index
Eq 6.20
Eq 6.21
1
I
i
eie fCfCC
c
rcr I
ICC
Ch 6-32© 2004 Pearson Education, Inc.Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management
Using Probability and Statistics
Expected Value Range Percentile Monte Carlo Simulation
Ch 6-33© 2004 Pearson Education, Inc.Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management
Expected Value
Elements of Uncertainty Assigned Probabilities
Certain Events (NO Other Possibilities) Mutually Exclusive Events Probabilities Indicate the Future Expected Value
Eq 6.22 n
j
ijjxpiC
Ch 6-34© 2004 Pearson Education, Inc.Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management
Range
Most Likely Value Optimistic and Pessimistic Estimates Expected Cost and Variance
Eq 6.23
6
4 HMLCE i
6var
2
LH
Ci
Eq 6.24
Ch 6-35© 2004 Pearson Education, Inc.Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management
More on Range
Central Limit TheoremMean of the Sum = Sum of MeansVariance = Sum of Variances
Probability Actual Cost Will Exceed Upper Limit
Eq 6.27
var 2/1T
T
C
CEULZ
Ch 6-36© 2004 Pearson Education, Inc.Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management
Percentile
Three Costs Best Case 10% (1 in 10 Cost Is Lower)Best Value 50%Worst Case 90% (1 in 10 Cost Is Higher)
Find the 3 Estimates Express (10% and 90%) as
Differences from 50%
Ch 6-37© 2004 Pearson Education, Inc.Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management
Example
Item
Percentile Difference
10th 50th 90th (50 – 10) (90 – 50)
1 $25 $33 $44 $8 $11
2 9 13 15 4 2
3 3 4 7 1 3
Ch 6-38© 2004 Pearson Education, Inc.Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management
Square and Sum
Square Root of Sum = Contribution to Uncertainty
(50 – 10)2 Midvalue (90 – 50)2
$64 $33 $121 16 13 4 1 4 9
Total 81 50 134
Square root $9 $11.58
Ch 6-39© 2004 Pearson Education, Inc.Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management
Final Result
50th Percentile = $50 10th Percentile
50 - 9 = $41 90th Percentile
50 + 11.58 = $61.58
Ch 6-40© 2004 Pearson Education, Inc.Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management
Monte Carlo Simulation
Mathematical Models Repeatedly Run Using Random Input
for Variables Based on Expected Probabilities Many Runs (1000s) Gives Cost
Distribution
Ch 6-41© 2004 Pearson Education, Inc.Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management
Single Value vs Distribution
Compare A and B Single Values - Choice is Obvious Distribution - Choices May Overlap
Ch 6-42© 2004 Pearson Education, Inc.Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management
A and B with Distributions
Ch 6-43© 2004 Pearson Education, Inc.Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management
Summary
How to Use Non-Analytic Methods About CERs and TERs Effects of Learning on Estimating Various Ways of Using Proportionality Impact and Uses of Probability and
Statistics for Estimates