PARAMETRIC COST ESTIMATING - L'Eccellenza in · PDF file02.05.2011 · parametric cost estimating (pce) = statistical or stochastic cost estimate ... parametric cost estimating - are

PARAMETRICCOST

ESTIMATINGSPEAKER: OTTORINO MAGGIORE VAN BEEST - PMP®

SAN DONATO MIL.SE - APRIL 9, 2010

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TABLE OF CONTENTS

PARA... WHAT? PARA... WHEN? PARA... WHY? PARA... START!


PARA... WHAT?

PMI PMBOK

CHAPTER 7 - PROJECT COST MANAGEMENT

PARA 7.1 - ESTIMATE COSTS

SUB-PARA 7.1.2 - ESTIMATE COSTS: TOOLS AND TECHNIQUES

POINT 7.1.2.3 - PARAMETRIC ESTIMATING (PAGE 172)


PARAMETRIC ESTIMATING USES A STATISTICAL RELATIONSHIP BETWEEN HISTORICAL DATA AND OTHER VARIABLES (E.G. SQUARE FOOTAGE IN CONSTRUCTION) TO CALCULATE AN ESTIMATE FOR ACTIVITY PARAMETERS, SUCH AS COST, BUDGET AND DURATION. THIS TECHNIQUE CAN PRODUCE HIGHER LEVELS OF ACCURACY DEPENDING UPON THE SOPHISTICATION AND UNDERLYING DATA BUILT INTO THE MODEL. PARAMETRIC COST ESTIMATES CAN BE APPLIED TO A TOTAL PROJECT OR TO SEGMENTS OF A PROJECT, IN CONJUNCTION WITH OTHER ESTIMATING METHODS.

PARA... WHAT?

PARAMETRIC COST ESTIMATING (PCE) = STATISTICAL OR STOCHASTIC COST ESTIMATE

PARAMETER = THE COST DRIVER(S)

COST ESTIMATING RELATIONSHIP (CER):

COST-TO-COST: ANCILLARIES F(MAIN ITEM)...

COST-TO-NO-COST: COST F(WEIGHT, MATERIAL, POWER, FLOW RATE, VOLUME, SURFACE, LENGHT, DWS. N°, LINES OF CODE, ...)

GENERAL FORM OF CER: Y = F (X)

F: FUNCTIONAL RELATIONSHIPX: INDEPENDENT VARIABLE OR PARAMETER

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PARA... WHAT?

TYPICAL CURVES USED FOR CERS:

LINEAR

SEGMENTED LINEAR

POLYNOMIAL

POWER LAW

LOGARITHMIC

EXPONENTIAL

RATIONAL

POWER SERIES


PARA... WHEN?

TIME & PROJECT DETAILS

ANALOGUS ESTIMATING

AACEI - RP N° 17R-97

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FOR ENGINEERING & CONSTRUCTION PROJECTS

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PARA... WHY?

CAN BE ACCURATE AS DEFINITIVE COST ESTIMATES


PARA... WHY?

IF YOUR BOSS TELLS YOU: “WE NEED THE PROJECT COST ESTIMATE BY TOMORROW”

YOU...


PARA... WHY?

PARAMETRIC COST ESTIMATING - TOP BENEFITS:


CONSIDERABLY REDUCING COST & TIME CYCLE FOR PROPOSAL PREPARATION, EVALUATION AND NEGOTIATION

ABOVE BENEFITS CAN BE ACHIEVED WHILE MAINTAINING OR IMPROVING THE QUALITY OF THE ESTIMATES PRODUCED

COST AND CICLE TIME SAVINGS UP TO 80%

PARA... WHY?

PARAMETRIC COST ESTIMATING - MAIN ROADBLOCKS:


CULTURAL RESISTANCE

SIGNIFICANT INITIAL INVESTMENT

LIMITED GUIDANCE HOW TO MANAGE PROPOSALS BASED ON PCE

PARA... WHY?

PARAMETRIC COST ESTIMATING - OBJECTIVES:


PRODUCTION OF MORE RELIABLE ESTIMATES

SHORTER TIME REQUIRED

BETTER DATA UNDERSTANDING

EASIER TO COMPUTE CONCEPTUAL DESIGNS

NO OTHER MEANS TO ESTIMATE EARLY COSTING

BILL OF MATERIAL IS NOT REQUIRED

MUCH EASIER TO HANDLE SCOPE, TECHNICAL AND PERFORMANCE CHANGES

BETTER RISK MODELLING AND UNDERSTANDING

PARA... WHY?

PARAMETRIC COST ESTIMATING - USE OF OUTPUTS:


PROPOSAL PRICING

ROUGH ESTIMATES

ECONOMIC STUDIES

ACTIVE PROJECT MANAGEMENT - SUPPORTS EARNED VALUE

RISK ANALYSIS

PARA... OWNER-CONTRACTOR...?


OWNER CONTRACTOR

screening or feasibility

stochastic or judgement

concept study or feasibility

primarly stochastic

budget, authorization, or

control

mixed, but primarly

stochastic

control or / bid / tender

primarly deterministic

check estimate or bid / tender

deterministic

POSSIBLE COMMON

UNDERSTANDING&

INVESTMENTS

PARA... FORMULA?

EXAMPLES: COST CAPACITY FORMULA

INDUSTRIAL PLANTS

C2 = C1 (Q2/Q1)K

LOG C2 = LOG C1 - K LOG Q1 + K LOG Q2

Y = A + K X

0.2 ≤ KAVERAGE = 0.6


LOG C

LOG Q

COMMERCIAL JET AIRPLANES

LOG C = F (LOG MAX TAKE-OFF WEIGHT) K = 0.85

LOG C = F (LOG NUMBER OF SEATS) K = 1.10

LOG C = F (LOG LENGHT) K = 1.90

PARA... FORMULA?EXAMPLES: PLANT EQUIPMENT

SHELL & TUBE HEAT EXCHANGER BEU TYPE - CARBON STEEL

CHE = EXP [A + B LN (W)]

4400 <W< 77400 KG7 <P< 85 BARGA = -2.910474B = 1.016550

R2 = 0.98


OIL INJECTED SCREW COMPRESSORS

CSC = EXP [A + BW + CW0.3]7 <W< 315 KW7 <P< 85 BARA = 2.193159320B = -0.01059287C = 0.450875824

R2 = 0.98

COST IN MILLION RIALSSTUDY BY MOHAMMED REZA SHABANI, REZA BEHRADI YEKTA

PARA... FORMULA?

ENTIRE PLANT


CE1 CE2 CE3 CE4 CE5 CE.. CEN

CET1 CET2 CET3 CET4 CET5 CET... CETN

OTHER FORMULAS OR FACTORS TO ACCOUNT FOR ANCILLARIES AND SURROUNDING PARTS

BASE COST = ∑I CETI

TOTAL COST = BASE COST + ESCALATION + CONTINGENCY

PARA... FORMULA?

EXAMPLE: OFFSHORE PLATFORM DECOMMISSIONING

PLUG AND ABANDONMENT

C1 = K0 + K1 CT + K2 JOB + K3 NW + K4 RIG + K5 WB + K6 SEASON + K7 WOW

CT = CONTRACT TYPE (=0 X RATE CONTRACT; = 1 TURNKEY CONTRACT)JOB = JOB SPECIFICATION (=0 TEMPORARY PLUG & ABANDON; =1 PERMANENT P&A)NW = NUMBER OF WELLSRIG = RIG DEPLOYMENT (=0 RIGLESS OPERAT.; =1 RIG OPERATION)WB = WORKBOAT DEPLOYMENT(=0 WORKBOAT NOT EMPLOYED; =1 WORKBOAT EMPLOYED)SEASON = SEASON WHEN THE WORK BEGANWOW = WAITING ON WEATHER (=NO WEATHER INTERRUPTION; =1 WEATHER INTERRUPTION)

STRUCTURE REMOVAL

C2 = H0 + H1 ST + H2 WD + H3 CF + H4 MW + H5 TW + H6 REEF + H7 TOW

ST = STRUCTURE TYPE (=0 CAISSON; =1 OTHERWISE)WD = WATER DEPHTCF = COMPLEXITY FACTOR = NC (NUMBER OF CONDUCTORS) + NPL (PIPELINE ATTACHMENTS) + NP (PILES) + NSP (SKIRT PILES ASSOCIATED WITH THE STRUCTURE)MW = MAXIMUM COMPONENT WEIGHTTW = TOTAL STRUCTURE WEIGHT (DECK + JACKET + EQUIPMENT + PILING AND CONDUCTORS)REEF = STRUCTURE DISPOSITION (=0 ON-SHORE REMOVAL; =1 ARTIFICIAL REEF DONATION)TOW = REEF REMOVAL METHOD (=0 TOPPLED-IN-PLACE OR PARTIALLY REMOVED; =1 TOWED TO SITE)

SITE CLEARANCE AND VERIFICATION

C3 = W0 + W1 AGE + H2 WD + H3 ND + H4 N

AGE = AGE YEARS UPON REMOVALWD = WATER DEPHTND = NUMBER OF DAYSN = NUMBER OF ITEMS COLLECTED


STUDY BY MARK J. KAISER

PARA... POWER FORMULA?

OPTIMIZATION STUDIES


FROM CONCEPT

TO ALTERNATIVE PROJECTS

ALTERNATIVES EVALUATED THROUGH COST ESTIMATES OF DIFFERENT “PRODUCT SCOPE”

PARA... FROM?

PARAMETRIC COST ESTIMATING - BUILDING CERS:

CERS ARE BUILT UPON STATISTICAL DATA ANALYSIS

SIGNIFICANCE OF CERS IS QUANTIFIED BY SEVERAL PARAMETERS; MOST IMPORTANT:

COEFFICIENT OF DETERMINATION R2 : REPRESENTS THE PORTION OF VARIATION IN THE INDEPENDENT VARIABLE THAT HAS BEEN EXPLAINED BY THE REGRESSION LINE

0≤R2≤1

R2 ACCEPTABLE ≥ 0.70


PARA... WHY?

PARAMETRIC COST ESTIMATING - ARE YOU SURE COST DRIVERS YOUR ORGANIZATION IS USING ARE CORRECT?

AN EXAMPLE - STUDY ON SAUDI ARABIAN RESIDENTIAL “VILLA”

COST = F (PARAMETER)

COST DRIVER = PERIMETER TO FLOOR RATIO = WALL AREA (M2) / PLAN AREA (M2)


TYPICAL:- GROSS FLOOR AREA ≅ 600 M2

- EXTERIOR DIMENSION ≅ 15 X 20 M- N° 2 FLOORS- STORY HEIGHT ≅ 3 M

TYPICAL

STUDY BY A.D. IBRAHIM, A.A. SHASH, S.A. ASSAF, O.A. JANNADI

PARA... CURVES?


PARAMETRIC COST ESTIMATING - BUILDING CERS:

CURVES USUALLY PROVIDE MORE CREDIBLE AND ACCURATE RELATIONSHIPS

LINEAR RELATIONSHIPS ARE VERY RARE AND OF LIMITED VALIDITY

PARA... PROCESS!

PARAMETRIC MODEL BUILDING PROCESS


MODELREQUIREMENTS

DATA SUPPORT MODEL REQUIREMENTS?

DATABASE DEVELOPMENT

NO

YES

MODELDEVELOPMENT

CALIBRATION AND VALIDATION?

NOT OK

UPDATE REQUIRED?

YES

OKDOCUMENTRESULTS

PARA... START!


DATABASE DEVELOPMENT - DATA NORMALIZATION

NORMALIZATION = DATA CORRECTION FROM DISSIMILARITIES, SUCH AS:

SOURCED FROM DIFFERENT ORGANIZATIONS

CHANGES IN ORGANIZATION

LEARNING / FORGETTING EFFECT

CURRENCY FLUCTUATION

ESCALATION

UNUSUAL EVENTS

ETC.

MAIN LIMITATION: UNRECORDERED DATA / INFO UNAVAILABILITY

PARA... START!


PARA... START!


PARA... START!


SOME IDEAS TO WORK ON

OWNER - CONTRACTOR RELATIONSHIP: PCES BASED BIDS✓ CONTRACT STRUCTURE✓ CONTRACT SCOPE AND PRICE

OWNER & CONTRACTOR COMMON INVESTMENTS✓ SHARE INFO & DATA✓ ESTABLISH COMMON TEAM✓ DEVELOP REAL PARTNERSHIP

...

PARA... START!


CONCLUSIONS

REQUIRES MANAGEMENT SUPPORT

NEEDS COMPANY CHAMPIONS

REQUIRED CONSTANT SELLING

CONSIDERABLE START-UP COST

TEAM REQUIRES TRAINING

REQUIRED CULTURE CHANGE

IMPLEMENTATION IS A CHALLENGING EFFORT

DATABASE DEV. AND DATA NORM. ARE THE MOST CHALLENGING EFFORTS

EFFORT: 95% DATABASE DEV. & DATA NORM., 5% CALIBRATION

REQUIRED PROJECT FULL UNDERSTANDING

PARA... START!


CONTACT:

OTTORINO MAGGIORE VAN BEEST

E-MAIL: [email protected]

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PARAMETRIC COST ESTIMATING - L'Eccellenza in · PDF file02.05.2011 · parametric cost estimating (pce) = statistical or stochastic cost estimate ... parametric cost estimating - are