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PROCEDURES CURRENTLY USED BY FEDERAL AGENCIES TO PREPARE EARLY ESTIMATES 15 3 Procedures Currently Used by Federal Agencies to Prepare Early Estimates As part of this study, the committee reviewed the procedures currently used by seven federal agencies to prepare early estimates, which in most agencies are roughly equivalent to the pre-programming, program, concept/schematic, and design development estimates discussed in Chapter 1. The seven agencies were: the Department of Energy (Real Property and Facilities Management Division), the U.S. Air Force (Directorate of Engineering and Services), the U.S. Army (Corps of Engineers), the U.S. Navy (Naval Facilities Engineering Command), the U.S. General Services Administration (Public Buildings Service), the U.S. Public Health Service (Indian Health Service), and the Veterans Administration (Office of Facilities). The information presented is based in part on a recent Federal Construction Council report (Consulting Committee on Cost Engineering, 1987) and in part on input from the agency liaison members of the committee. The general observations and conclusions of the committee are presented at the end of this chapter. In accordance with its charge, the committee's review of current procedures has concentrated on the policies and practices of federal agencies. However, as noted previously, many early estimates for federal projects are prepared by private A-E firms, and a significant percentage of agency budget-related problems undoubtedly are caused by A-E estimating errors (see Figure A-4, Appendix A). Recommended actions to reduce such errors are discussed in Chapter 4. PRE-PROGRAMMING ESTIMATES In almost all agencies, pre-programming estimates are used for preliminary screening purposes. Such estimates are ordinarily prepared by the engineering office in a user installation and generally are of the single unit cost type. The most commonly used unit for buildings is dollars per square foot; however, pre-programming estimates in the Veterans Administration are sometimes expressed in terms of dollars per hospital bed. The cost of elements other than buildings are usually shown as a lump sum or in terms of some other unit, such as dollars per linear foot for piping. In the Department of Energy (DoE), parametric estimating systems are sometimes used to check the accuracy of pre-programming estimates; however, the actual estimates that are submitted to DoE headquarters are always traditional order-of-magnitude estimates based on dollars per square foot or some similar unit. In the Department of Defense (DoD), pre-programming estimates for commonly constructed military facilities are based on average unit prices published by DoD (see Tri-Service Committee on Cost Engineering, 1988). The DoD pricing guide* covers twenty-seven broad categories of facilities (there are several subcategories under some of the *Each of the three military services actually publishes its own version of the DoD pricing guide; however, all of the versions are essentially identical.
PROCEDURES CURRENTLY USED BY FEDERAL AGENCIES TO PREPARE EARLY ESTIMATES 16 broad categories). The pricing guide shows the average size of each type of facility for two different fiscal years. The unit costs shown include the cost of built-in equipment, but not the cost of furnishings and loose or portable equipment. The cost of site improvements beyond the five foot line also are not included, nor are allowances included for contingencies or administration of the project by the responsible agency. The pricing guide also includes a chart for adjusting the unit cost of a facility if it is larger or smaller than the average. Finally, the pricing guide gives area cost factors for over 600 locations in the United States and abroad, to permit the average unit cost values to be localized. When estimating the cost of facilities not listed in the DoD pricing guide, military users are expected to use whatever cost information is available, such as commercially published pricing guides and local historical cost data. The Corps of Engineers has developed a computer system to help their local engineering offices prepare and submit requests for facilities and level one estimates. The system, called the 1391 processor,* is available on a time-sharing basis through an Army-wide network. The DoD pricing guide is stored in the 1391 processor system and the system automatically calculates building costs adjusted for year of construction and location. Other military agencies have similar but less sophisticated programs. In the General Services Administration (GSA), pre-programming estimates are prepared in accordance with the General Construction Cost Review Guide for Federal Office Buildings, which shows ranges of unit costs in dollars per gross square foot for seven types of facilities: three categories of office buildings plus general storage space, basement parking space, conference and training space, and open-deck parking structures (see Public Buildings Service, 1987). The unit costs include allowances for construction change orders, normal site work and landscaping, and art work. The unit costs do not include the cost of design or construction management services, site acquisition or demolition work, unusual site work, special functional spaces like laboratories, or special building features or systems. Indices are provided to permit unit costs to be adjusted to reflect differences in construction costs in different locations. Pre-programming estimates in GSA are used to make an economic assessment of space procurement options (e.g., whether to build a new building, purchase a building, or lease space). Such assessments are made in accordance with Office of Management and Budget Circular A-104. It is interesting to note that in the early 1980s, GSA instituted a sophisticated procedure for establishing construction budgets on the basis of the amount of ârentâ that GSA could charge the occupants of the building. The procedure was called the âCapitalized Income Approach to Project Budgetingâ (Public Buildings Service, 1981). While the project budget established through the procedure was more detailed than a typical pre- programming estimate, it was used for preliminary screening proposes as well as for requesting congressional funding and project control. The use of the procedure was discontinued because the required analyses were complex and highly sensitive to certain economic assumptions. The Indian Health Service (IHS) also distributes an estimating manual to its centers which provides data and worksheets for estimating the cost of the two types of facilities commonly constructed by the IHS: health care facilities and staff quarters (see Hanscomb Associates Inc., 1986). The cost of health care facilities is estimated on the basis of dollars per gross square foot and the cost of staff quarters is estimated on the basis of dollars per dwelling unit. Data is provided on the basic cost of these facilities plus the cost of âspecialâ items (such as playgrounds and garages) and average site work, for ten locations. Factors are provided to adjust estimates for escalation and for locations different from those given. The manual is used for preparing both pre- programming and concept estimates. For pre-programming estimates, which are used for preliminary screening purposes, average site conditions are ordinarily assumed. The Department of Energy and the Veterans Administration do not distribute pricing guides. Local users in these agencies are expected to use whatever pricing information is available to them. PROGRAM ESTIMATES Program estimates for military construction projects are essentially refined versions of pre-programming estimates. The program estimates are mostly used to indicate to design organizations (usually private A-E firms) the approximate budget for a needed facility, and to negotiatie the A-E's design fee. Program estimates for Army projects are ordi *The number 1391 refers to the DoD form that military agencies use to indicate a facilities need.
PROCEDURES CURRENTLY USED BY FEDERAL AGENCIES TO PREPARE EARLY ESTIMATES 17 narily prepared by district offices of the Corps of Engineers. Program estimates for Navy projects are prepared by engineering field divisions of the Naval Facilities Engineering Command (NAVFAC). Most program estimates for Air Force projects also are prepared by the Corps of Engineers district offices and NAVFAC division offices, since those two services manage most Air Force construction work. However, a limited number of program estimates for Air Force projects are prepared by major Air Force commands or Air Force Headquarters. Recently, some of these estimates have been prepared using a parametric estimating system known as the Construction Cost Management Analysis System (COMAS). The COMAS includes a data base with detailed cost breakdowns for several types of facilities commonly constructed by the Air Force, including: administrative buildings, medical buildings, runways and taxiways, and supporting facilities. The COMAS will automatically generate a detailed cost breakdown for a proposed facility by modifying the appropriate prototype breakdown in the data base on the basis of certain modifiers, for which the specifier provides values. The system modifiers permit the estimator to (a) alter the types of systems to be included in the proposed facility, (b) change the size of the facility, (c) reflect market and/or bidding conditions, (d) reflect uncertainties about the site, and (e) indicate the anticipated duration of the project. The COMAS evolved from a parametric estimating system developed for the Air Force by a private professional firm (see CRS Group, Inc., 1983). The Air Force has expressed confidence in the accuracy of parametric estimates based on the COMAS and has requested congressional permission to use such estimates as the basis for funding requests when appropriate. Congress has authorized limited use of parametric estimates on a trial basis. If the trial is successful, Congress is expected to begin accepting funding requests based on parametric estimates. For the present, most program estimates prepared by the Air Force using the COMAS are used like the concept estimates of other agencies. The Veterans Administration (VA) develops program estimates in approximately the same manner as the Army and Navy. Specifically, the program estimates in the VA are ordinarily developed by cost engineers at VA headquarters and are based to a large extent on VA historical data. In addition, like the military agencies, the VA uses these estimates as a basis for selecting and negotiating with private A-E firms for preliminary design work. Conversely, program estimates in the Department of Energy and the Indian Health Service are used as the basis for requests to Congress for funding. These agencies are not required to have partially completed designs before preparing budget requests. Program estimates in the Indian Health Service are essentially refined versions of pre-programming estimates. Such estimates are prepared by engineering offices at IHS centers using the IHS estimating manual (as discussed previously). The main differences between a program estimate and a preprogramming estimate lie in the extent to which user needs have been defined and in the amount of analysis included in the estimate's site- work portion. In the Department of Energy, program estimates for large projects are ordinarily prepared by private A-E firms, while program estimates for small projects are ordinarily prepared by the staffs of the private firms that operate DoE facilities. The estimates are based on some conceptual design work and a limited amount of analysis of materials and equipment needs. DoE does not provide any cost data to the A-E firms or field offices that prepare these estimates. CONCEPT/SCHEMATIC AND DESIGN DEVELOPMENT ESTIMATES In the military agencies, the great majority of both concept/schematic and design-development estimates are prepared by private A-E firms. However, a small percentage of projects are designed and estimated by government personnel. Both concept/schematic and design development estimates for military projects are presented as detailed breakdowns, frequently in both an elemental and trade format (see Appendix D for a more detailed discussion of estimating formats). The Corps of Engineers and the Naval Facilities Engineering Command both provide historical cost information to estimators preparing design development estimates. In addition, the Corps of Engineers makes available to estimators the Computer Assisted Cost Estimating System (CACES), and the Navy provides a similar system called the Cost Estimating System (CES). Both systems include extensive unit-cost data bases; however, estimators preparing detailed estimates are expected to verify the accuracy of prices taken from the data bases.
PROCEDURES CURRENTLY USED BY FEDERAL AGENCIES TO PREPARE EARLY ESTIMATES 18 As noted previously, design development estimates are frequently used as the basis for funding requests to Congress; however, if a design is more fully developed when a budget request is being prepared, a more detailed estimate may be used. The Veterans Administration also usually bases its budget requests to Congress on a design development estimate. Such estimates usually are prepared by a private A-E firm, and they usually are presented on the basis of an elemental breakdown. A-E's are expected to use their own data in preparing such estimates, but A-E estimates are ordinarily checked against VA historical cost data. The Department of Energy and the Indian Health Service both require A-E's to submit design development estimates, which are used primarily as a design check to ensure that the project is within budget. Both agencies generally require that design development estimates be broken down on the basis of the CSI (trade) format, and both expect A-E's to use their own cost data in preparing such estimates. COMMITTEE OBSERVATIONS The procedures used by most federal agencies to prepare early estimates for construction are fairly traditional. While the computer estimating systems developed by the Corps of Engineers and the Naval Facilities Engineering Command are useful, the techniques built into the programs are based on traditional estimating concepts. One innovative estimating concept being used is the parametric estimating system developed by the Air Force. Most agencies keep historical cost data and use such information in the preparation of various early estimates. However, except for the three military services, federal agencies apparently do not routinely exchange cost data. The sharing of historical cost data might be inhibited by the fact that the agencies have not adopted common cost estimating terminology and formats, and because the cost data of one agency is not always relevant to another agency. The procedures used by most of the federal agencies are not necessary poor or inadequate; in fact, similar procedures are used by many private organizations. The results achieved, in terms of the extent of disparity between early estimates and contract awards, also are in line with the experiences of private companies. However, in view of the importance attached to controlling federal expenditures and the amount of critical attention estimates receive when budgets are exceeded, the committee had expected to see more emphasis on innovative approaches as well as more interagency cooperation.
