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OCR for page 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-program-
ming, program, concept/schematic, and design
development estimates discussed in Chapter 1. The
seven agencies were: the Department of Energy
(Real Property and Facilities Management Divi-
sion), the U.S. Air Force (Directorate of Engineer-
ing and Services), He U.S. Army (Corps of Engi-
neers), the U.S. Navy (Naval Facilities Engineering
Command), the U.S. General Services Administra-
tion (Public Buildings Service), the U.S. Public
Health Service Indian Health Service), and the
Veterans Administration (Office of Facilities).
The information presenter! is based in part on a
recent Federal Construction Council report (Con-
sulting Committee on Cost Engineering, 19X7) 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 Act, Appendix A).
Recommended actions to reduce such errors are
discussed in Chapter 4.
PRE-PROGRAMMING ESTIMATES
In almost all agencies, pre-programming esti-
mates are used for preliminary screening purposes.
Such estimates are ordinarily prepared by the engi-
neering office in a user installation and generally
are of the single unit cost type. The most com-
monly 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 Depart-
ment of Energy (DoE), parametric estimating sys-
tems 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-pro-
gramming 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
He versions are essentially identical.
15
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16
broad categories). The pricing guide shows the
average size of each type of facility for two differ-
ent fiscal years. The unit costs shown include the
cost of built-in equipment, but not the cost of fur-
nishings 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 Me 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 local-
ized. When estimating the cost of facilities not
listed in the DoD pricing guide, military users are
expected to use whatever cost information is avail-
able, such as commercially published pricing guides
and local historical cost data.
The Corps of Engineers has developed a com-
puter system to help their local engineering offices
prepare and submit requests for facilities and level
one estimates. The system, called the 1391 proces-
sor,* is available on a time-sharing basis Dough
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 pro-
grams.
In the General Services Administration (GSA),
pre-prog~amming estimates are prepared in accor-
dance 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, base-
ment parking space, conference and training space,
and open-deck parking structures (see Public Bu~ld-
ings Service, 1987~. The unit costs include allow-
ances 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 demoli-
tion work, unusual site work, special functional
spaces like laboratories, or special building fea-
tures 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
EARLY COST ESTIAIATES FOR FEDERAL CONSTRUCTION PROJECTS
make an economic assessment of space procure-
ment options (e.g., whether to build a new building,
purchase a building, or lease space). Such assess-
ments are made in accordance with Office of Man-
agement and Budget Circular A-104.
It is interesting to note that in the early 1980s,
GSA instituted a sophisticated procedure for estab-
lishing construction budgets on the basis of the
amount of `'rent" that GSA could charge the occu-
pants of the building. The procedure was called the
"Capitalized Income Approach to Project Budget-
ing" (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 proce-
dure was discontinued because the required analy-
ses 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 IlIS: 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 "special" 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-pro~nming and concept estimates. For
pre-programming estimates, which- are used for
preliminary screening purposes, average site condi-
tions 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 proj-
ects are essentially refined versions of pre-program-
ming estimates. The program estimates are mostly
used to indicate to design organizations (usually
private A-E firms) the approximate budget for a
*The number 1391 refers to the 1)oD fonn that military needed facility, and to negotiatie the A-E's design
agencies use to indicate a facilities need. fee. Program estimates for Army projects are ordi-
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PROCEDURES CURRENTLY USED BY FEDS AGENCIES
narily prepared by district offices of the Corps of
Engineers.Program estimates for Navy projects are
prepared by engineering field divisions of the Na-
val Facilities Engineering Command (NAVFAC).
Most prog~n estimates for Air Force projects also
are prepared by He 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 esti-
mates for Air Force projects are prepared by major
Air Force commands or Air Force Headquarters.
Recently, some of these estimates have been pre-
pared using a paramedic 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, n~n-
ways and ta'{iways, 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 sys-
tems to be included in the proposed facility, (b)
change the size of the facility, (c) reflect market
andior bidding conditions, (d) reflect uncertainties
about the site, and (e) indicate the anticipated dura-
tion of the project. The COMAS evolved from a
parametric estimating system developed for He 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 permis-
sion to use such estimates as the basis for funding
requests when appropriate. Congress has author-
ized limited use of paramedic estimates on a trial
basis. If the trial is successful, Congress is ex-
pected 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 He concept estimates of
other agencies.
The Veterans Administration (VA) develops
program estimates in approximately the same man-
ner as the Army and Navy. Specifically, the pro-
gram estimates in He VA are ordinanly 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 esti-
~7
maws as a basis for selecting and negotiating with
private A-E firms for preliminary design work.
Conversely, program estimates in the Depart-
ment of Energy and the Indian Health Service are
used as the basis for requests to Congress for fund-
ing. These agencies are not required to have par-
tially completed designs before preparing budget
requests.
Program estimates in the Indian Health Service
are essentially refined versions of pre-prograrnming
estimates. Such estimates are prepared by engi-
neering offices at IHS centers using the IHS esti-
mating manual (as discussed previously). The main
differences between a program estimate and a pre-
programming 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 por-
tion.
In the Department of Energy, program estimates
for large projects are ordinarily prepared by private
A-E firms, while program estimates for small proj-
ects are ordinarily prepared by the staffs of the
private firms that operate DoE facilities. The esti-
mates 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 Hat prepare
these estimates.
CONCEPT/SCHEMATIC AND DESIGN
DEVELOPMENT ESTIMATES
In the military agencies, the great majority of
both conceptlschematic and design-development
estimates are prepared by private A-E firms.
However, a small percentage of projects are de-
signed and estimated by government personnel.
Bow concept/schematic and design development
estimates for military projects are presented as de-
tailed breakdowns, frequently in bow an elemental
and trade format (see Appendix D for a more de-
tailed discussion of estimating formats).
The Corps of Engineers and the Naval Facilities
Engineering Command both provide historical cost
information to estimators preparing design devel-
opment estimates. In addition, the Corps of Engi-
neers makes available to estimators the Computer
Assisted Cost Estimating System (CAGES), 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.
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18
As noted previously, design development esti-
mates 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 devel-
opment estimate. Such estimates usually are pre-
pared 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 prepar-
ing 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 devel-
opment estimates, which are used primarily as a
design check to ensure that the project is within
budget. Both agencies generally require that de-
sign 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
EARLY COST ELI IMATES FOR PEDER" CONSTRUCTION PROJECTS
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 rou-
tinely 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 agen-
cies are not necessary poor or inadequate; in fact,
similar procedures are used by many private or-
ganizations. The results achieved, in terms of the
extent of disparity between early estimates and
contract awards, also are in line with the experi-
ences of private companies. However, in view of
the importance attached to controlling federal ex-
penditures and the amount of critical attention esti-
mates receive when budgets are exceeded, the
committee had expected to see more emphasis on
innovative approaches as well as more interagency
cooperation.
Representative terms from entire chapter:
cost data
