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BUDGET ESTIMATING PROCEDURES FOR NEW FACILITIES of the NAVAL FACILITIES ENGINEERING COMMAND Get Moy and Dana Smith Naval Facilities Engineering Command BACKGROUND The Naval Facilities Engineering Command (NAVFAC) manages the planning, design, and construction of facilities for U.S. Navy shore activities around the world. NAVFAC is responsible for facilities material acquisition and support. It manages and maintains public works, family housing, and public utilities for the Department of the Navy. While NAVFAC Headquarters provides overall direction for these responsibilities, the tasks are actually accomplished by the Command's field activities: Engineering Field Divisions, Construction Battalion Centers, and Public Works Centers. The Engineering Field Divisions (EFD), of which there are six located across the United States, provide engineering support and services to the several hundred activities of the Navy shore establishment. The EFDs, working closely with NAVFAC Headquarters, are the site managers during the development and acquisition of new Navy facilities. NAVFAC's military construction business for FY 1986 is estimated at more than $2.5 billion. Virtually all of this work is in fixed price, competitively bid construction contracts awarded to private businesses. The Navy uses a methodological process to acquire facilities. Although the acquisition process, which runs from the time a need is identified through occupancy, may seem to consist of simple, smoothly connected phases, in reality it is very complex. Figure 4 identifies the ideal steps of the acquisition process from the planning stage, when a need is identified and a set of facility requirements is developed, through construction and occupancy. The facility requirements provide the basis for design, which in turn identifies construction requirements. 29
i- 4- =«] _»|_ -it -£âfit --89 FY --87 FY1985 C FY 88 Milita u >, o -p V M T3 5 & 2 a, E 4 30
Budget estimating begins during the planning phase--early in the acquisition process--when facility deficiencies (which translate into project requirements) of the Navy are identified. The requirements for a facility must be identified prior to the start of the acquisition process. In addition, the planning process assures that the stated requirements for each project will satisfy the customer's needs and can be justified. NAVFAC's budget estimating process is designed to: (1) develop the best estimate for a valid facility project using information available, (2) update that estimate as scope and design information becomes more refined, and (3) enhance cost-effective/cost-conscious facility designs throughout the acquisition process. PRELIMINARY BUDGET ESTIMATE The first step in developing an estimate for a project in the military construction program is preparation of a Preliminary DD Form 1391 (Figure 5) that states the project's requirements, scope, and cost. At this stage, the cost indicated on DD 1391 is only a preliminary figure that is used for planning purposes. It is not the final budget estimate that will be sent to the Congress. Sources of cost information used to prepare the preliminary estimate include: ⢠Annual Department of Defense (DoD) and NAVFAC cost guidance documents, which give unit costs and other cost information and definitions for "common" facilities like barracks, and warehouses. These guidance documents represent the policy statements of DoD and NAVFAC regarding construction investments. ⢠NAVFAC DM-10, Cost Engineering Criteria and Cost Data. ⢠NAVFAC Cost Engineering System and Historical Data Base. ⢠Commercial publications such as Dodge and Means. ⢠Recent actual bidding experience. Generally, preliminary cost estimates are based on an assumed award date of April 1 of the proposed project fiscal year. Costs also are adjusted for location using DoD-approved area cost factors. 31
3 MSTACLATDN AMD LOCATON Cm nn ton Aray Depot. Mabama 1 COMPONENT FY 1986 MILITARY CONSTRUCTION PROJECT DATA 13 FEB83 Huchine Shop 5 PRO(jH*M ELEMENT 72007ft ft CATEGORY COM 214 103 ⢠PROJECT COST ((0001 9 COST ESTIMAteS Machine Shop 28,144 75.90 2,136 (2,136) Electric Scrvice Uatvr* Sawar I Gas St. Ita lit Co* Chilled Water t Heat Distribution nq, UalK>. Curbs t Gutter* i Drainage Improvement unication Relocation Subtotal Contingency (5.00X) Total Contract Cost Supervision. Inspection S Overhead (3.SOX) Total Request Total Request (Rounded) Installed Equipment - Other Appropriations OMcrvmn oi P.OTCMO Co*.w«cw C an s t r u c 1 1 an of permanent Machine shop building plus mezzanine, to include operations area, shop space, computer equip»ent area, bridge cranes and Jib booms. UorK to include all required utilities services, fire protection and alara/detection system, lighting, couunications and site iftproveftent* Heating to be provided by extension of existing central steal distribution system. Air conditioning (90 tons) will be provided >y . 11. REQUIREMENT: 1,0*4,198 SF ADEQUATE: 627,932 SF SUBSTANDARD: 14,496 SF F'ROJCCT: Construct a eachine shop facility at Anniston Ar«y Depot, Alabama. REQUIREMENT: This project is required to provide state-of-the-art ftachining capabilities necessary to support the rebuild of new weapons systems now entering the Arey's Arsenal. CURRENT SITUATION: Present shop is located in a largely unimproved, artillery building. This facility is spatially and functionally unsuited for iiachininq. The building has inadequate lighting and holding area and unsafe conditions due to generated noise and fuees. In addition, inadequate environmental controls do not afford the protection conditions necessary to accoeaodate state-of-the-art Nueeric Control (NO equipment, This expensive coep'iter nueeric controlled Machinery offers increased speed* accuracy, DO , . 1391 o»ae >o FIGURE 5 Example of a Completed Form 1391 32
1 COMPONENT FY 1986 MILITARY CONSTRUCTION PROJECT DATA t OAIE aMl* IS FEB 85 3 MSTAU-ATO** AND LOCATON Anniston Army Depot, Alabama PROJECT TITLE Machine Shop S PROJECT NUMBER 103 11. REQUIREMENT: (Continued) CURRENT SITUATION: (Continued) cost-efficiency, reduced inspection requirenents and increased productivity* The majority of the conventional equipment on hand it old and inefficient and consequently, costs for producing, reclaiming or machining parts are Much greater than they would be with sufficient NC capability* The required NC equipment to be installed in machine shop has been received* No other facilities exist at this installation to satisfy this requirement. IMPACT IF NOT PROVIDED: Continued spatial and functional constraints in the existing machine shop will deny Anniston Any Depot (ANAD) the benefits of extensive use of NC equipment. The resulting decline in production capability due to facility and equipment degradation will adversely affect ANAD's nission of reclaiming/fabricating Any weapons parts* 12. SUPPLEMENTAL DATA: A. Estimated Design Data: (U Status: U) Date Design Started QE!"i3" (b) Percent Complete As Of January 1985 60 (c) Percent Complete As Of October 1985 I~i53l (d) Date Design Complete -HOsI (2) Basis: (4) Standard or Definitive Design - Yes No J5_ (b) Where Design Was Most Recently Used , ^ r (3) Total Cost (c) ' (a)+(b) or (d)t(e): (a) Production of Plans and Specifications (b) All Other Design Costs (c) Total Cost (d) Contract (e) In-house (»000) ____ 145 ____ IIIII12 (4) Construction Start " â¢onth I year B. Eauipnent associated with this project which will be provided from other appropriation*: Fiscal Year Equipment Procuring Appropriated Cost Wo.iefjcl'iture Agjrogriatign Or Ragu«ted. ( *000) EXISTING EQUIP OPft ââ- ~"""i6 '"" 3000 COOL REC SYS OPA 36 200 TOTAL " ~ 37200 DO ,SSr,,1M1e FIGURE 5 Continued 33
The basic methodology used in preparing the pre- liminary cost estimates shown on the DD 1391 forms involves: (1) defining the scope of the project in terms of some unit measure (square feet, square yards, kilo- watts, etc.) and (2) identifying the unit costs of each unit measure used. The source of these unit costs are the references cited above. The product of the unit costs and unit measures are used to determine an estimated cost of the project. An example of these calculations on a completed form is shown in Figure 5. When unit measures or unit costs are not available, lump sum estimates are used. Site development and overhead costs are added to arrive at an estimate of the total cost of constructing the project. The sum of the budget estimates for the projects to be carried out in a given fiscal year constitutes the Navy's military construction program (MCP) for that year. In order to provide time for various budget reviews and hearings, an MCP budget must be prepared approximately 20 months prior to the start of the year in which it will be carried out. Thus the preliminary estimates for the FY 1988 construction program were assembled in February 1986. With this lead time, changing market conditions can have a major impact on actual construction costs after budget estimates are submitted to Congress. Once an overall MCP budget is established, it is, for practical purposes set. The estimates for individual project costs may change as a result of new requirements and new technical information (discussed below). NAVFAC tries to ensure that preliminary project estimates are as accurate as possible. After the preliminary estimates are made, the requirements, priorities, and levels of investment for the projects in the program are reviewed by various organizations, including: Engineering Field Divisions The chains of command of the using activities The Navy Comptroller The DoD Comptroller Congressional committees 34
FINAL BUDGET ESTIMATES The final budget estimate for a project is prepared when the design of the project is 35 percent complete. The final budget estimate is of critical importance because it is the estimate that goes into the President's budget, which is sent to Congress. In essence, when the Navy submits a final budget estimate it is stating that it can build the proposed facility for the estimated amount. To minimize the chance of error in the final budget estimate, the Navy generally does not request funding for projects with design is less than 35 percent complete. The 35 percent design includes the basic features, materials, and systems needed to meet the functional requirements of a facility and their estimated costs. Reference materials used to develop the 35 percent cost estimate include commercial publications, direct price quotes, and historical cost information. Once Congressional approval is received, NAVFAC proceeds to final design and construction of the facility. 35
