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# Estimates to complete

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A very simple example of the value of good estimates to complete in the construction process.

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• Note that Method 1 will always give you what you want to hear (on budget, on time), not necessarily the reality of what’s happening on site. For example, 7 remaining days is odd – one week and two days for one person, or 3-1/2 days each for two guys.
• This seems like a quick response that says, “yeah, a couple of guys next week.” While it doesn’t sound like a big deal, not managing the work more than halves the desired profit.
• For example, if the supervisor pushes to meet the budget, there is still enough profit in the job to have something left for a bonus, but if (s)he lets it slide to the 10 days, there is not only no bonus but there is barely any profit for the time spent.
• ### Estimates to complete

1. 1. An examplePrepared for Hayles and Howe, Inc. Joselin R Martin Financial Manager
2. 2. Value of contract \$3,500Estimated budget mandays 12Estimated budget manday rate \$200Estimated total cost \$2,400Estimated profit \$1,100Estimated profit % 31% All rights reserved 07/26/2012 2
3. 3.  Calculation: Subtract the actual to date from the budget Benefit: Easy Drawback: May or may not have any relationship to the amount of work actually performed to date All rights reserved 07/26/2012 3
4. 4. Original Estimate Method 1: Budget - ActualValue of contract \$3,500 \$3,500Estimated budget mandays 12 12Estimated budget manday rate \$200 \$200Actual mandays incurred 5ETC: Est - Actual 7Estimated total cost \$2,400 \$2,400 (12*200)Estimated profit \$1,100 \$1,100Estimated profit % 31% 31% All rights reserved 07/26/2012 4
5. 5.  Calculation: Conduct physical evaluation of manday to complete each phase Benefit: 1. Better reflection of remaining work 2. Makes clear just how to schedule work 3. Allows identification of overages (change?) Drawback: Requires understanding of scope and ability to evaluate how much work remains All rights reserved 07/26/2012 5
6. 6. Original Estimate Method 2: Physical EvaluationValue of contract \$3,500 \$3,500Estimated budget mandays 12 12Estimated budget manday rate \$200 \$200Actual mandays incurred 5ETC: Physical review 10Estimated total cost \$2,400 \$3,000 (15*200)Estimated profit \$1,100 \$500Estimated profit % 31% 14% All rights reserved 07/26/2012 6
7. 7. Method 1: Budget - Method 2: Physical Original Estimate Actual EvaluationValue of contract \$3,500 \$3,500 \$3,500Estimated budget mandays 12 12 12Estimated budget manday rate \$200 \$200 \$200Actual mandays incurred 5 5ETC 7 10Estimated total cost \$2,400 \$2,400 (12*200) \$3,000 (15*200)Estimated profit \$1,100 \$1,100 \$500Estimated profit % 31% 31% 14% All rights reserved 07/26/2012 7
8. 8.  Physical evaluations of mandays to complete (by phase) are important to effective job cost control and management PM should periodically walk job with Superintendent to ensure estimates properly reflect ETC Unexpected variances should be investigated promptly for causes and potential remediation. Possible explanations: • Change orders need to be priced • Productivity issues on site • Problems with original estimate Failure to get good ETC information makes remediation difficult, if not impossible! and perhaps…. All rights reserved 07/26/2012 8