Capital Cost Expenditure Estimating .ppt

HYDROCARBONS | MINERALS & METALS | POWER | INFRASTRUCTURE
CAPITAL COST ESTIMATING

INTRODUCTION TO ESTIMATING
AGENDA
PART I - INTRODUCTION TO ESTIMATING (APPROX 2 HRS)
• Estimating Principles
• Accuracy Ranges
• Estimating Classes – an overview
• Cost Risk Analysis
• Control Budget
• Codes of Accounts / Benchmarking
PART II – WPMP: THE WORKFLOWS (APPROX 1.5 HRS)
• WPMP
• Estimating Plan
• Estimating Reviews
• Codes of Accounts / Benchmarking
• Lessons Learnt
PART III – THE WAY FORWARD (APPROX 0.5 HRS)

PART I – INTRODUCTION TO COST ESTIMATING

METHODS OF ESTIMATING
TOP DOWN – (RATIO OR FACTORED ESTIMATE)
Historical cost data from similar projects, modified to reflect economic ranges, size,
location and other factors to predict future costs
 Applied in early phases of a project (Identify/Evaluate/Define phases)
 Estimating Tools – Excel Spreadsheet Template / K-Base / Selego / Quest
BOTTOM UP – (QUANITY BASED ESTIMATE)
Detail approach developed by breaking a project down into smaller components (EBS), allocate
quantities and cost to these elements (materials, hours etc), and then rolling up these cost into a
composite estimate
 Applied when the design or plan is well defined and substantially agreed to.
(Evaluate/Define/Execute phases)
 Estimating Tool - Quest

ESTIMATE BUILT-UP PRINCIPLES
1. What is known (Based on current level of project definition)
2. What our experience tells us is required (Expected)
3. What is unknown (Contingency).
A “Bottom Up” Capital Cost Estimate consists of three parts:
Basic Estimate
Quantities x Rates
(includes EPCM & Owners Cost)
US $ 82,000,000
Design Allowances:
Pricing Allowance
Quantity Allowance
US $ 5,000,000
Contingency Amount
Uncertainties
???
BASE ESTIMATE
TOTAL INSTALLED COST (TIC) ESTIMATE
82.0 M 87.0 M ???
EXPERIENCE
KNOWN UNKNOWN
EXAMPLE ESTIMATE BUILT-UP

ESTIMATE BUILT-UP PRINCIPLES
1. What is known (Priced and Weighted Equipment List, as minimum definition depth)
2. Our experience around the ratio of “Bulks” & their Cost’s to Equipment weight
3. What our experience tells us is required or expected beyond this
4. What is unknown (Contingency).
A “Top-Down” Capital Cost Estimate consists of four parts:
Equipment List
Quantities x Costs (& Weights)
US $ 32,000,000
Design Allowances:
Pricing Allowance
Quantity Allowance
US $ 10,000,000
Contingency Amount
Uncertainties
???
BASE ESTIMATE
82.0 M 92.0 M ???
EXPERIENCE
KNOWN UNKNOWN
EXAMPLE ESTIMATE BUILD-UP
Factored Bulks
(Weight %= Quantities) x Rates
(includes FREIGHT, INDIRECTS + EPCM & Owners Cost)
US $ 50,000,000
32.0 M
PROCESS EXPERIENCE

BASIC ESTIMATE – “WHAT IS KNOWN”
MATERIAL QUANTITIES
Materials, Equipment, Plant
Weight, Area, Power, etc…
• Design criteria
• Process description
• Process flow diagrams
• P & ID’s
• Plant equipment lists
• Site plans & Layout’s
• General arrangements
• Material take-offs (MTO)
Etc…
Labour rates
Unit Cost Rates
Vendor / Contractor Quotation’s
Benchmark Database
Etc…
RATES ($$$)
Basic Estimate
Rates x Quantities
SCHEDULE (TIME)

ALLOWANCES – “WHAT EXPERIENCE TELLS US”
Gap between what is known and our “experience” from previously completed work.
To close this gap, we apply:
• Quantities allowances for Design Quantities (MTO’s)
• Pricing allowances for quotes and expected contractual awards.
Quantity allowance is based on the degree of engineering completed and a
comparison of the material take off (MTO) quantities to historical experience.
(Design Quantities versus Expected Quantities)
Pricing allowance is based on the level of scope definition at “Bid Receipt” date
and the forecasted scope adjustments in the period till contract-award.
(Bid Value versus Expected Value at award)
Basic Estimate
Quantities x Rates
Design Allowances:
Quantity Allowance
Pricing Allowance
BASE ESTIMATE

CONTINGENCY – “WHAT IS UNKNOWN”
• Contingency is added to the estimate to cover unforeseen needs of a project
that is beyond the control of the appointed EPCM contractor or Owner.
• Contingency is necessary to compensate for these areas of uncertainty.
• The magnitude of the contingency is directly related to the probability of these
uncertainties occurring.
• The contingency amount may or may not be spent.
Basic Estimate
Quantities x Rates
Design Allowances
Quantity Allowance
Pricing Allowance
Contingency Amount
Uncertainties

IDENTIFY EVALUATE DEFINE EXECUTE OPERATE
Determine project
feasibility and
alignment with
business strategy.
Select the preferred
Development
Option(s) &
Execution Strategy.
Finalise project
scope, cost and
schedule and
Sanction Project.
Prepare for
Execute Phase.
Produce (Build)
an operating asset
consistent with
scope, cost &
schedule.
Evaluate and
operate asset to
ensure
performance to
specifications and
maximum return
to Client.
PROJECT PHASES

Class 1 Order Of Magnitude (+/- 50%)
Developed in the Identify Phase
Class 2 Screening / Study (+/-30%)
Developed in the Select Phase
Class 3 Control / Budget (+/-15 – 20%)
Developed in the Define Phase
Class 4 Definitive (+/- 10%)
Developed in the Execution Phase
IDENTIFY EVALUATE DEFINE EXECUTE OPERATE
CLASS 1
ORDER OF
MAGNITUDE
ESTIMATE
CLASS 2
SCREENING /
ESTIMATE
CLASS 3
CONTROL BUDGET
ESTIMATE
CLASS 4
DEFINITIVE
ESTIMATE
1 2 3 4
BOTTOM
–UP
TOP
–DOWN
ALIGNMENT WPMP PROJECT PHASE - ESTIMATE CLASSES

WPMP GATES IDENTIFY EVALUATE DEFINE EXECUTE
Estimate Class 1 2 3 4
Estimate Type
Order of
Magnitude
Screening Control Definitive
Level of
Engineering
Complete
0% to 5% 1% to 20% 15% to 70% 50% to 100%
Accuracy ≤ ± 50% ≤ ± 30% ≤ ± 15% ≤ ± 10%
Contingency 20% to 25% 15% to 20% < 10% < 5%
ALIGNMENT WPMP - ESTIMATE CLASSES - ACCURACIES
1 2 3 4

CLASS 1 (ORDER OF MAGNITUDE)
• Based on design definition which is very limited and conceptual in nature.
• The general accuracy range for an order of magnitude estimate is +/-50%.
• The estimate is often developed using the following methods:
Historical $ per unit Capacity and Benchmarking Data - Lang Factor Methods -
Chilton Factors - Gutheries Factors - Metrics Factoring - Proration Methods - Semi
Detailed Estimates utilizing bulk quantities and composite rates
• Pricing is only roughly evaluated.
• The objective of a Class 1 estimate is to provide one or more of the following:
1. Indication of whether there is a case for further study.
2. Early evaluation at minimum expense.
3. Preliminary comparisons of alternatives
4. A rough indication of the economic feasibility before proceeding with the next phase
5. Assistance for business development in preparing proposals and evaluating EPCM
service costs
6. Initial project planning and control

CLASS 2 (SCREENING ESTIMATES)
• Prepared when engineering is approximately between 1% and 15% complete.
• The general accuracy range of a screening estimate +/-30%
• The estimate is usually developed by:
1.applying factors or multipliers against the equipment costs and/or weights to
determine bulk material and construction costs.
2.quantify and price site specific scopes to complete the core of the Procurement,
Fabrication and Construction Costs.
3.apply additional factors to ascertain Engineering, Project Management &
Commissioning cost-factors to arrive at a complete Total Installed Cost.
• A Class 2 estimate will deliver a pre-feasibility estimate during the Conceptual or
Evaluate stages Phase of Project Execution and its objective is to:
• determine whether there is sufficient reason to pursue the project. It permits the
evaluation of alternative processes, technologies, or alternative scenarios.
• to justify the funding additional engineering and design for proceeding to the Define
Phase where a Class 3 Estimate will be undertaken.
• to support management strategies, budgeting and planning proposals.
.
.

• Based on a firm project scope where by 25 to 40% of the engineering has been completed
• Firm Project Execution Plan, Contract Strategy & Purchasing Plan
• The accuracy levels of these estimates are within a +/-15% Range.
• The Class 3 Control Estimate requires that scopes are clearly defined and quantified:
Pricing is obtained based budgetary quotations, site specific costs are clearly understood.
Integral engineering, procurement, construction and estimating team-effort
• Class 3 Control Estimates normally provide one or more of the following:
1. A mechanism for a Customer to present to the board for project sanctioniong and AFE
Approval
2. Establish a project Control Budget
3. A yardstick to monitor and control project costs during the execution phase
4. Basis for evaluating future changes in scopes
5. A basis for negotiating contracts for the execution of the works
6. For inclusion in a Bankable Document
The Class 3 estimate is the most important estimate !
CLASS 3 (CONTROL ESTIMATES)

CLASS 4 (DEFINITIVE ESTIMATES)
• Prepared after the project has been sanctioned.
• The accuracy levels of these estimates are within a +/-10% Range
• This estimate is similar in its preparation as the Class 3 Control Estimate. Higher
accuracies levels due to:
1. improved engineering definition and quantification of scope.
2. large portions of the work have been committed for the Project
• Purpose of this estimate is:
a) to confirm the existing project cost forecasts
b) to provide a more accurate estimate of construction quantities and costs.

IDENTIFY –
Order of Magnitude
(+ / - 50%)
 Scenarios developed.
 Locations of plant and main processes and facility types specified.
EVALUATE –
Screening
(+ / - 30%)
 Major equipment specifications, flow diagrams, plot plans, location plans
available.
 Outline Basis of Design, Project Technical Specification and Project Strategy
available.
 Develop work breakdown structure.
DEFINE –
Control / Budget
(+ / - 15%)
 Choice of technology made.
 BOD produced and finalised
 Project locations and environmental conditions studied and surveyed
 All Equipment confirmed, capacity ratings finalised
 Flow and line diagrams finalised
 Quantified material take offs of bulk materials produced
 Project schedule prepared
 Value improvement practices carried out.
 Operations and maintenance needs defined.
 Safety reviews completed
EXECUTE –
Definitive
(+ / - 10%)
 Major equipment ordered.
 Design nearing completion.
 Final material take offs of bulk materials made.
 Major contracts let.
 Construction commences.
REQUIRED LEVEL OF PROJECT DEFINITION

ACCURACY RANGES
Stage of Project Class Type Accuracy Contingency
Identify 1 Order of Magnitude + / 50% 15% - 25%
Select 2 Screening + / 30% 15%
Define 3 Control + / 15% < 10%
Execute 4 Definitive + / 10% < 5%
The Estimating Class/Accuracy-table above is just a guideline;
in practise there are many different accuracy-range combinations possible such as +10/-15,
+40%/-10% etc...
Example:
a CAPEX estimate of 100M Total Installed Cost, with an +10/-15% Accuracy range means
that the TIC at project completion is expected to be anything between 110M (+10%) and
85M (-15%)
Management of Client-expectations;
• either confirm that we will deliver the required accuracy
• or advice him/her on a more realistic accuracy range.
The Risk Analysis process is used to determine what these ranges should be.

COST RISK ANALYSIS
Cost Risk Analysis is the process to determine:
• The project contingency
• A realistic Accuracy-range
The main principle
1. Apply a three-point distribution (Trigen distribution) on the Base Estimate Cost Elements.
2. This Trigen distribution will be as follows:
• Minimum (Optimistic) Cost: least value of the Cost Element (expressed as a
percentage of the Most Likely Cost)
• Most Likely (Realistic) Cost: probable value of the Cost Element (usually, but not
always the Estimated Value)
• Maximum (Pessimistic) Cost: most value of the Cost Element (expressed as a
percentage of the Most Likely Cost)
3. A ‘Monte Carlo’ simulation process will randomly calculate cost values from across the
Minimum, Most Likely and Maximum ranges.
4. These calculations (iterations) are done 1,000 times
5. At the end of the recalculation it will indicate a possible combination of scenario’s that could
occur, and the probabilities of them occurring (P-Values).

RISK ANALYSIS – ROLES / RESPONSIBILITIES
Review Base
Cost Estimate
and identify
Cost elements
Develop Cost
Risk Model in
MS Excel
Conduct Risk
Ranging
Session
Run Simulation
Generate
Analysis
Graphs / Tables
Prepare Cost
Risk Analysis
Report
Group Discussion – Project Team (Internal)
• Select Estimate Key-drivers
• Identify associated risks
Estimator
Assign cost + associated risks to Estimate drivers
(key-elements)
Risk Facilitator - 1 – 2 day Workshop
Participants WorleyParsons & Customer (Buy-in):
Project Key personnel Engineering, Procurement,
Construction/Commissioning, Project Management
Estimator
Software @Risk - Monte Carlo Simulation - 1,000
Iterations
Estimator
• Probability Distribution (P-Values)
• Sensitivity ‘Tornado’ Graph and Table
Estimator
• Detailed narrative of Base Cost Estimate
• Rationale behind Cost Elements & associated Risk
• Conclusion / Recommendation
• Risk Analysis Outputs and Graphs

OUTPUT-EXAMPLE RISK SIMULATION
Simulation Results
Project Total Plus Contingency
Statistic Value %tile Value
Minimum 18977836 5% 19,972,328
Maximum 24107622 10% 20,230,344
Mean 21338219.4 15% 20,372,680
Std Dev 906234.3809 20% 20,505,168
Variance 8.21261E+11 25% 20,631,638
Skewness 0.298287451 30% 20,785,428
Kurtosis 2.804725175 35% 20,913,818
Median 21320158 40% 21,045,078
Mode 21494046 45% 21,189,396
Left X 19972328 50% 21,320,158
Left P 5% 55% 21,420,644
Right X 22871042 60% 21,509,046
Right P 95% 65% 21,643,788
Diff X 2898714 70% 21,797,406
Diff P 90% 75% 21,947,600
#Errors 0 80% 22,113,884
Filter Min 85% 22,327,718
Filter Max 90% 22,546,276
#Filtered 0 95% 22,871,042
Summary Statistics

P-VALUES
The P10 value indicates a 10% probability that the budget-value will be
sufficient (so 90% chance that it will overrun). In other words the most
optimistic (lowest) budget-scenario.
The P50 value is the budget value that has an equal chance of overrunning or
under running the budget (50/50 chance).
The P90 value paints the most conservative picture, it has a 90% probability
that the budget will not overrun. In other words the most pessimistic (highest)
budget-scenario.

APPLYING P-VALUES TO CALCULATE CONTINGENCY
“All Class 3 and 4 estimates prepared by the estimating department are based on
a 50% probability that the project will not overrun”.
1.Determine P50 value using Monte Carlo simulation technique
2.Delta between the Base Estimate value and the P50 value is the contingency
amount
Example:
Basic Estimate 82M
Allowance/Growth 5M
Total Base-Estimate 87M
After running the Risk Simulation the following P-values are returned:
P10 – 80M
P50 – 100M
P90 – 110M

APPLYING P-VALUES TO CALCULATE CONTINGENCY
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0
60 70 80 90 100 110 120 130 140 150
P50 (50/50)
Base Estimate in US $ 87M $ 13M
P90 (90/10)
P10 (10/90)
“Contingency is the amount required to bring the Base Estimate to a 50/50 Estimate”.
P50 value – 100M
Base Estimate – 87M
Contingency = (100M – 87M) = 13M or 15%

APPLYING P-VALUES TO CALCULATE ACCURACY RANGE
Delta P50-P10 = the “minus”-range value
Delta P90-P50 = the “plus”-range value
Based on our example: P10 – 80M / P50 – 100M / P90 – 110M
Basic Estimate
Quantities x Rates
US $ 82,000,000
Design Allowances
Quantity Allowance
Pricing Allowance
US $ 5,000,000
Contingency Amount
Uncertainties
US $ 13,000,000
BASE ESTIMATE
82 M 87 M 100M
EXPERIENCE
KNOWN UNKNOWN
P50 VALUE
P10 VALUE P90 VALUE
80 M 110 M
20 M (-20%) 10 M (+10%)

EXAMPLE CONCLUSION
CONCLUSION
This CAPEX Estimate has a TIC value of US $100M, 15% Contingency, and a +10/-20
accuracy range.
This means that the TIC at completion is expected to be anything between 110M (+10%)
and 80M (-20%), with a 50/50 chance that it will be 100M (P50 value)
Basic Estimate
Quantities x Rates
US $ 82,000,000
Design Allowances
Quantity Allowance
Pricing Allowance
US $ 5,000,000
Contingency Amount
Uncertainties
US $ 13,000,000
BASE ESTIMATE
82 M 87 M 100M
EXPERIENCE
KNOWN UNKNOWN
P50 VALUE
P10 VALUE P90 VALUE
80 M 110 M
20 M (-20%) 10 M (+10%)
13 M (15%)

ESTIMATING REVIEWS
Estimate Review Matrix
REVIEWS CLASS 1 CLASS 2 CLASS 3 CLASS 4
Quantity/Scope Reviews Basic YES YES YES
Design Allowance Reviews Basic YES YES YES
ContingencyRisk Assessment Reviews Intermediate Project Specific YES YES
EPCM Services Reviews NO Intermediate YES YES
Corporate Estimating Management Review YES YES YES YES
Customer Service Group Review (CSG) NO Project Specific YES YES
Estimate Assurance Review (Cold-eyes) NO NO YES YES
Client Presentation and Review NO NO YES YES
WorleyParsons WPMP includes some mandatory Estimate reviews:
• to maintain an ongoing check on quality, application and fit-for-purpose design of
the estimating procedures
• to provide ongoing process development, system enhancement and as a basis for user training

THE PITFALLS: TRANSITION “CLASS 3 ESTIMATES - CONTROL BUDGET”
• Class 3 Estimate preparation is a critical component in the project Definition phase (FEED)
• Class 3 Estimate will drive the Control Budget allocation for the Execution Phase.
• Alignment of the EBS (How the TIC is estimated) with the Project WBS/CBS (How the
project is executed) will facilitate a seamless transition from a Class 3 TIC - Estimate to a
TIC Control Budget .
• External factors that could dictate an estimate-format that’s different from the projects
WBS/CBS:
1. Customer requires a comparison of the Class 3 estimate against estimates delivered
in previous project-stages, and adopts the estimate-format as the project CBS.
2. Customer adopts an ‘Ledger’-based CoA-structure instead of a ‘Activity’-based WBS
structure to satisfy internal Finance requirements
IDENTIFY EVALUATE DEFINE EXECUTE
CLASS 1
ORDER OF
MAGNITUDE
ESTIMATE
CLASS 2
SCREENING /
ESTIMATE
CLASS 3
CONTROL BUDGET
ESTIMATE
MANAGEMENT OF
TIC CONTROL
BUDGET
1 2 3

IDENTIFY SELECT DEFINE EXECUTE
CLASS 1
ORDER OF
MAGNITUDE
ESTIMATE
CLASS 2
SCREENING /
ESTIMATE
CLASS 3
CONTROL BUDGET
ESTIMATE
MANAGEMENT OF
TIC CONTROL
BUDGET
1 2 3
Estimate
Breakdown is
based on design
definition which is
very limited and
conceptual in
nature.
High level cost-
elements, not
broken down in
much detail.
Estimate
Breakdown is
based on a more
matured
engineering
definition.
Client insists on
same breakdown
structure with
more detailed
levels to be able
to see how the
‘numbers’ have
moved
Based on a firm
project scope &
Preliminary
Contract
Strategy.
Client insists
again on same
EBS to be able
to compare with
the Class 1 & 2
Estimates. The
existing EBS is
broken down in
more detail.
Client adopts
EBS line-items
as their COA
(Code of
Accounts).
WorleyParsons
is expected to
manage and
report project
cost on those
cost-elements.
Project WBS
looks
signficantly
different!!
Compare
“CLASS 3 ESTIMATES - CONTROL BUDGET” PITFALLS
Approval
Compare

LEDGER-BASED ESTIMATE MODEL
COA COA CATEGORY CONTROL
CODE ESTIMATE
ATR-005 Salaries $18,000
ATR-105 Equipment $20,000
ATR-205 Travel Expense $2,000
ATR-305 Supplies $1,000
ATR-405 Rent $500
TOTAL $41,500
CONTINGENCY (15%) $6,225
CONTROL ESTIMATE $47,725
COA COA CATEGORY CONTROL ACTUALS TO AT UNDER-/
CODE BUDGET COMPL. COMPL. OVERRUN
ATR-005 Salaries $18,000 14,000 $10,000 $24,000 $6,000
ATR-105 Equipment / Material $20,000 18,000 $1,000 $19,000 -$1,000
ATR-205 Travel Expense $2,000 4,400 $2,000 $6,400 $4,400
ATR-305 Supplies $1,000 2,400 $800 $3,200 $2,200
ATR-405 Rent $500 1,000 $1,500 $2,500 $2,000
TOTAL $41,500 39,800 $15,300 $55,100 $13,600
CONTROL BUDGET $47,725 $39,800 $15,300 $55,100 $7,375
 COST ELEMENTS HAVE MULTIPLE “OWNERS” (COST NEEDS
TO BE SLICED & DICED / COMPILED BEFORE ALLOCATED TO
APPROPRIATE CODES)
 FORECASTING BASED ON “GUESSTIMATES”
 REGULAR RE-VISIT OF CONTROL-ESTIMATE REQUIRED DUE
TO LACK OF PERFORMANCE DATA
 NO DETAIL BREAKDOWN OF ‘PROBLEM’-AREA’s
 IN SHORT : BEAN - COUNTING METHOD / NOT COST
MANAGEMENT TOOL
???
???
???
???
???
WHEN A LEDGER-BASED ESTIMATE IS DIRECTLY
CONVERTED (ONE FOR ONE) INTO THE PROJECT WBS…

COA COA CATEGORY CONTROL
CODE ESTIMATE
ATR-005 Salaries $18,000
ATR-105 Equipment $20,000
ATR-205 Travel Expense $2,000
ATR-305 Supplies $1,000
ATR-405 Rent $500
TOTAL $41,500
CONTROL ESTIMATE $47,725
COA COA CONTROL
CODE CATEGORY ESTIMATE
CONTRACT 'A"
A-100 Site Survey $4,000
A-200 Prepare Site Design $4,500
TOTAL CONTRACT "A" $8,500
CONTRACT "B"
B-100 Procurement Equipment/Materials $4,000
B-200 Equipment Installation $1,000
B-300 Antennae Installation $2,000
B-400 Installation Feeder Lines $4,000
B-500 Testing Antennae Line System $500
B-600 Installation BTS Cabinet $1,000
B-700 Installation Power System $1,000
TOTAL CONTRACT "B" $13,500
CONTRACT "C"
C-100 Procurement Equipment/Materials $1,000
C-200 Commissioning BTS $750
C-300 Transmission Connection $750
C-400 Integrate BTS $500
TOTAL CONTRACT "C" $3,000
OWNER COST
O-100 Procurement Long Lead Items $15,000
O-200 Produce Site Folder $1,000
O-200 Site Assessment $500
TOTAL OWNERS COST $16,500
TOTAL $41,500
CONTROL BUDGET $47,725
 CBS IN LINE WITH THE WAY COST IS COLLECTED (NO
MANUAL SLICE & DICE OF COST TO CoA’S)
 PERFORMANCE MEASUREMENT POSSIBLE
(COLLECTING COST AND PROGRESS AGAINST THE
SAME CBS/WBS ELEMENTS)
ACTIVITY-BASED CONTROL BUDGET
WHEN A LEDGER-BASED ESTIMATE IS CONVERTED INTO A
WBS/ACTIVITY BASED COST BREAKDOWN STRUCTURE…

PERFORMANCE MANAGEMENT “ACTIVITY”-BASED CONTROL BUDGET
COA COA CATEGORY CONTROL ACTUALS % TO AT UNDER-/
CODE BUDGET COMPL. COMPL. COMPL. OVERRUN
CONTRACT 'A"
A-100 Site Survey $4,000 $5,750 100% $0 $5,750 $1,750
A-200 Prepare Site Design $4,500 $5,600 100% $0 $5,600 $1,100
TOTAL CONTRACT "A" $8,500 $11,350 100% $0 $11,350 $2,850
CONTRACT "B"
B-100 Procurement Equipment/Materials $4,000 $5,250 100% $0 $5,250 $1,250
B-200 Equipment Installation $1,000 $1,250 80% $200 $1,450 $450
B-300 Antennae Installation $2,000 $1,800 80% $400 $2,200 $200
B-400 Installation Feeder Lines $4,000 $3,500 90% $400 $3,900 -$100
B-500 Testing Antennae Line System $500 $1,500 50% $250 $1,750 $1,250
B-600 Installation BTS Cabinet $1,000 $800 50% $500 $1,300 $300
B-700 Installation Power System $1,000 $100 25% $750 $850 -$150
TOTAL CONTRACT "B" $13,500 $14,200 81% $2,500 $16,700 $3,200
CONTRACT "C"
C-100 Procurement Equipment/Materials $1,000 $750 100% $0 $750 -$250
C-200 Commissioning BTS $750 $0 0% $750 $750 $0
C-300 Transmission Connection $750 $0 0% $750 $750 $0
C-400 Integrate BTS $500 $0 0% $500 $500 $0
TOTAL CONTRACT "C" $3,000 $750 33% $2,000 $2,750 -$250
OWNER COST
O-100 Procurement Long Lead Items $15,000 $13,500 100% $0 $13,500 -$1,500
O-200 Produce Site Folder $1,000 $0 0% $1,000 $1,000 $0
O-200 Site Assessment $500 $0 0% $500 $500 $0
TOTAL OWNER COST $16,500 $13,500 91% $1,500 $15,000 -$1,500
TOTAL $41,500 $39,800 85% $6,225 $46,025 $4,525
CONTINGNCY (15%) $6,225
CONTROL BUDGET $47,725 $39,800 85% $6,225 $46,025 -$1,700
 CURRENT
PERFORMANCE IS
TAKING INTO
CONSIDERATION WHEN
FORECASTING COST TO
COMPLETE
 APPLICATION OF
PERFORMANCE – TREND
POSSIBLE
 EASY IDENTIFICATION OF
UNDERPERFORMING
CONTRACTS AND WBS
ELEMENTS
 IN SHORT – COST AND
PERFORMANCE
MANAGEMENT TOOL

CONTROL BUDGET: ACTIVITY-BASED vs LEDGER BASED
COA COA CATEGORY CONTROL ACTUALS % TO AT UNDER-/
CODE BUDGET COMPL. COMPL. COMPL. OVERRUN
CONTRACT 'A"
A-100 Site Survey $4,000 $5,750 100% $0 $5,750 $1,750
A-200 Prepare Site Design $4,500 $5,600 100% $0 $5,600 $1,100
TOTAL CONTRACT "A" $8,500 $11,350 100% $0 $11,350 $2,850
CONTRACT "B"
B-100 Procurement Equipment/Materials $4,000 $5,250 100% $0 $5,250 $1,250
B-200 Equipment Installation $1,000 $1,250 80% $200 $1,450 $450
B-300 Antennae Installation $2,000 $1,800 80% $400 $2,200 $200
B-400 Installation Feeder Lines $4,000 $3,500 90% $400 $3,900 -$100
B-500 Testing Antennae Line System $500 $1,500 50% $250 $1,750 $1,250
B-600 Installation BTS Cabinet $1,000 $800 50% $500 $1,300 $300
B-700 Installation Power System $1,000 $100 25% $750 $850 -$150
TOTAL CONTRACT "B" $13,500 $14,200 81% $2,500 $16,700 $3,200
CONTRACT "C"
C-100 Procurement Equipment/Materials $1,000 $750 100% $0 $750 -$250
C-200 Commissioning BTS $750 $0 0% $750 $750 $0
C-300 Transmission Connection $750 $0 0% $750 $750 $0
C-400 Integrate BTS $500 $0 0% $500 $500 $0
TOTAL CONTRACT "C" $3,000 $750 33% $2,000 $2,750 -$250
OWNER COST
O-100 Procurement Long Lead Items $15,000 $13,500 100% $0 $13,500 -$1,500
O-200 Produce Site Folder $1,000 $0 0% $1,000 $1,000 $0
O-200 Site Assessment $500 $0 0% $500 $500 $0
TOTAL OWNER COST $16,500 $13,500 91% $1,500 $15,000 -$1,500
TOTAL $41,500 $39,800 85% $6,225 $46,025 $4,525
CONTINGNCY (15%) $6,225
CONTROL BUDGET $47,725 $39,800 85% $6,225 $46,025 -$1,700
COA COA CATEGORY CONTROL ACTUALS TO AT UNDER-/
CODE BUDGET COMPL. COMPL. OVERRUN
ATR-005 Salaries $18,000 14,000 $10,000 $24,000 $6,000
ATR-105 Equipment / Material $20,000 18,000 $1,000 $19,000 -$1,000
ATR-205 Travel Expense $2,000 4,400 $2,000 $6,400 $4,400
ATR-305 Supplies $1,000 2,400 $800 $3,200 $2,200
ATR-405 Rent $500 1,000 $1,500 $2,500 $2,000
TOTAL $41,500 39,800 $15,300 $55,100 $13,600
CONTROL BUDGET $47,725 $39,800 $15,300 $55,100 $7,375
• DIFFERENT FORECAST BASIS
(GUESSTIMATE versus PERFORMANCE
TREND)
• DIFFERENT OUTCOMES :
(OVERRUN OF $ 7,375 AGAINST
UNDERRUN OF $ 1,700)

CODES OF ACCOUNT
WorleyParsons has recently developed its own Global Code of Accounts,.
Primary Objective:
“To collect historical cost and related project data and use it for future cost
estimating and benchmarking.”
In AMEA, it is not the intent to manage project cost and performance on the
Codes of Accounts !!! (Only mapping from WBS elements)
The Global Estimating Code of Accounts Guideline is contained in EMS.
It is mandated that the Code of Accounts structure is used when preparing all
Services and Total Installed Cost Estimates.

BENCHMARKING
A companywide (Global) Estimating, Cost Benchmarking Database will be
developed to facilitate storage and retrieval of return data.
Associated procedures will be developed to ensure all cost estimating and
project controls personnel work in alignment to realise and deliver the significant
benefits of this system.
This system will enable the Global WorleyParsons team to tap into a vast array
of cost data from across the entire globe
Over time this system will provide one of the cornerstone points of competitive
advantage for WorleyParsons on a global scale.

PART II – THE ESTIMATING WORKFLOWS

WPMP/EMS V3 – THE WORKFLOWS
WHY EMS V3 ?
Assists estimating, project management and other functional groups to search and use
estimating guidelines and procedures for their respective projects
Ensure consistent approach in planning, delivering, presenting and reviewing estimates across
all phases of a project
Useful for induction purposes, training and assisting in proposal preparation
Global system across WorleyParsons
Powerful differentiator to our competitors

Process Steps
Policy
Definition
Plan
Cost Estimate Preparation
Review and Quality Assurance
Close Out
Transition to WBS-based Control Budget
THE PROCESS STEPS

HOW DOES WPMP/EMS V3 WORK…?

SPOTLIGHT – THE ESTIMATING PLAN
Outline the Estimate requirements & objectives…
 Overview of the Project, it’s Environment and the Customers objectives
 Type of estimate approach or technique and the intended accuracy
 Purpose or end use of the estimate
 Estimate work breakdown structure
 Scope summary including assumptions & exclusions as known
 Anticipated Source of estimating Data
 Engineering, Procurement, and Construction input requirements & their timing
 Management review and approval level
 Level of contingency, risk, and fees assumed
 Estimate execution schedule with critical milestones flagged
 Schedule of Estimate deliverables (both Inputs & Outputs)
 Should provide a one stop view of the estimating vision relating to that particular project…

LESSONS LEARNT
The two most critical areas to watch when preparing estimates are…
1 Ensure the Estimating Team are Fully Aware of the Estimate Scope of Work…
• Ensure the estimator prepares an Estimate Plan and has sign-off from the Project Manager
• Carefully consider all meetings for their estimating relevance & need to include Lead Estimator
• Include a run-down on the EMS/WPMP estimate requirements within Kick-off meeting
• Hold a formal estimate kick-off meeting after sufficient design progression
2 Maintain Strong Communications…
• Include agenda item for the Cost Estimate preparation issues and clarification in weekly meetings
• Make certain all Engineering Leads are known to the Lead Estimator and Vice-versa
• Use formal Document Control for the transfer of all ‘final-in-phase’ documentation handover
• Include a detailed plan / schedule of Estimate in-put deliverables, and stick to the plan
• Develop an appropriately detailed Basis of Estimate document and circulate for Leads sign-off
Be wary when forming new project teams… interactions, strengths and weaknesses are fundamentally
unknown… don’t take anything for granted.
Some of the biggest tragedies have been the ultimate result of people taking what appeared to be
common sense for granted….

PART III – THE WAY FORWARD
PROJECT SERVICES ORG CHART
AME Project Services
Humphrey Kerger
AME Manager of Project Services
Project Controls / DCC
AME Locations
Manager of Project Services
Estimating
Simon Morris
AME Estimating Coordinator
Business Systems
Matthew Frick
AME Business Systems Coordinator
Lex Van Dapperen
Malaysia
System Support Centre
Malaysia Matthew Frick
AME Tool Champions
Middle East
Bahrain Iyad Elkhatib
India
Kuwait
Oman
Qatar
Srinivasu Thuraga
Issam Hallal
Sher Mansoor
Abdul Bannayan
Saudi Arabia
UAE
Iyad Elkhatib
Briccio Bolo
Asia
Brunei Vic Pao
China
Indonesia
Malaysia
Philippines
Daniel Creer
John Armstrong
Aniruddha Nagnur
Marinel Manzano
Singapore
Thailand Isr Wipada
Vietnam David Wearne (Act)
Estimating Hub Managers
China Zhou Qian
Indonesia
Malaysia
Singapore
Kuwait
Zulfan Ismail
Ian Deck
Simon Morris
Thailand Boonchu S.
UAE Abdul Razak

AMEA STRATEGIC OBJECTIVES FY 08-09
Main Targets for Estimating Group for FY 08/09
• Achieve resource growth targets as indicated in Table 1
• Capability development in each Estimating Hub as per Table 2.

Table 1 - Location Details Malaysia China
South
Africa
Nigeria Singapore UAE
Total Staff 972 1403 86 600 800 454
Total Project Services Staff 33 90 9 22 40 15
Total Estimating Staff 3 8 1 Part time 4 2 2
Target Estimating Staff FY 08/09 5 8 4 7 5 5
Ratio Local / International Projects 50/50 80/20 100/0 100/0 60/40 60/40
Project Track record – Hydrocarbons X X X X X X
Project Track record – Infrastructure X X
Project Track record - Power X X X X
Project Track record – Minerals & Metals X X X X X
Contract Type – Conceptual / FEED X X X X X X
Contract Type – Detail Design X X X X X X
Contract Type – EPC X X
Contract Type - EPCM X X X X X
Contract Type - PMC X X X X
Current estimating capability – Survey May 08

Table 2 - Estimating Capability Malaysia China South Africa Nigeria Singapore UAE
HydroCarbons - Upstream ( On/Offshore) w uk vl vl ul vl
HydroCarbons - Downstream ( On/Offshore) w uk vl vl vl vl
HydroCarbons - Subsea Pipelines ul uk u vl w u
HydroCarbons - Terminals/Onshore Pipelines vl uk vl vl w w
Infrastructure v u vl u vl u
Power u u w u ul u
Minerals & Metals - Minerals w u u u u ul
Minerals & Metals - Metals u u u u u vl
Minerals & Metals - Chemical v w u u u vl
uLow vModerate wStrong lCapability Target FY 08/09
Current and Target capability FY 08/09

Actions:
• Department Development Plan for each Estimating Hub
• Resource Growth achieved through either recruitment or training
• Implementation PSDP concept (Project Services Development Program)
Annual Individual Competency Survey
Gap Analysis / Individual Development Program
Mentor / Mentee Program
Modular Estimating Entry Level Training Program (in development)
• Implementation of Estimating Review Process
• Development Cost Risk Facilitation/Analysis Services Capability
• Implementation Global Codes of Accounts on all estimates
• Commonality of Tools (Quest/Selego/K-Base), Methods & Workprocesses across AMEA

THE PREFERRED ESTIMATING TOOLS – ASPEN K-BASE
Aspen Kbase™
• Produces concept design data and Gulf of Mexico (GOM) Costs for Class 2 process plant estimates
• Mainly used on downstream Hydrocarbon work up to Class 2
• Proprietary system previously known as ICARUS. Has been used extensively by Houston, Arcadia and
Calgary for Green & Brownfield work for some years
• Some clients are now requesting we use it for Class 3…
• Has a ‘lite’ version known as IPM (Icarus Project Manager) apparently suited to Brownfield work
• Not yet seen in AMEA… but will explore in FY2008-09
• Licences are expensive… but does save early phase engineering and, we could partner with Canada or
USA to run design data from Kbase into SELEGO as a review step to prove value in AMEA
• Target to understand the use of Kbase and it’s function during FY2008-9
• User contacts are Ed Cimic in Edmonton Canada and Darrell Earnheart in Monrovia (Los Angeles USA)

THE PREFERRED ESTIMATING TOOLS – SELEGO
SELEGO
• Internal WorleyParsons concept used by the SELECT team from Western Australia
• Recently built into basic Access Database
• Used for Class 1 & 2 estimates and as review support tool for Class 3
• Top down concept based on numerous bottom-up estimates with format alignment
• Uses granular tables for hourly rates and productivities feeding into a building block (LEGO) type approach
• Building Blocks are based on Standard Process Units
• Almost any process package can be consolidated into a Component Sheet as a Block
• Approach has been used by SELECT group from Perth Australia and Singapore office
• FY2009 Plan is to develop the SELEGO system on an integrated database platform
• Cost of the development is currently unknown… could be as low as S$250k or up to S$750k…
• Feeds into the SELECTOR scenario comparison system

THE PREFERRED ESTIMATING TOOLS – QUEST
• Operates on a resources and commodities, “bottom-up” estimating method
• Must have structured WBS, Codes of Account and Commodity Code system established & installed
• Particularly suited to Class 3 estimates with full WBS coding
• Must have MTO’s & relatively fine level of detail
• Provides strong migration from Class 3 into Control Budget
• Source file resides on the QUEST Server in Perth WA running via Citrix
• V3 has been in use in Australia since April 2008
• Currently being rolled-out in Kuala-Lumpur and Abu Dhabi with Singapore to follow around September
• User Experts – Steve D’Rozario & Mathew Cuolahan & Ben Simpkin from Australia
• BSG Project Manager – Rollout is ‘Diego Carli’ from Melbourne BSG team
• Cost to operate is A$500 per month per user.

• Be a stakeholder in the estimate
• Ensure that Projects include sufficient Estimating hours and resources for both
delivering the estimate as well as the Estimating Reviews and Cost Risk workshops.
• Ensure that the procedures, guidelines, forms, templates, task sheets etc are
understood by the Project Team
• Include the input deliverables and review-dates in the project-schedule (especially with
FEED projects)
• Invite the Estimator in the weekly project meetings to ensure the estimating inputs are
expedited.
• Own the estimate plan and end deliverable.
• Be ambassadors for the system
Where can you help in improving the WP Estimating Capability?

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