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A painless approach to construction cost estimating.

THE SECURITY PROFESSIONAL MUST fill a variety of roles, from guard force manager to electronic security system design engineer. But few of the security professional's assignments arouse as much anxiety or are the object of as much procrastination as preparing a construction cost estimate (CCE).

Construction cost estimating is an exacting process. To be proficient, a broad knowledge of system engineering, the design profession, and the construction industry is required. Security professionals with little cost-estimating experience can obtain useful budgetary and planning information by breaking the process down into a few well-defined components--labor, materials, and equipment.

Why do it? To compete successfully for limited capital resources--a problem exacerbated by the recession--security decision makers must be skillful in predicting and justifying the cost of their operations and capital improvement programs. The manager who can innovatively prepare, justify, and meet annual capital expenditure budgets will be successful in maintaining adequate funding during lean economic times.

A CCE can smooth the way by providing a basis for the following:

* Project evaluation. There really is more than one way to skin a cat, and in a recession, the best way is usually the one requiring the smallest amount of capital resources. To choose among various project options, a measure of the cost is needed.

For example, a project evaluation is common when determining the type of data transmission media (DTM) to be used. Fiber-optic DTM offers many advantages over conventional hardwire DTM; however, those advantages are normally accompanied by an increase in installation cost. The cost differential must be known to make an informed decision.

* Project planning. The timing of certain aspects of projects can be affected by the availability of capital. Knowing the probable cost of a project can enable the organization to arrange for funding that is necessary.

* Bid evaluation. After a design is completed and the installation bids are received, an independent cost estimate can be essential in evaluating how realistic the bids are. An exceptionally low bid often reflects a poor understanding of the project by the contractor and usually leads to difficulties down the road. An independent cost estimate can provide the owner with an additional tool in selecting the best contractor.

Getting started. The preparation of a CCE is an ongoing effort involving periodic revision as more information becomes available. The security manager is often responsible for preparing the initial budgetary estimate. The primary purposes of this estimate are to determine project economic feasibility and establish a criterion by which a "go" or "no-go" decision can be made.

This estimate is often based solely on a conceptual formulation of the system's functional requirements. It is often the most difficult estimate to prepare because of the lack of definitive design information.

Once a decision has been made to proceed with the project, engineering design activities must be initiated. Some firms are able to use in-house security engineering design professionals, while others must contract with outside consultants for engineering support.

Regardless of whether in-house or contracted design services are used, a CCE must be prepared. Several estimates are usually prepared by the design agent corresponding to the contractually defined owner review cycles. These reviews normally correspond to design completion levels of 35 percent, 60 percent, and 100 percent.

Three basic components must be considered in developing a CCE: labor, materials, and equipment.

Labor. The labor associated with installing the new system is a significant component of the project cost. The estimator needs to accurately predict the number of hours required for each installation task as well as the cost of those labor hours.

The prediction of labor costs must take into consideration the cost of fringe benefits and labor-related taxes and insurance as well as the obvious direct costs. This part of the cost estimate must also take into account the various skill levels required of the installation crew. They will need to perform a variety of activities, ranging from programming distributed processing devices to installing electrical conduit.

Materials. The materials category consists of those pieces of hardware that actually make up the system. This is also a large part of the total project cost.

Again, a number of items must be considered in this category. The obvious specialized security system hardware needs to be considered in addition to more common items, such as electrical conduit, junction boxes, and lighting fixtures.

Equipment. The cost of specialized installation equipment should be included in project cost projections. This equipment includes such items as trenchers, backhoes, and cherry pickers as well as electronic test and diagnostic devices. Depending on the size of the project, these costs can involve actual purchase of equipment, use of contractor-owned equipment, or equipment rental charges.

Two other categories of cost should be considered as the CCE is refined and bid time draws near. These are miscellaneous costs and implementation costs.

Miscellaneous. Additional project costs are usually incurred through the purchase of such items as extended maintenance warranties and operator training. The total cost of these items is directly related to the size of the installed system.

Implementation. Costs are also incurred for activities that are related to but separate from system installation. For example, project design has an associated cost regardless of whether it is performed by in-house or contracted design professionals. The same is true for owner observation and monitoring of actual system installation.

How to do it. Preparation of the CCE can be broken down into the following six steps:

1. Identify subtasks.

2. Establish a bill of materials.

3. Establish material prices.

4. Formulate work crew productivity rates.

5. Formulate required equipment rates.

6. Combine with the bill of materials.

Identify subtasks. The first step involves breaking down the overall task into manageable subtasks. This can often be done successfully along system or subsystem lines.

For example, a typical task could be TABULAR DATA OMITTED broken down into the following groups, or subtasks: alarm annunciations system, test equipment, site work, power distribution, signal cabling, electrical power equipment, lighting, security barriers, entry control, intrusion detection sensors, and CCTV cameras and equipment.

Establish bill of materials. A bill of materials is simply a list of materials required for the project. This list should be as detailed as possible. Items that should be on the list include power cable; signal cable; specialized security equipment, such as cameras, card readers, and keypads; and other construction materials, such as fill dirt and concrete. Spares should also be included in the bill of materials.

Establish material prices. Cost data can be obtained from several sources. For specialized security equipment, security system vendors are the best source of information. However, the estimator should not rely solely on one vendor. Two or more vendors should be contacted to ensure a representative quote. Manufacturer's representatives can also be contacted for quotes on items, such as power cable and equipment enclosures.

Published cost estimating guides are another source of data. One commonly used cost-estimating guide is Mean's Building Construction Cost Data.(*) The data contained in this guide and similar guides are industry average prices for generic equipment.

Factors are available to adjust for regional differences in prices. Such guides can be valuable in estimating the cost of standard construction items, such as cable, conduit, and equipment enclosures.

Formulate work crew productivity rates. To estimate the labor cost associated with the installation of a project component, the composition and productivity of the labor crews must be known. For individuals who lack a background in the construction industry, this is probably the most difficult aspect of the project cost estimate. Fortunately, the published guides mentioned earlier provide data on the cost of installing standard construction items.

Vendors can be helpful. They should be able to provide an average installed cost for most components, such as card readers and cameras. This price they quote usually includes labor, equipment, and the necessary ancillary materials, such as cabling and conduit.

Installed quotes from the vendor must be used with some caution because there is no guarantee that the specific configuration assumed in the quote will match individual design requirements. However, in most cases, and especially during the preparation of a cost estimate with little or no design data, vendor supplied quotes can be helpful.

Formulate required equipment rates. Certain items on the bill of materials will require special equipment to install. For example, buried cable requires a trencher, outdoor lighting requires a cherry picker or crane, and distributed processing devices require specialized programming and diagnostic equipment.

Cost-estimating guides can provide guidance on the cost of this equipment for normal construction items. Vendors will need to be contacted for quotes on specialized programming and diagnostic equipment.

Combine with bill of materials. Now the necessary data is compiled. All that remains is to multiply numbers. The final task is simply to multiply the unit rates by the quantities to obtain the basic project cost estimate. Fortunately, the tedium of this part of cost estimating has been relieved by PCs and spreadsheets.

Cost estimating can be frustrating because the right answer is never determined. Bid prices will always be different from the estimate. The goal, however, is a planning and evaluation estimate, not absolute prediction of bid prices. By following these guidelines, the security manager can proceed on new projects with confidence in his or her budgetary projections.

* Mean's Building Construction Cost Data. R. S. Means Company Inc., 100 Construction Plaza, PO Box 800, Kingston, MA 02364-0800.

Randall R. Nason is manager of the security systems department at C. H. Guernsey and Company in Oklahoma City, OK. He is a member of the ASIS Standing Committee on Security Architecture and Engineering.
COPYRIGHT 1992 American Society for Industrial Security
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992 Gale, Cengage Learning. All rights reserved.

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Author:Nason, Randall R.
Publication:Security Management
Date:Nov 1, 1992
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