Estimation & Budgeting

Tender Documents

Document Cost
Description Type of information
Assignment
General Condition
Equipment
Prescribe how the Administer
& Permits
Owner. Contractor Require
Utilities
And Architect are
To interact with

Indirect Cost
Fund & Project
Each other
Loan Taxes Management
Particular Condition Interest Require
Prescribe how the Public Accomd Site
Owner. Contractor Relation & Setup
And Architect are Require Compans (mobilize)
To interact with
Each other

Specification
Prescribe detail for Method Method
Types of
The work that needs Of Of
Materials
To be completed in Execution Measuring
Project Construct

Direct Cost
Drawings Building Services Finishes
Demonstrate how the Works Dwg Plans &
Building is put Dwg (Mep) Schedules
Together stating every Section
General Detailed
Material used and the Arrange &
Method of Dwg
Plans Elevation
Construction

Schedules
Bill of Prefer
Refers to lists or Time
Quantities Supplier
Spreadsheets of (BOQ) Schedule
List
Certain Information
 Estimation & Budgeting

Bid Price Components

Fixed Variable

Indirect Direct

Financial Labor
Risk Markup
Operation &
Reserve
Legal
Material

Personnel Personnel Contingency Equipment

Fees & Warranty Subcontract

Mobilization Stamps

General Bonds
Equipment
Head Office
G&A
Consumption
Find interest
Gross Profit
Office Expenses
GP
Profit
Consultancy
Taxes
Custom Clearance
 ESTIMATION & BUDGETING

Bid Price Estimation Technique

Review all Define Price

Start - up Define Method
Tender Sourcing
Of Execution
Documents Strategy

Source of Internal Data Base &

Data Tender Document
Company Polices

Data Working Labor Supplier Equip Subcon Project Time Staff Fina
Sorting BOQ List List List List ID Sched Bene Asssu

Detailed Direct Indirect Cost Markup

Process Cost Breakdown Breakdown &
For BOQ item Profit

BOQ with total

Direct cost for Multiplier
Each item

Multiplier is factor to distribute

The portion of indirect & Markup
Selling Price Values on BOQ s items

By using the items total Direct

Top sheet cost as weight to distribute the
Total indirect & Markup
 ESTIMATION & BUDGETING
Cost Budgeting Technique

Budget Sorting
Codes Estimation outputs Cost Element Budget/ Code
Procurement Finance Cost Control
Budget Classified Based on task
Codes CSI Labor
Detailed Direct cost
Breakdown for Budget Classified Based on Material
Account Code COA
BOQ s items Equipment
Budget Classified Based on
Task Material Codes Store Subcontract
Codes
CSI Personal
Mobilization
Budget Classified Based on task
Codes CSI General
Indirect Cost Equipment
Breakdown
Budget Classified Based on
Consumption
Account Code COA Office Exp
Consultancy
Material Custom
Material Budget
Codes 1- Mat . Code Clearance
Financial
Store 2- Mat . Name Budget Insurance
3- Unite Meas 1-Account
4- Unite Price Code Fees & Stamps
5- Total Qty 2- Account
6- Total Cost Name Bonds
3- Total
Contingency
Account Budget
Codes Warranty
COA
Budget Classified Based on
Account Code COA Head Office
G&A
Markup Budget Classified Based on task
Codes CSI Fund interest
 MULTIPLIER ??
In Construction Projects

Total Selling Price = Direct Cost + Indirect Cost + Overhead & Margin

WHEN, The Parameters estimated in different manner as follow

Direct Cost = for each BOQ s item

Indirect Cost = for each indirect element based on the Period of its
Existence in the Project

Overhead & Margin = Percentage from the selling Price

SO ………
How we can Reflect the Portion of indirect & Overhead in one Formula
To Estimate the Selling Price for each BOQ item ????
 MULTIPLIER ??

Is a Factor to Distribute the Portion of Indirect & Overhead Values on BOQ s items

( 1+(IT/DT)
Si=Di Multiplier
1 – (%) )

Si : Item Selling Price Di : Item Direct + Cost Value

ST : Total Selling Price DT : Total Direct + Cost Value
IT : Total indirect Cost Value
(%): Total Overhead & Markup % From sell price

PROOF

ST = DT + IT + (%) ST

ST - (%) ST = DT + IT

ST(1 - (%) ) = DT + IT

DT + IT
ST =
( 1- (%))

DI Di
DT × DT + DT × IT 1 + (IT / DT
Si = = Di =
( 1- (%)) ( 1- (%)
 Cost Control & Forecasting

Actual Cost Collection & Sorting

Type of Data Actual Cost Sorting

Source of Data Process
(Elements Actual cost per
Code)
Labor daily
Site Engineer Place of work (task code) time sheet Labor

Equip daily Material

time sheet
Invent ray Materials Qty issued Equipment
Store issue
Receipt Subcontractor

Personal
Purchase order
Procurement Unit Price of Material Mobilization
PO
General Equipment

Human Monthly Staff Consumption

Staff salary & Benefits
Resource sheet
Office Exp

Consultancy

Monthly
Accountant Indirect Expenses Accounting Custom Clearance
Expenses
Insurance

Tech Office Subcontractor Invoice Fees & Stamps

Monthly Bonds
Subcontractor Subcontractor
Subcontractor Agreement
Division Invoices

Equip Work Owned Equip Rate

 Cost Control & Forecasting

Cost Performance Evaluation

Evaluation
Estimate At Completion for Costs
Source Type of Data
Elements per Code

Budget Cost
1 BC Rates
Sorted Budget 3 RB
Cost
Based on Cost s Per Code
Budgeting
Elements per 2 BCWP Remaining
Technique
Cost Code Per Code Budget
Budget Cost = BC -BCWP
For work
Performance
1
Working client Actual Qty 4 ETC
Invoice Q.S Executed Per Code
Estimate to
Complete
3 CPI = RB / CPI
Per Code
Cost
1 AC Performance
Actual Cost Sorted Actual 5 EAC
Indicator Per Code
Collection & Based on Cost s = BCWP/AC
Elements per Estimate At
Soring
Cost Code Complete
Technique
= AC + ETC

6 Budget
Deviation
Per Code
 Budget Deviation Analysis
Proposed
Deviation Calculation Process Causes of Deviations Action
Respectivly

Budget Actual Cost

Actual Qty
Technique Technique
AQ
BC AC
1
Record
Productivity Impact
BCWP = EN
= AC Qty × Budget Material
Rates Waste 2
Cause
Price Notification
CPI Fluctuation
= BCWP/AC
Over
Estimation 3
Mitigation
RB ETC Take off If Possible
= BC- BCWP = RB / CPI LS Contract
RB = BAC - EV = BAC / CPI
Change 4
Method of Release
EAC Execution Part of
= AC + ETC Reserved
Change of Counting
Contract
Value
BUDGET
DEVIATION
Qty Take off

Variation Order REVISED

BUDGET
Claims

Escalation
 Cost Control & Forecasting

Revised Budget Technique

Impact Budget cost
Event Action (Process) Outputs
Elements

Change Rectify Allocation of direct

Cost Elements in direct Direct Revised
Execution Material list
Method Breakdown Cost
(Self- execute Subcontract) Budget

Take off
Replace original BOQ Qty
Re- measured
With the new take off Qty
Contract

Add new task with

Revised
Variation 1- Direct cost break Indirect Financial
Orders 2- Extra indirect Cost Cost Budget
3- Approved sell Price

Add the expected

Incurred indirect Cost and the
Claims
Equivalent Value as extra sell
Price Revised
Detailed
Coded
Budget
Add the Periodically
Selling
Escalation Approved value as extra
Selling price Price

Penalties Add the Deducted Revised Top

Deduction Values as Negative sell price Sheet & GP
REVENUE RECOGNITION for Construction Projects is a financial task
Calculated based on the following Formula
by using POC Technique

Cost n
(Revenue) n = × Contract
Value
EAC

WHEN:

POC = Percent of Completion

N = Specific period
Cost = Actual cost through the period
EAC = Estimate cost at Completion
Contract Value = Final Selling Contract Value

WHAT IS IF ,
The Contract Value not Available ??
 REVENUE RECOGNITION

The contractor Recognizes revenue over the life of the project based on the
Percent of Completion (POV) as Follow
Cost n
(Revenue) n = × Contract
Value
EAC
WHEN:

N = Specific period
Cost = Actual cost through the period
EAC = Estimate cost at Completion
Contract Value = Final Selling Contract Value
GP = Gross Profit
But if, The contract Value is Unknown
Cost n
(Revenue) n =
(1- GP %)
PROOF :
Contract Value – EAC EAC
Gp % = =1-
Contract Value Contract Value
EAC 1 Contract Value
1 - GP = =
Contract Value 1- GP % EAC
Contract Value
(Revenue) n = Cost n ×
EAC
Cost n
(Revenue) n =
1- GP %
 Implementation of Escalation Formula in Construction Project

Procure
Quantity Tender Dep
Contract
Source of Survey Dep Condition
data Govern
Organize
CAMPAS

Working Working Working Working Working

Client Client Client Client Client
invoice invoice invoice invoice invoice

Type of Monthly Current

data Work Volume Specific Material Cost Price
Wn Mat. Budget Indices Adjustment
Rate Or Coefficient
Bo Price pn
Bn

Material Adjust. Coefficient

Specific Mater. Budget B,C ……..
B= Adjustable Item
Total Project Budget

Fixed Coefficient for

Process A+b+c = 100 %
Non- Adjustable Portion
A = 100 % - b

Bn Cn
Pn = a +b +C + ………
Bo Co

Escalation Value = Wn × (Pn -1)

Out Puts
Final Client
invoice
 Mitigation Plan of Inflation Impact on income statement year 2022
Income Statement
Action Result Mitigation Plan
Year 2022
Optimize Material
Increase the Utilization
Reflect the new 1- Accurate take off NP= Net Profit
Estimate at
Rate on the 2- Central Fabrication workshop
Completion 3- Delivery to install
Rest of Budget
EAC Technique for MEP Equip NP Revenue
4- Minimize Stock in stores

Re-Visit the rest of indirect Decrease

Budget to eliminate EAC
unnecessary Expenses
Replace the self Execution 1
To apply subcontract to N/P =
Claim for Mitigate Productivity loss G &A
Compensation
Based on Release Part of Project
yes Contingency
Escalation Client NP other income
Formula Approve
Under Review Consider Proper % from
Re-estimate yes
Estimate as sell value
Client
The rest of Approve
Non- Approved Under Review Consider the Estimate
Variation order
Project in Value as sell value
Handover
Stage Minimize the Indirect
Classify the Expenses
Running Project in Increase
Increase
Project Based Progress 30%
Contract
Revenue
On their Value
Project in
Progress
Start Stage
Decrease
Head Office 70 % Re – Distribute the H.O G&A
Salaries Salaries on Projects And other
Re-Estimate
rest of Income from
Financial cost bank Deposits Rectify Deposit based on Decrease
In Planned New bank rate other
Income State Reserved Income
Partially Release
Company Contingency
Contingency
 Financial Plan

Projects Cash flow Projection

Source Type of Data Process

Dist. Monthly Weight

ETC Disturb Backlog Monthly Cost per Element
=
Cost Control
ETC for each Element
Estimate of Collection
EAC
Remaining Cash out
=
Actual Cash out EAC - ACO
Finance
ACO Labor

Supplier s Payment Material

Procurement
Conditions
Subcontract

Subcontract Payment
Q.S Indirect
Conditions
Dist. Monthly Weight
Monthly work volume
Monthly
Planner =
Work volume Distribution Total Cash
Rem work volume
out C

Client contract value

Monthly Total Cash
Q.S
in B
Revised contract value
Remaining
Cash in
Actual Cash in collections
Finance
Cash Variance
Opening Balance A = A+B+C
 Financial Plan

Projects Backlog projection

Process
Source Type of Data Re –Distribute the ETC based on the Monthly
Weight of Work Volume

1 Time Schedule 2 3 Remaining Work

Planner Uploaded with Updated Schedule Volume Disturb
Selling price (Monthly)

4
Dist. Monthly Weight
Monthly Work Volume
1 =
Financial Actual
Finance
Cost
Rem Work Volume

2 Estimate to
Complete 5
1 EAC = EAC - AC Re-distribute ETC
Cost
Estimate at Based on Dist.
Control
Complete Monthly Weight

6 Monthly Revenue Recognition

1 Revised Contract Monthly Cost
Q.S
Selling price = × Revised Contract Value
EAC

7
Backlog
Projection
 OWEND EQUIPMENTS
MAIN WORKSHOP

Why we need it ???

And How we establish it

CRITERIA

Separate Heavy Duty

Non Profitability
Accounting Equipment
Organization
cost Center only

ADVANTAGE

Fair Optimize the Facilitate the

Evaluate the
Distribution of Utilization of Process in
Equipment
Equip. s cost Equip. s as General cost
Performance
on Project Assets Control Sys

METHODOLOGY

Establish Calculate the Equip.s Cost

All Equipment's
Dep. With Total Actual Distributed by
In the Projects
Specific org Cost Rate for Internal Monthly
Supervised by
Chart & Cost Each Invoice (Dummy)
The Dep. Team
Center Equipment/Day For each project
 OWNED EQUIPMENTS
MAIN WORKSHOP

Operation Cost Rate / Equip

Monthly Monthly
Direct Cost Indirect Cost

- Spare part
- Filter Mobiliza
- Fuel Operator Office
Material tion
- Oils Salary Expenses
- Other

Equip Equip Staff Cons ump

Deprec Insurance

1 2
Total Monthly Indirect Distribution
Direct Cost Prorated based on
Per Equip Direct Cost / Equip

3 Total Monthly
Cost / Equip

4
Monthly Cost Rate
Working Hours Per Equip
 Cost Control Process for Equipment's Main Workshop

Source of Cost Workshop

Inventory Procure Finance
Data Control Eng

Cost code Mater Materials Unit price Monthly

Type of Work hours
For each Allocate on Qty Of Account
Data For Equip
Equipment Equip Issued Material Report

Allocate Direct Cost Indirect Cost

Materials
Cost on
Each Equip

Material
Staff Small
- Fuel Equip Mobilize Other
Equip Equip Salaries Tools
- Oils Operate & Indirect
Deeper Insure Offices & &
- Filters Salary Expense
Expense
Supplies
- Others
Process

Total Direct Total Direct Total Indirect

Cost of Cost of Cost of
Each Equip All Equip Each Equip

Distribution Weight Total Indirect Cost

Direct Cost for Equip Distribution on Equip
= =
Total Direct Cost Dist Weight × Total Indirect cost

Total Cost for

each equip
Out puts Cost Rate Internal rent for Owned Equip
= TC ÷ WH Based on the actual cost rate
Work hours for
each equip
 Integration between Eng. Cost & Financial income statement

Engineering cost analysis Projected Income Statement

Projected cost Distribution
Project 1 3 5 Estimate Revenue Recognition 6
Remaining Next year Revised
Budget At
Budget Cost × Contract
= BC -BCWP Complete =
Actual EAC
1 EAC Value
Executed BCWP
Qty Operation Cost
1 4 Next Year 6
Actual cost Estimate To Estimated Cost
AC Complete
EAC GP (Gross profit) 7
Remaining = Revenue – Operation cost
Work CPI 3
volume 1 = BCWP/AC ETC 5 G&A 1
Diatribe Distribution General & Administer
Expected Cost
Revised Contract Value
Projected Fund 9
Take off 1 Interest Value
Quantities = Cash Variance × Loan
2 Interest
3
Variation 1 Original Revised
Orders Contract Contract Contingency 1
Value Value Based on organization Risk
1 Assessment Analysis
Claims
1
Escalation 1
Others (Gain / Loss)
- Currency Exchange
- Equip. Re -sale
Projected Cash Variance
4 5
Actual 1 Remaining Cash in
Cash in Cash in Distribution Net Profit before Tax 10
GP – G & A – Fund – Contract + Other
Inter
Actual 1
Cash out 11
6 7 8 Taxes = NPBT × Tax %
Remaining Cash out Cash
Cash out Distribution Variance
Contract
12
Condition 1 Net Profit After Tax
= NPBT – Taxes
 EPR Business Flow

Cycle from Project Award to Revenue Recognition

0 1
Project Project File
Tender
Award Distribution
10
2 3 12
Budget Cost Codes Cost Report EAC &
Cost Calcific 3 Accounting 9 Actual Cost
Actual Cost
Codes
2 11
Prepare Time 3 Final 10 Updated Progress
Planning
Schedule Baseline Schedule Report
2 9 Execution
Method Stat
2 Subcontractor 5
Operation
Request
Material
2
Staff Request Request
4 6
Procurement 2 Material List Procurement
P.O
Budget Plan
7 8
Receive Issue Material
Inventory
3 Material
2
Subcontractor Subcontractor Subcontract
Agreement 4
Subcontractor List Budget Quotation
2
H.R Staff Budget 3 Staff
Recruitment
2 Priced Subcontractor 10 Client
Q.S Client + 10 Invoice Invoice
BOQ
11
2 4 Indirect Cash
Contractor Expenses 11 Collection
Finance Value & Obligation Payment 13
RevenueR
Release
ecog
 EPR Business Flow

Materials Cost cycle in Construction Project

2 11 10
1
Project Coded Cost
Tasks Codes Actual Cost
Manager Budget Control

1 8 9
Material Mater Cost
Inventory Issue Mater
Codes Allocate
6 7
Receive
Mater Card
Material
3 4 5
Procurement Purch Purch Order Send PO To
Request PR PO Supplier

1 5 8 9
Supplier List Pre - 3D Payment
Finance
Payment Match Release

7
Uploaded Data Supplier
Invoice
External Process

Validation
Process
 ERP Business Flow

Cost Cycle for Owned Equip s Rental in Construction Project

1
Tender Budget

Main Equip Main Work shop Rent Rate Transfer

Work shop Per Equip Equip to Site
Cost Cycle

Subcontract Internal
Division Agreement

Equip Equip Daily

Operation Execution
Required Report

Rent Equip Subcontract

Q.S Invoice
Request-SR

Actual cost Cost Variance

Cost Control

Subcontract List Debit Note Allocate Cost

Finance (incl .Man .Equip . On Project
Workshop
Credit Note Allocate Cost
On Workshop
Uploaded
Data
External
Process
 ERP Business Flow

Subcontracts Cost Cycle in Construction Project

1
Tender Budget

5 6
4 Subcontractor Within Subcontractor
Quotation Budget Agreement

Subcontract
8
Division
6
Budget Var
Request.BVR
12
7
N Yes Cost Variance
Cost Control O Approve 11
Actual cost

2 9
Operation Subcontract
Execution
Required

3 10
Subcontract Subcontract
Q.S Invoice
Request-SR

1 Subcontract 11
9 Payment
Finance Pre - Payment
List Release

Uploaded Data

Validation
Process