Project Estimating and Cost Control (Depth)
Concepts
Estimate types: conceptual (order-of-magnitude), engineer's, and bid; quantity takeoff; unit costs; labor productivity and burden; equipment; overhead; contingency; escalation; bonding and insurance; markup and margin; earned value (CPI, SPI, EAC, ETC, TCPI); cost codes and change orders. Cost control compares actual and committed cost to budget.
Traps
Markup on cost is not margin on price. Contingency is not markup and is not profit. Labor burden (taxes, insurance, benefits) is added to base wage. Overtime lowers productivity and adds premium. Unbalanced bidding and front loading are not the same. Earned value: EAC = BAC/CPI only when the current CPI is expected to continue.
Worked example
A subcontract costs $100,000. A 10% markup gives $110,000. A 10% margin requires price = cost/(1 − 0.10) = $111,111. If the project budget is $500,000 and CPI = 0.90, EAC = 500,000/0.90 = $555,556, an overrun of $55,556. If remaining work can be done at budget, use EAC = AC + (BAC − EV).
Rule of thumb
Conceptual estimates often use cost per square foot or per unit capacity with a range of about −20% to +30%; bid estimates should be within about 5–10%. Track committed cost plus actual cost, not invoices alone.