Being able to accurately predict the cost of future projects is vital to the economic survival of any business. Cost estimators develop this information for owners or managers to use in making bids for contracts or in determining if a new product will be profitable, or in determining which of a firms' products are making a profit.
Regardless of industry, estimators compile and analyze data on all the factors that can influence costs materials, labor, location, and special machinery requirements, including computer hardware and software. Job duties vary widely depending upon the type and size of the project. Estimators working in the construction industry and manufacturing businesses have different methods of, and reasons for, estimating costs.
On a large construction project, for example, the estimating process begins with the decision to submit a bid. After reviewing the architect's drawings, specifications, and other bidding documents, the estimator visits the site of the proposed construction project to gather information on access to the site and availability of electricity, water, and other services, as well as surface topography and drainage. If the project is a remodeling or renovation job, the estimator might consider the need to control noise and dust and to perform work in such a way that occupants can continue to carry out their activities as normally as possible. The information developed during the site visit generally is recorded in a signed report that is made part of the project estimate.
After the site visit is completed, the estimator must determine the quantity of materials and labor that the firm will have to furnish. This process, called the quantity survey or takeoff, is completed by filling out standard estimating forms that provide spaces for the entry of dimensions, number of units, and other information. A cost estimator working for a general contractor, for example, will estimate the costs of the items the contractor must provide. Although subcontractors will estimate their costs as part of their own bidding process, the general contractor's cost estimator often analyzes bids made by subcontractors as well. Allowances for the waste of materials, inclement weather, shipping delays, and other factors that may increase costs are made as the takeoff proceeds. In large construction companies with several estimators, it is common practice for them to specialize. For instance, one person may estimate only electrical work, whereas another may concentrate on excavation, concrete, and forms. Also during the takeoff process, the estimator must make decisions concerning equipment needs, sequence of operations, and crew size.
On completion of the quantity surveys, a total project cost summary is prepared by the chief estimator that includes the cost of labor, equipment, materials, subcontracts, overhead, taxes, insurance, markup, and any other costs that may affect the project. The chief estimator then prepares the bid proposal for submission to the developer.
In manufacturing and other firms, cost estimators generally are assigned to the engineering or cost department. The estimators' goal in manufacturing is to accurately allocate costs of making products to the people and machines they are produced by. Their job may begin with a request by managers to estimate the costs associated with a major redesign of an existing product or the development of a new product or production process. For example, to develop a new product, the estimator, working with engineers, first reviews blueprints or conceptual drawings to determine the machining operations, tools and gauges, and materials that would be required for the job. The estimator then must prepare a parts list and determine whether it is more efficient to produce or to purchase the parts. To do this, the estimator must initiate inquiries for price information from potential suppliers. The next step is to determine the cost of manufacturing each component of the product. Some high technology products require massive amounts of computer programming during the design phase. The cost of software is one of the fastest growing and most difficult activities to estimate. Some cost estimators now specialize in estimating computer software development and related costs.
The cost estimator then prepares time-phase charts and learning curves. The former indicate the time required for tool design and fabrication, tool debugging (finding and correcting all problems), manufacturing of parts, assembly, and testing. Learning curves represent graphically the rate at which performance improves with practice. These curves are commonly called problem-elimination curves because many problems, such as engineering changes, rework, parts shortages, and lack of operator skills, diminish as the number of parts produced increases, resulting in lower unit costs.
Using all this information, the estimator then calculates the standard labor hours necessary to produce a predetermined number of units. Standard labor hours are then converted to dollar values, to which are added factors for waste, overhead, and profit to yield the unit cost in dollars. Then the estimator compares the cost of purchasing parts with the firm's cost of manufacturing them to determine which is cheaper.
Computers are widely used because cost estimating may involve complex mathematical techniques. For example, to undertake a parametric analysis, a process used to estimate project costs on a per unit basis subject to the specific requirements of a project, cost estimators use a computer database containing information on costs and conditions of many other similar projects. Although computers cannot be used for the entire estimating process, they can relieve estimators of much of the drudgery associated with routine, repetitive, and time-consuming calculations. This leaves estimators with more time to study and analyze projects and can lead to more accurate estimates. (Details on various cost estimating techniques are available from the organizations listed under Sources of Additional Information below.)
Cost estimators use quantitative techniques to analyze factors that influence cost.
Estimators spend most of their time in an office. Nevertheless, construction estimators must make frequent visits to work sites that are dirty and cluttered with debris. Likewise, estimators in manufacturing must spend time on the factory floor where it can be hot, noisy, and dirty. Cost estimators usually operate under pressure, especially when facing deadlines, because inaccurate estimating can cause a firm to lose out on a bid that would have been profitable or to take on a job that proves to be unprofitable. Although estimators usually work a 40-hour week, much overtime is often required. In some industries, frequent travel between the parent firm and its subsidiaries or subcontractors is required. Government and other estimators often visit firms to substantiate bids or prices.
Cost estimators held about 163,000 jobs in 1992, primarily in construction industries. Others worked for manufacturing industries. Some worked for engineering and architectural services firms, business services firms, and a wide range of other industries. Construction analysts in the Department of Housing and Urban Development and operations research, production control, cost, and price analysts in the Departments of Defense and Energy may do significant amounts of cost estimating in the course of their regular duties. (For more information, see the statement on operations research analysts elsewhere in the Handbook.)
Cost estimators work in all parts of the country, usually in or near major industrial, commercial, and government centers and in cities and suburban areas undergoing rapid change or development where large amounts of construction are taking place.
Entry requirements vary by industry. In construction, employers prefer applicants with a thorough knowledge of construction materials, costs, and procedures in areas ranging from heavy construction to electrical work, plumbing systems, or masonry work. In fact, most construction estimators have experience as a construction craft worker or as a contractor. Persons who combine this experience with some postsecondary training in construction estimating or a bachelor's or associate degree in civil engineering, architectural drafting, or building construction have the edge in landing jobs. Those with an academic background who lack work experience qualify for some jobs, but are at a distinct disadvantage when competing for jobs with experienced applicants. In manufacturing, employers prefer persons with a degree in engineering, science, operations research, mathematics, or statistics, or in accounting, finance, business, or a related subject. In high-technology industries, great emphasis is placed on experience involving quantitative techniques. Computer literacy and, in some cases, programming capability are required.
Regardless of background, estimators receive much training on the job. Working with an experienced estimator, they become familiar with each step in the process. Those with no experience reading construction specifications or blueprints first learn that aspect of the work. Then they may accompany an experienced estimator to the construction site or the shop floor where they observe the work being done, take measurements, or perform other routine tasks. As they become more knowledgeable, they learn how to tabulate quantities and dimensions from drawings and how to select which material prices are to be used.
Cost estimating is included as part of the civil engineering, industrial engineering, and construction management or construction engineering technology curriculums in many colleges and universities. Many technical schools, junior colleges, and universities offer courses and programs in cost estimating techniques and procedures. In addition, cost estimating is a significant part of the master's degree program in construction management offered by many colleges and universities. Organizations that represent cost estimators, such as AACE International and the Society of Cost Estimating and Analysis, also sponsor educational programs. These programs help students, estimators-in-training, and experienced estimators stay abreast of changes affecting the profession.
Professional recognition through certification is valuable, because it is a mark of the estimator's competence and experience. To become certified, estimators generally must have between 3 and 7 years of estimating experience and must pass both a written and an oral examination. In addition, certification requirements may include publication of at least one article or paper in the field.
Cost estimators should have an aptitude for mathematics, be able to quickly analyze, compare, and interpret detailed and sometimes poorly defined information, and be able to make sound and accurate judgments based on this knowledge. Assertiveness and self-confidence in presenting and supporting their conclusions are important.
For most estimators, advancement takes the form of higher pay and prestige. Some move into a management position, such as project manager for a construction firm or manager of the industrial engineering department for a manufacturer. Others may go into business for themselves as consultants, providing estimating services for a fee to government or construction and manufacturing firms.
Employment of cost estimators is dependent primarily upon the level of construction and manufacturing activity. Growth of the construction industry, where about 58 percent of all cost estimators are employed, will be the driving force behind the rising demand for these workers, whose employment is expected to increase faster than the average for all occupations through the year 2005. The fastest growing sectors of the construction industry will be those associated with spending on the Nation's infrastructure. Construction and repair of highways and streets, bridges, and construction of more subway systems, airports, water and sewage systems, and electric powerplants and transmission lines will stimulate demand for many more cost estimators. In addition, spending on hotels, office and other commercial buildings, and construction of residential units, will add to the demand for cost estimators to predict the costs of these projects. Job prospects should be best for those workers who have substantial experience in various phases of construction or a specialty craft or those with a degree in construction management, engineering, or architectural drafting.
Employment of cost estimators in manufacturing should expand as output increases and as more firms use the services of cost estimators to identify and control their operating costs. In manufacturing, experienced persons with degrees in engineering, science, mathematics, business administration, or economics and who have computer expertise should have the best job prospects. Certification is an asset in all instances.
Salaries for cost estimators vary widely by experience, education, size of firm, and industry. According to limited data available, most starting salaries in the construction industry for those with limited training ranged from $17,000 to $21,000 in 1992. College graduates in fields such as engineering or construction management that provide a strong background in cost estimating can start at $30,000 or more. Highly experienced individuals earned $75,000 or more. Starting salaries and annual earnings in the manufacturing sector were usually somewhat higher.
Other workers who quantitatively analyze information based upon relatively imprecise data include appraisers, cost accountants, cost engineers, economists, evaluators, financial analysts, loan officers, operations research analysts, underwriters, and value engineers.
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Reprinted with Permission of U. S. Department of Labor