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v) Unit pricing and allowed variability in unit pricing.
6) Supporting documentation and assumptions for sponsor’s general conditions cost estimate.
a) Develop an independent, detailed general conditions cost estimate of the three largest
construction contracts and of the systems work.
7) Escalation and Inflation Review
a) Building up from the second SCC level, evaluate uniformity of application of escalation and
inflation factors.
b) Compare escalation and inflation factors used by sponsor to Producer Price Index data from
the Bureau of Labor and Statistics (http://www.bls.gov) and other sources such as ENR,
Means, Richardson, etc. to ensure adequate escalation and inflation cost is included to carry
the project to the mid-point of construction (the assumed time when contract unit awards will
be complete).
REVIEW AND ANALYSIS OF PROJECT COST
The PMOC team reviewed the cost estimate documentation supplied by sponsor, including packages for
line contracts, stations contracts and breakout contracts (the list of documents reviewed is provided in
Appendix). Sponsor provided the cost estimate for each contract package in electronic format and the
estimate backup documentation in hard-copy format. The cost estimate and backup documentation
reviewed was dated [date] . A summary of the [title of Grantee cost estimate] is provided as Appendix
[XX]. The backup documentation was well organized and presented in a clear and concise manner.
Having both the electronic files and hard-copy documentation facilitated the cost item review and
analysis, as well as permitted the tracking of costs and quantities from the individual line items to project
or contract cost estimate to ensure proper traceability and application.
A randomly selected group of project quantities, unit costs, CERs, and lump sums was reviewed and
validated, and the mechanical checks were deemed to be reliable and mathematically correct.
Consequently, the level of document and estimate detail is commensurate for a project at this stage of
design.
Cost Item Classification
The approach for planning the cost item analysis for this risk assessment was to identify and categorize
each cost item in the sponsor’s estimate. The cost items of the estimate were analyzed and categorized
by: 1) Unit Cost or Quantity supported or not supported on the design deliverables, 2) Cost Estimating
Relationships (CER), and 3) Lump Sum. The cost items were further categorized by large and small,
determined by a break point of $1 million. Cost items are large if their value is greater or equal to $1
million, while items lower than this are considered small cost items. A summary of the Grantee’s cost
estimate, including PMOC’s recommendations, classified into unit cost, CER and lump sum is provided
in Appendix [XX]. This estimate classification also categorizes the budget by: a)
Drawings/Specifications, b) Schedule (includes escalation), c) Design Report, and d) General Conditions.
Costs are classified into these categories on the basis of their estimate (how it was derived) and the extent
of project definition.
Mechanical Check
Quality and mathematical checks for accuracy and traceability were performed at both a micro and macro
level on the Project Cost Estimate. Individual line items for the Line, Stations, and Breakout Contracts
were checked and summed to confirm the title level subtotals. This was performed manually with a
calculator and electronically by reviewing the spreadsheet formulas. These computed subtotals were
OP 33 Capital Cost Estimate Review
Revision 0, June 2008
Page D-3