This article aims to provide some insight and guidance to the Engineer, Project Manager and Estimating team colleagues as to the process of cost estimating for mining projects based on the writers experience spanning 25 years in this field working for a large Mining construction company.

Basis of Estimating

Estimates can be made be made by various ways depending on accuracy level required and at which stage of the life of the project is addressed.

  • Benchmarking

Often estimates are compiled by consultants based on benchmarking prices to that of similar recent projects. As no two projects are identical the accuracy of benchmarking is often considered as a best guess as not all the specific conditions are considered.

  • Budget and Desktop Studies

Budget estimates are based on 1st principle process based on the specific project information as is available at the time but often before the whole specification is complete. Budgets can be obtained from suitable contractors who will often provide this non-binding pricing service with the future expectation of participation in the Tender process.

  • Accuracy

It must be stated that the writer considers accuracy as a measure to the mean of at least 3 final estimates in response to the Client’s final RFQ (Request for Quotation), such a RFQ will include : 

  1. Design specifications
  2. Safety requirements
  3. Quality requirements
  4. Geological information
  5. Geo-technical information
  6. Support types and specifications.
  7. Schedules of Responsibilities
  8. General and Special Conditions of Contract
  9. Forms of Tender
  10. A Client or Client representative guided site visit to the actual site
  11. Suitable Questions and Answers process available to all Tenderers
  12. A Suitable tender compilation period which may range from 3 to 6 weeks for smaller projects but at least 10 to 12 weeks for projects with value in excess of U$100m

Contractor 1st Principle Estimate Compilation

The Estimator would want to present a price which will secure the project and which will have the resultant price is of such accuracy that the cost of construction is within his pricing and that if for a contractor that the price allows a return on his investment whilst adding value to the Client’s business plan and to form a lasting business relationship.

Estimating Process

The 1st step in the process is to properly read and understand the Client’s RFQ .

Once the Scope and deliverables are understood a construction program based on suitable and available resources is established by means of estimating duration based on productivity levels and sequencing the activities in order of execution to present an overall achievable construction program which is achievable and within the Client’s expectation.

Allocation of Resources Identified

  • Labor and Materials
  1. The Estimator will then identify and calculate the costs according to the resources utilized to obtain the construction program and price direct costs such as materials.
  2. This will entail allocation Labor costs according to the duration of each activity based on the scope of work units as contained in the RFQ.
  3. The application of the labor will result in a labor Evaluation which comprises all of the labor costs.
  4. Identification of and costing of consumable materials such as explosives, drill consumables, hoses and fittings, fuels and lubricants etc. for selected equipment and materials necessary for structures such as concrete, concrete additives and support materials.
  5. Such identified consumable materials are then extended per unit of measure for the scope of work as contained in the RFQ. Such application comprises all of the consumable materials and is known as the Extension of Consumables.
  •  On Costs

These costs are the initial costs associated with the labour but which are not wages and also monthly costs such as accommodation, visits to site, site vehicles etc. These costs report to either Fixed or Time Related Preliminary and General Sections of the RFQ depending on their expenditure  occurrence.

  • General Contractors Equipment

These costs are costs associated with setup and equipment required during the execution of the project. A large portion of these costs will be expended and similarly claimed at the start of the project. Examples are huts and buildings, site services reticulation and initial equipment's requirements. These items typically remain the property of the contractor and may be or not be removed by the contractor on completion of the project but this is dependent on the Schedule of responsibilities.

  • Plant

Plant costs are the costs associated with major equipment costs which are contractors assets and typically have a life beyond a project or number of projects. Examples are Excavators, loaders, trucks etc. or any other item of large value. The costs include amortization of in house equipment, charges for rented and associated maintenance costs. They are generally priced as time related charges and claimed for the on-site period of the specific equipment.

The Price

A summary of all the costs will attract a markup according to the contractor’s tendering strategy and may include a risk element.

The total of the costs including the markup constitute an Estimate for project Execution.

 

Dirk Strachan - Mining Consultant

 
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