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Accurately predicting the cost of future projects is vital to the survival of any business. Cost estimators develop cost information for owners or managers to use in making bids for contracts, in determining if a new product will be profitable, or in determining which of a firms' products are making a profit.
Regardless of the industry they work in, estimators compile and analyze data on all the factors that can influence costs-such as 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 motivations 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 and specifications, the estimator visits the site of the proposed project. The estimator needs 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 schedule work in order to accommodate occupants of the building. The information developed during the site visit generally is recorded in a signed report that is made part of the final project estimate.
After the site visit is completed, the estimator determines 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 all 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. Also during the takeoff process, the estimator must make decisions concerning equipment needs, sequence of operations, and crew size. Allowances for the waste of materials, inclement weather, shipping delays, and other factors that may increase costs are incorporated in the takeoff.
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.
Construction cost estimators also may be employed by the project's architect or owner to estimate costs or track actual costs relative to bid specifications as the project develops. In large construction companies that employ more than one estimator, 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.
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 the costs associated with making products. The job may begin when management requests an estimate of the costs associated with a major redesign of an existing product or the development of a new product or production process. When estimating the cost of developing a new product, for example, the estimator works with engineers, first reviewing blueprints or conceptual drawings to determine the machining operations, tools, gauges, and materials that would be required for the job. The estimator then prepares a parts list and determines 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 a tremendous amount of computer programming during the design phase. The cost of software development is one of the fastest growing and most difficult activities to estimate. Some cost estimators now specialize in only estimating computer software development and related costs.
The cost estimator then prepares time-phase charts and learning curves. Time-phase charts indicate the time required for tool design and fabrication, tool "debugging"-finding and correcting all problems-manufacturing of parts, assembly, and testing. Learning curves graphically represent 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 of 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. The estimator then 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 calculations and require advanced 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. Computers also are used to produce all of the necessary documentation with the help of basic word-processing and spreadsheet software. This leaves estimators with more time to study and analyze projects and can lead to more accurate estimates. (More detailed information on various cost estimating techniques is available from the organizations listed under Sources of Additional Information below.)
Although estimators spend most of their time in an office, 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. Inaccurate estimating can cause a firm to lose out on a bid or lose money on a job that proves to be unprofitable. Although estimators normally work a 40-hour week, much overtime is often required. In some industries, frequent travel between a firm's headquarters and its subsidiaries or subcontractors also may be required.
Cost estimators held about 179,000 jobs in 1994, primarily in construction industries. Others can be found primarily in manufacturing industries. Some cost estimators also worked for engineering and architectural services firms, business services firms, and throughout a wide range of other industries. Construction, operations research, production control, cost, and price analysts who work for government agencies also may do significant amounts of cost estimating in the course of their regular duties. (For more information, see the section on operations research analysts elsewhere in the Handbook.)
Cost estimators work throughout the country, usually in or near major industrial, commercial, and government centers, and in cities and suburban areas undergoing rapid change or development.
Entry requirements for cost estimators vary significantly by industry. In the construction industry, 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. Most construction estimators have considerable previous experience as a construction craft worker or manager. Individuals who combine this experience with some postsecondary training in construction estimating, or with a bachelor's or associate degree in civil engineering, architectural drafting, or building construction, have a competitive edge in landing jobs.
In manufacturing industries, employers prefer to hire individuals 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.
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. Cost estimators should also be familiar with computers and their application to the estimating process, including word-processing and spreadsheet packages used to produce necessary documentation. In some instances, familiarity with special estimation software or programming skills may be useful.
Regardless of their 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. They then may accompany an experienced estimator to the construction site or shop floor where they observe the work being done, take measurements, or perform other routine tasks. As they become more knowledgeable, estimators learn how to tabulate quantities and dimensions from drawings and how to select the appropriate material prices.
Many colleges and universities include cost estimating as part of curriculums in civil engineering, industrial engineering, and construction management or construction engineering technology. Courses and programs in cost estimating techniques and procedures are offered by many technical schools, junior colleges, and universities. In addition, cost estimating is a significant part of master's degree programs in construction management offered by many colleges and universities. Organizations that represent cost estimators, such as American Association of Cost Engineers (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.
Voluntary certification can be valuable to cost estimators because it provides professional recognition of the estimator's competence and experience. Both AACE International and the Society of Cost Estimating and Analysis administer certification programs. 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.
For most estimators, advancement takes the form of higher pay and prestige. Some move into management positions, 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.
Overall employment of cost estimators is expected to grow
about as fast as the average for all occupations through the year 2005 as the levels of construction and manufacturing activity increase as the economy grows. However, even when construction and manufacturing activity decline, there should always remain a demand for cost estimators to accurately predict costs in all areas of business. Some job openings will also arise from the need to replace workers who transfer to other occupations or who leave the labor force altogether.
Growth of the construction industry, where over 60 percent of all cost estimators are employed, will be the driving force behind the rising demand for these workers. The fastest growing sectors of the construction industry are expected to be special trade contractors and those associated with heavy construction and 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 power plants and transmission lines will stimulate demand for many more cost estimators. Job prospects in construction should be best for those workers with a degree in construction management, engineering, or architectural drafting, or who have substantial experience in various phases of construction or a specialty craft area.
Employment of cost estimators in manufacturing should remain relatively stable as firms continue to use their services to identify and control their operating costs. Experienced estimators with degrees in engineering, science, mathematics, business administration, or economics and who have computer expertise should have the best job prospects in manufacturing.
Salaries of 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 cost estimators with limited training were between about $17,000 and $21,000 a year in 1994. College graduates with degrees in fields such as engineering or construction management that provide a strong background in cost estimating could start at about $30,000 annually or more. Highly experienced cost estimators earned $75,000 a year or more. Starting salaries and annual earnings in the manufacturing sector usually were somewhat higher.
Other workers who quantitatively analyze information in a similar capacity include appraisers, cost accountants, cost engineers, economists, evaluators, financial analysts, loan officers, operations research analysts, underwriters, and value engineers.
Information about career opportunities, certification, and educational programs in cost estimating in the construction industry may be obtained from:
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