CPM Test 1

Based on five projects performed in the past, a company developed a relationship between unit cost and size of the project through an equation: y = -0.0568x+27.819, where y = unit cost ($/unit) and x = project size (unit). The sizes of the past projects range from 60-90 units. Now, the company would like to build a project with a size of 150 units. Is it reliable to use the question provided to predict cost?

No, this extrapolates not interpolates

Rank the four types of cost estimating methods (Order of magnitude, square (cubic) foot, assemblies, unit price) based on accuracy in descending order

UP → A → SF→OM

True/False: Estimating methods based on weighted average unit cost and unit price are typically used at the same design stage?

False

Which two estimating methods are used at later design stages?

Assemblies, Unit Price

Which cost item of the following does NOT belong to direct cost? Materials, Equipment, Sub-Contracts, Bonds

Bonds

Which on of the following projects is LEAST likely to be tax exempted?

A church building, a country bridge, a restaurant building, a public university classroom building.

A restaurant buidling

What reference books would you use to prepare a detailed cost estimate if you do not have historical cost data form previous projects?

RSMeans

_____ is an endeavor that is undertaken to produced results that are expected from the requesting party?

Project

List the basic components of a project (Triangle) and the connecting feature

• Scope

• Schedule

• Budget

Quality

_____ is defined as meeting the owner’s needs

Quality

At the _____ design phase of a project, a schematic design or design alternatives are typically provided.

Conceptual

At the _____ phase, as-built drawings are provided to the owner

Closeout

List the main project stakeholders of a project in the figure below.

• Owner

• Designer

• Contractor

Project management is the art and science of coordinating ____, _____, ____, money, and schedules to complete a specified project on time and within approved costs.

• People

• Materials

• Equipment

Name two out of the 5 basic functions of project management

Directing, Organizing, Planning, Staffing, Controlling

Among the 4 leadership roles that a project manager needs to play, _____ roles can be demonstrated in arranging and leading team meetings effectively.

Informational

True/False: During the early phase of a project, decision-makers have a higher influence on project quality, sot, and schedule

True

True/False: The D-B-B project delivery method can enable fast-track projects

False

The lump sum contract is more applicable to which of the following project delivery methods?

DBB, DB, IPD

DBB

Under which project delivery method, project participants are more likely to experience adversarial relationships.

DBB, DB, IPD, CM

DBB

Which contract type is preferred, if the quantity of a highway construction project is difficult to estimate at bidding?

Lump Sum, Unit Price, Cost Plus Fee

Unit Price

True/False: The CM project delivery method can enable fast-track projects

True

True/False: A guaranteed maximum price (GMP) contracts are typically used in DBB porjects

True

A project completed 2 years ago cost $950,000. The cost index 2 years ago was 365, and the current year’s cost index is 378. Calculate the estimated cost of a similar project completed this year.

$983835.62

A project cost $500,000 in City A (Location Index = 1025). estimate the cost of the same project in City C (Location Index = 1260).

$614634.15

A 5,000 sf building costs $400,000. Estimate the cost of a similar 6,500 sf building.

$520000

Prepare a conceptual cost estimate for a proposed building with 60,000 sf. The building will be built 2 years from now in City B (Index = 150). A similar building with 40,000 sf was completed 1 year ago in City E (Index = 80) and cot $2,200,000. The quivalent compound interest rate in 2.0%

$6179908.81

What is Risk?

Risk is an UNCERTAIN condition or event that, if it occurs, has an EFFECT on at least one project objective, such as scope, schedule, cost, or quality.

What are the 3 types of risks?

• known knowns

• Known unknowns

• Unknown unknowns

Describe known knowns

• These are things we know that we known

• Quantifiable

Describe Known Unknowns

• These are things that we know we don’t know

• Expected to be there ( anticipated based on similar projects)

• Cannot be accurately modeled (measured)

Describe unknown unknowns

• These are things we don’t not know we don’t know

• Unrecognized events or causes

• Occurrence cannot be determined

What are some risk areas? (About 7)

• Funding

• Time

• Staffing

• Customer Relations

• Project Complexity

• External Factors

What is the ultimate risk?

Act of God

Define Risk Management

Risk management is planning for the possibility of a problem by estimating its PROBABILITY, evaluating its IMPACT, and identifying acceptable SOLUTIONS in advance.

Describe the circle of the risk management process

Identify → Assess/Analyze → Mitigate and Plan → Allocate → Monitor and Control

Define contingency

Contingency is EXTRA MONEY, added to the budget in case OVERRUNS occur.

What are the 3 main methods of assigning contingency

• Percentage of Base Estimate

• Expected Net Risk

• Simulation

Describe percentage of base estimate

Prepare the estimate and then add a small percentage

Describe expected net risk

Evaluates maximum risk exposure and likelihood it will occur

Describe simulation

Uses probability theory and tools like Monte Carlo simulation to assess risk

True/False: For economic feasibility studies, private companies typically evaluate return on investment to determine the economic feasibility of their projects

True

True/False: To use the Uniform Series Compound Amount formula directly, the uniform payment series needs to happen at the end of each compounding period.

True

True/False: The economic feasibility of public projects, or those projects owned by the government, is typically evaluated by the benefit/cost ratio.

True

True/False: The essence of compound interest is that previously accumulated interest can generate interest

True

True/False: Based on the following present worth formula, for fixed F and n, P decreased as i increases. P = F (1+i)^-n

True

To convert single cash flow (F) at the end of year n to the present worth, with an interest of i, which functions would you use?

(P/F, i, n)

What is the payback period for a project with an initial investment of $1,000,000 and an annual profit of $200,000 per year? The rate of return is 5%.

P = A (((1+i)^n-1)/(i*(1+i)^n) A=P((i*(1+i)^n)/(1+i)^n-1)

About 5.95 Years

What does PDRI stand for and what is it

Project Definition Rating Index

The Project Definition Rating Index (PDRI) is a checklist‑style tool that measures how clearly and completely a project’s scope is defined before detailed design and construction starts. Lower Score = Better (like golf), Max points is 1000, Cut off Point = 200

5 criteria for setting project goals (SMART)

Specific

Measurable

Agreed Upon

Realistic

Time Component

POSSIBLE ESSAY QUESTION: Explain influence and its effect on the cost curve diagram. Also describe the role of PDRI.

The influence-cost curve demonstrates that a project's ability to influence cost, schedule, and performance is greatest during early planning stages and decreases as the project progresses, while the cost of making changes increases significantly over time. PDRI (Project Definition Rating Index) supports effective front-end planning by evaluating the completeness of project scope definition, identifying risks and missing information early, and helping teams make improvements when influence is highest and changes are least expensive

What is Fast Tracking for a project

When construction can begin before the design if officially completed

Describe the IPD contractual agreement(Integrated project delivery type)

• Collective project roles

• Shared risk

• Shared Profit

• Open sharing BIM models

Describe the Construction management contractual agreement

• Allows for value-engineering program

• Owner receives cost benefits for competition of contractor bids

• Requires higher owner involvement

• Fast tracking is possible but risky

When would you generally use each of the contractual agreement types?

• DBB (Design-Bid-Build): Traditional low-bid project delivery

• DB (Design-Build): Single-source design and construction

• IPD (Integrated Project Delivery): Collaborative shared-risk teamwork

• CM (Construction Manager): Owner needs construction expertise

A slightly more descriptive version:

• DBB: Design completed before bidding

• DB: Fast-track, unified responsibility

• IPD: Early collaboration and integration

• CM: Complex projects needing coordination

When do each of the 4 contract types get use generally

• DBB + LS: Complete design before bidding

• DB + CPF: Design still developing

• CM + CPF: Complex scope still evolving

• IPD + CPF: Collaborative shared-risk project

• UP: Unknown work quantities

Where:

• LS (Lump Sum): Fixed total price

• UP (Unit Price): Pay per unit completed

• CPF (Cost Plus Fee): Reimburse costs plus fee

What are the different types of bonds and what are they used for?

• Bid Bonds: contractor signs with owner

• Performance Bonds: Contractor performs work

  • Payment Bonds: Contractor pays subs and suppliers

Describe Quantity Take-off and its purpose

Perform a quantity takeoff for all work items in the project,

• Record the quantity and Unit (Cubic yard, feet, each etc.)

Quantity Takeoff (QTO): The process of measuring and listing all materials, labor, or work quantities required for a construction project.

Purpose: To develop accurate cost estimates, prepare bids, and plan material procurement.

Expected Net Risk Analysis

Element | Base Estimate | Maximum Cost | Maximum Risk | Percent Probability | Expected Net Risk

1 | $400 | $500 | $100 | 30% | $30

2 | $80 | $120 | $40 | 80% | $32

3 | $100 | $200 | $100 | 50% | $50

Total | $580 | $820 | | | $112

If you has estimated 10% of the base estimate as contingency, would that have likely been enough?

No: expected risk should have been estimated to be about 20% of the base

112/580 = 0.193 × 100 = 19.3%

Describe the Monte Carlo Simulation and its purpose.

Monte Carlo Simulation: Uses repeated random iterations to model uncertainty in project variables.
Purpose: Predict the likelihood of cost, schedule, and risk outcomes.

What is the difference between cost and benefit?

• Cost: What you must spend or give up to complete a project.

• Benefit: The value or gain received from the project.

A company is considering replacing its air conditioner. Management has narrowed the

choice to alternatives that offer comparable performance and considerable savings over

their present system. The annual interest rate is 8%. A positive salvage value indicates the

remaining value of an air conditioner. A negative salvage value means the cost of

disposal. Perform an analysis to determine which alternative is better. What is the

benefit-cost ratio of the better alternative? (Hint: Salvage values should be considered

as a cost category; a positive salvage value means a reduction to the initial cost and a

negative salvage value means that the company needs to pay for the disposal and

should be added to the initial cost) (5 pts)

Note: please always consider the time value of money when performing the calculation

alt 1 alt2

Initial Cost : $7000 $9000

Annual Savings: $1500 $1900

Salvage at 15 YR: $500 -$1250

Life: 15 yr. 15yr.

Alt 2 is better at 1.73 < Alt 1 = 1.88

Delta B/C = 1.3471