PPP Canada Publishes Schematic Design Estimate Guide
PPP Canada today released a Schematic Design Estimate Guide to assist Canadian governments at all levels procuring public infrastructure through P3s. The guide provides detailed advice on developing appropriate schematic designs that support the preparation of accurate and reliable cost estimates for P3 projects.
Because P3 projects encourage design innovation and integration, only minimal design work is undertaken by public authorities ahead of procurement. This means that the resulting cost estimates carry significant contingencies to account for variance. The guide highlights industry best practices aimed at achieving a high degree of accuracy. It addresses design requirements, approaches to the application of contingencies, sector-specific considerations, and the treatment of outputs. Through use of the guide, practitioners will develop cost estimates that are easily verifiable and can be bench marked against existing construction cost data. The guide’s methods also promote a consistent approach to the preparation of cost estimates, allowing for improved cost comparisons over time.
As key inputs to the financial models, cost estimates form the basis of the selection of the preferred delivery option. Accuracy in cost estimates is essential for P3 projects, and research shows that gaps between estimated and actual project costs have been significant. For example, a recent report from the Joint Federal Government/Industry Cost Predictability Taskforce examining traditional procured projects found that “40% of tenders had low bids that varied, either up or down, by more than 30% from the pre-tender estimate and fewer than 20% of tenders had bids within 10% of the estimate.” Variations were determined to be independent of market bidding behavior and were primarily influenced by the techniques used to forecast project costs.
Source: Joint Federal Government / Industry Cost Predictability Taskforce (2012), Guide to Cost Predictability in Construction: An Analysis of Issues Affecting the Accuracy of Construction Cost Estimates.