Online Estimating Guide - Background
Key Points
Structural steelwork needs to be measured in a manner appropriate to the value adding processes used in its manufacture. This will result in a more confident and just basis for trading the product in the building construction market.
Quantity surveying as a measurement profession and estimating in general, plays an important role in society and commerce by assisting in the determination and application of appropriate measures for valuing goods and services exchanged in the construction market place.
Fabricated structural steelwork is a value added product. It is a customised building product requiring skilled management, labour and machine time to be added to the basic steel sections.
Advances have been made in Australia and New Zealand towards assisting measurement professionals utilise a more elemental value-added cost approach to estimating structural steel work.
The Role of Estimating in The Development of the Building Construction Market
Estimating plays a pivotal role in the development of commerce in the building construction market.
The Royal Institution of Chartered Surveyors was established in Britain in1868. However the role of measurement professionals in society goes back along way further.
In ancient civilisations the maintenance of standards of measurement was considered a sacred and priestly duty. It is recorded in the Bible that the people of the priestly tribe of Levi , "... were set in charge of ... all measurements of quantity and size"( 2 Chron 23:28 -29).
A high degree of importance was therefore attached to the role that standards of measurement had in encouraging fair and confident trading in the market place and society.
It was recognised that both the buyer and the seller need to have confidence in how a product is measured and valued for free enterprise to flourish. As the proverb says, "A false balance is an abomination to the Lord; But a just weight is His delight." (Proverbs 11:1)
In modern New Zealand society, measurement in commerce is still a very important issue. There is still a need for terms of measurement to be agreed upon by participants in the market, to allow intelligent and confident trading of goods and services. Industry development and innovation is the result where this need is satisfied. Priests are no longer seen as the primary determiners and maintainers of commercial measures. In the construction industry this role has been taken on, to a large extent, by Quantity Surveyors.
Today's Quantity Surveyor and estimator in the New Zealand construction industry, therefore has a key part to play in helping the market set and apply equitable measurement standards for construction products.
Fabricated Structural Steelwork is an Advanced Value Added Product
Steel mills produce plate and sections that are sold in fairly consistent $/tonne rates for particular product types. However steelwork fabricators utilise various manufacturing processes such as cutting, drilling, punching, cropping, welding, grinding, and painting to produce a customised building component from the steel mill's product.
The increasing development and application of computer based design and manufacturing technology in New Zealand, is changing the way steelwork is being produced and increasing the scope for its application. New Zealand has some innovative fabricators whom are as advanced in these new technologies as any in the world.
The $/tonne Method is a Very Rough Order of Cost Approach.
A $/tonne method of measuring and estimating structural steelwork, based on past project data, cannot be relied on to give more than a very rough order of cost estimate. As structural steelwork options are being increasingly evaluated against other building material options, a more accurate and sophisticated approach to steelwork estimating is required.
The $/tonne method does not consistently track the value added processes involved in the production of structural steelwork. Members of differing weights with the same amount of work done on them, are wrongly valued as though they cost the same to produce.
- This leads to many distortions in the way the product is traded.
- The value of the product is not fairly measured.
- It becomes difficult to properly evaluate and negotiate contracts and variations claims.
- Reliable estimates are difficult to prepare at preliminary evaluation stage.
- Distrust between fabricators and contract administrators is almost inevitable.
- The wrong signals are sent to designers and decision makers as to what is good value and what is not.
The lightest design is usually not the most economical. Since the real factors that contribute to the cost of fabricated steelwork, are hidden by the $/tonne approach, truly cost effective steel design options are not readily recognised and rewarded by lower estimates at preliminary project evaluation stage.
These distortions introduced by the $/tonne method can act to reduce confidence in trading the product. Therefore steelwork weight is not an appropriate indicator for measuring the value of the fabricated steelwork.
Preliminary Estimates Decide Material Choice
Project material selection decisions are made on the basis of preliminary estimates of the constructed cost of a building's structural frame and flooring systems.
The necessary accuracy for preliminary estimates is increasing. Contingency allowances of no more than 5% are now expected. The $/tonne approach cannot deliver that sort of reliability. The time is right for a more comprehensive basis for measuring value added steelwork.
More reliable estimating also increases the equity and confidence in trading the product. Better competitive comparison of products is possible, encouraging more innovation and product and market development.
Units of Measurement Must Track Value Indicators.
A good measurement system identifies the product's key cost drivers or benefit attributes and tracks them with suitable price indicators .
A similar process is used in Activity Based Cost Accounting practice, where It has been found that the assignment of overhead costs needs to match cost drivers otherwise the wrong signals are sent to managers concerning which products are profit making and which aren't.
The same sort of approach can be applied to the estimation of structural steelwork. The cost drivers in production can be readily identified and indicators assigned to track the costs. These same indicators can then be used as measures of the value added worth of the product in the market.
- In the competitive building construction market, building purchasers value the following benefits:
- Clear span.
- Speed of construction.
- Reliability of preliminary estimates.
- Economy of construction.
- Steelwork fabrication costs can be readily associated with the following work categories:
- Material supply and storage.
- Fabrication of Connections.
- Surface Coatings.
- Transport & Erection.
Recent Developments in Measuring and Pricing Structural Steelwork
In 1996, Watson, Dallas and van der Kreek of BHP Steel, Melbourne in conjunction with Quantity Surveyor Trevor Main, proposed a method for measuring and estimating structural steelwork on a per member basis. In their method the cost components of supply, fabrication, surface coatings and erection are separated out. Typical rates for standard connections and for elemental fabrication processes were listed.
A comprehensive article on their work was published by the Australian Institute of Steel Construction in June 1996 titled, "Costing of Steelwork From Feasibility Through to Completion".
Computerised estimating systems were also investigated by HERA. In 1995 NDJ Systems Ltd were engaged to partially customise COSTCALC, a steel plate fabrication estimating package, for use as a structural steel estimating tool.
The Steel Structures Analysis Service, initiated an industry connection price survey in 1996. The results of which were presented at the February 1997 IPENZ Conference in Wellington.
The first edition of the Structural Steelwork Estimating Guide was developed and launched in June 1998. The guide addressed steel handling cost issues by assessing handling operations for a range of standard connections through an imaginary fabrication workshop with what was seen to be a reasonably typical layout of processing machinery. Connection cost estimates were then generated systematically by calculating both process and handling times.
Conclusion
Fabricated structural steelwork is an important value added building product.
This guide aims to set out a consistent and appropriate method for measuring of steel construction value that will foster confidence, innovation and economy in the New Zealand construction industry.
