Cost Estimating and Cost Management for Marine Construction

Cost estimating is an integral part of engineering, regardless of the discipline or type of project. Costing estimating resources are widely available and seemingly reliable when used for civil, building, and transportation projects. However, the complexities of marine construction projects add a layer of difficulty when it comes to cost estimating, often leading to widespread inaccuracies in budgeting and funding throughout the planning and design process. These complexities can include several factors such as specialized offshore equipment, limited qualified contractors, weather-related contingencies, elevated project risks, and increased potential for differing site conditions. These factors are not well defined or given direction in any one resource and are typically only considered holistically by those with a thorough understanding of means and methods of marine construction, locality characteristics, contract vehicles and funding constraints, bidding environment, and the applicability and limitations of each costing resource. The recent impacts of the COVID-19 pandemic resulted in unprecedented escalations in material costs, with steel prices rising over 70% and lumber prices rising over 300% in a six-month period. The sudden increase in material costs sent owners, contractors, and engineers scrambling to find additional funding and explore alternative design approaches for ongoing projects. Supply chain problems and withdrawals in the labor market exacerbated these issues. While events like this are unpredictable and almost impossible to prepare for, it reinforces the importance of having accurate and detailed engineering estimates, that include appropriate contingencies and adjustment factors that can help account for market fluctuations. Cost estimating, in the planning and design process, and cost management during construction go hand-in-hand, where insufficient detail in contract documents can be buried cost drivers, artificially inflating bid prices or increasing the risk of change orders and contract creep during construction. In addition to providing accurate cost estimates during the planning and design stage, it is equally as important that the same level of detail is carried through to the production of contract documents, to ensure costs are effectively managed during bidding and construction. This paper provides an overview of the different levels of cost estimating; different types and suitability of some of the costing resources available; cost estimating procedures and determination of contingency levels; factors that warrant careful consideration due to their significant impact on the cost of marine projects; and some methods to help improve cost management and cost control during construction.