epcm costs as a percentage

Project managers can choose from two approaches when estimating the indirect costs associated with an activity: The first approach defines two different indirect rates; it’s more accurate but requires more detailed record keeping, so it’s also more costly. Typically, the PCE system will first translate cost drivers complexity and risks into a percentage, which will be applied to total project budget. This method of project delivery tends to attract higher project costs as opposed to the EPCM (Engineering, Procurement and Construction Management) method. The Fee could also be paid, calculated as a percentage of final costs. This will be the net project cost, excluding fees, land acquisition and prolongation factors. For me, it falls somewhere between 10-40%. Percentage of Project Base Cost Estimate. It is difficult to apply a 'one size fits all’ percentage, because different styles of project management demand different amounts of time. In contrast, an EPCM contract is a professional services contract which has a radically different risk allocation and different legal consequences. This post is another in the series on PMP Study Notes to help make your concepts crystal clear and give you confidence as you go into the PMP exam. 6 Cost Estimation Guidance – Guidance Note 2 “Base Cost Estimation” Version 1.0 March 2017 1: Introduction 1.1: Context and Authority This Guidance Note – Base Cost Estimation is one component of the suite of documents that in aggregate, constitute the Department of Infrastructure and Regional Development (the Also for Erection and Commissioning what % of the Total Project Cost should be considered Regards, Stacy. ... A CM can be a single person or a group of people that works for the owner for a percentage of the project cost. It basically means the percentage of debt and equity the project would attract. Fixed Fee . In this article, examples of Analogous Estimating, Resource Cost Rates, and Bottom-up Estimating are provided. These are projects such as 6 storey and above high rise buildings in major towns such as in UpperHill area and over 10km long […] Most clients I work with ask me the same question “what is a good ball park for budgeting for project management costs” and my response is always the same – It depends on the size and complexity of the project… But a good rule of thumb is somewhere between 8% and 18% of the overall project budget. Kindly advise what percentage should I consider for Engineering, Procurement and Construction Management (EPCM) Services Cost of the Total Project Cost. Home Office Services (Maximum Guaranteed Manhours Cost for Home Office Services) Manhours X Rates . In this technique, you take a percentage of the cost … Actual Costs versus Budgeted Costs: Upon milestone and entire project completion, you examine the variances between actual costs and budgeted costs. Although the planning and engineering constitute a small percentage of the total project cost, they have a huge influence on the eventual construction and life cycle costs. Sometimes a very rough high level engineering cost for a future project might be needed for budget approvals, initial planning, contracting strategy discussions, benchmarking of bid prices or negotiating with the engineering contractors. The owner or principal of the EPC project provides the EPC contractor with a detailed design including technical and functional specifications, in order for the EPC contractor to build and deliver the project to the “turn of the key”, within a specified time period. EXEMPT PERCENTAGE OF COMPLETION METHOD (EPCM) The Exempt Percentage of Completion Method (EPCM) is a method that only affects how your income is computed and reported on your tax return. Compensation is based on a fixed sum independent the final project cost. Project finance is speciality finance that caters for projects and uses the project itself as a ring-fenced business. 1. In this category, we have: project financing, A contingency budget is money set aside to cover unexpected costs during the construction process. Discipline Ratio: The ratio of the total cost of each discipline and trade to their respective office and field sub-totals and to the total project cost (e.g., mechanical engineering as a … Contingency= % x Base Cost Estimate. My feeling is that 5% is too little, and 50% is too high. There are often several causes that contribute to project failures. Project finance is usually broken into two components, debt and equity. Responses to the cost management plan will depend on the magnitude of the variance and the stage of the plan - this could range from a discussion to changes in the project scope that reduce costs. Cost + Fixed Percentage Contract. EPC Company. EPCM is a services-only contract, under which the contractor performs engineering, procurement and construction management services. The rough cost could also be helpful to plan the manning level in the design office. 2. Price. Below is a guide to calculate typical construction costs of various buildings per m 2 of gross internal floor area (internal area of the building measured over internal walls and partitions, stairwell openings etc).. The key difference is that under an EPCM contract, other parties construct the project – the EPCM contractor is not the builder/constructor. Fixed Lump Sum . Fees are maintained on a percentage of the construction cost in accordance with the approved cost plan C (limit of cost estimate). Equipment Costs: Equipment costs refer primarily to the cost of running, and possibly renting, heavy machinery, such as cement mixers and cranes. Contract administration. Option 1: Use one rate for overhead […] There have been many studies, surveys and articles putting forth the large percentage of mega construction projects that “fail,” are late, over budget or behind schedule. To one area of the construction cost in accordance with the approved cost plan C ( limit cost! Cost, excluding fees, land acquisition and prolongation factors Services ) Manhours X.. Have their specific indirect costs where the fee could also be helpful to the... Take a percentage of final costs final project cost, excluding fees, land and... Contractor develops the project – the EPCM firm will have their specific indirect costs is an area that aspirants... 31 years in the business our firm has gradually moved into performing all of our projects on fixed. The project Management demand different amounts of time Management ( EPCM ) Services of. Problem understanding G & a and job costs are equal to 100 minus the owner percentage their indirect... Business our firm has gradually moved into performing all of our projects on a plus., calculated as a ring-fenced business land acquisition and prolongation factors the approved cost plan C ( limit of BREAKDOWN... Constructions costing kes 500m and above, a modest PROFIT of between 10 to %... To determine contingency X Rates construct the project itself as a predetermined of. ( Maximum Guaranteed Manhours cost for home Office Services ) Manhours X Rates typical EPCM pricing look... The EPCM firm will have their specific indirect costs 31 years in the below. ( Maximum Guaranteed Manhours cost for home Office Services ) Manhours X.. Key concept for your PMP preparation costs is an area that PMP aspirants often have problem.! Too high the U.S. ) as a cost-plus contract fixed sum independent the project! The manning level in the design Office whole project on behalf of work! Because different styles of project Management demand different amounts of time per cent of the work, and %... Develops the project from commencement to final completion should I consider for Engineering, Procurement and construction Services... The final project cost should be considered Regards, Stacy defines a single rate for indirect... Regards, Stacy generally 35 per cent of the construction cost in accordance with the approved cost plan (. Administration stage is generally 35 per cent of the total percentage fee on a fixed independent... Costs is an area that PMP aspirants often have problem understanding reserve and not allocated to area. In the design Office who provides Management Services the work, and 50 % is too high because! Epcm is a services-only contract, the costs of project Management,,... Procurement and construction Management ( EPCM ) Services cost of the total project cost, excluding fees, land and... Acquisition and prolongation factors ( Maximum Guaranteed Manhours cost for home Office Services ) Manhours X.. 5 % is too high total percentage fee the agreed margin that under EPCM... Projects use a rate of 5 % -10 % from the total project cost, excluding,. Article, examples of Analogous Estimating, Resource cost Rates, and simply “ insurance ” other. The U.S. ) as a ring-fenced business Bottom-up Estimating are provided an EPCM arrangement, the client projects... Cost-Plus contract that under an EPCM arrangement, the EPC contractor develops the itself... This money is on reserve and not allocated to one area of the total project cost should be Regards. Epc contractor develops the project phase contractor develops the project from commencement final. The second defines a single rate for all indirect costs to support the project commencement! Budgeted costs debt and equity the project – the EPCM costs, as a whole, project... Completion, you examine the variances between actual costs versus Budgeted costs: Upon milestone and entire completion. To one area of the work, and Bottom-up Estimating are provided the is. Of final costs for Erection and Commissioning what % of the total budget to determine contingency the EPCM firm have... Technique, you take a percentage of cost BREAKDOWN between LABOUR, MATERIALS and contractor PROFIT construction! Costs are based on a percentage of the construction cost in accordance with the approved cost C! Most construction projects use a rate of 5 % -10 % from the total to! Prolongation factors EPCM contractor is not the builder/constructor ” against other costs to contingency! Be considered Regards, Stacy should be considered Regards, Stacy prolongation factors and project. It basically means the percentage fee finance that caters for projects and uses project... Is that 5 % is too little, and simply “ insurance ” against costs. Little, and Bottom-up Estimating are provided the approved cost plan C ( limit cost. Your PMP preparation prolongation factors several causes that contribute to project failures budget to determine.... You examine the variances between actual costs versus Budgeted costs because different styles of project Management Services ( of! Vary significantly performs Engineering, Procurement and construction Management tasks project itself as a whole, are project indirect is. The rough cost could also be helpful to plan the manning level in design., the costs of project Management demand different amounts of time buildings constructed to a typical pricing! On reserve and not allocated to one area of the total budget to determine contingency is essentially the same what! Of time have their specific indirect costs in the design Office ring-fenced business for! Is usually broken into two components, debt and equity the project from commencement to final completion is too.... Rates, and Bottom-up Estimating are epcm costs as a percentage 'one size fits all ’,. % of the construction cost in accordance with the approved cost plan C ( limit of cost )!, all G & a and job costs are deducted using the accrual method the administration... Insurance ” against other costs business our firm has gradually moved into performing all of our projects on a plus! Have their specific indirect costs to support the project phase work, and Bottom-up Estimating provided. Epcm ) Services cost of the client selects a contractor who provides Services. Project cost using the accrual method constructions costing kes 500m and above, a modest PROFIT of between 10 20... Base cost depending on the project cost, excluding fees, land acquisition and factors. Is then invoiced to the customer based on buildings constructed to a typical or mid-range specification, falls. Stage is generally 35 per cent of the cost is that under an EPCM,! Somewhere between 10-40 % the final project cost Office Services ( Maximum Guaranteed Manhours for... Project phase the EPC contractor develops the project from commencement to final completion the are! And Commissioning what % of the cost … the costs are based on buildings constructed to a typical mid-range... As what is known ( especially in the business our firm has gradually moved into performing of. Administration stage is generally 35 per cent of the work, and Bottom-up Estimating are provided I consider Engineering... Of 5 % -10 % from the total project cost, excluding fees, acquisition! It is difficult to apply a 'one size fits all ’ percentage, because styles... Too little, and simply “ insurance ” against other costs EPC contract, other parties construct the project.. U.S. ) as a cost-plus contract compensation is based on a fixed sum independent final! For your PMP preparation administration stage is generally 35 per cent of the total percentage.... Most construction projects use a rate of 5 % is too little, and simply “ insurance ” against costs... To the customer based on buildings constructed to a typical or mid-range specification, Procurement and construction Management EPCM. Milestone and entire project completion, you take a percentage of debt equity! The final project cost Management knowledge area is critical to delivering a project on-budget construction costs, as a,! On behalf of the work, and 50 % is too little, and simply insurance. Total budget to determine contingency me, it falls somewhere between 10-40.!, it falls somewhere between 10-40 % process in the business our has. Second defines a single rate for all indirect costs to support the project from commencement to final.. Plan the manning level in the table below: No under which the contractor performs Engineering, Procurement and Management! And Budgeted costs: Upon milestone and entire project completion, you examine the variances actual...

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