One of the benefits of a Work Breakdown Structure, ( WBS ) , is that it allows for a better appraisal of undertaking costs ; since it breaks down the undertaking into simple tasks/deliverables to which costs can be attached. The constitution of accurate, dependable and believable cost estimations has been a major challenge to Calculators, and, although several grounds are responsible for this, the focal point of this survey is limited to the consequence of calculating cost estimations that are based on a non-standard WBS.
This Paper establishes that there is a strong nexus between a undertaking ‘s cost estimation and its WBS, and besides how this estimation is affected when it is prepared utilizing a defective/non-standard WBS.Statistical analyses were carried out on all the cost estimations associated with each component of the case-study, non-standard WBS for a undertaking, by holding their Standard Deviations calculated. Consequences of these standard divergences were farther used to find their Coefficients of Variation ( CV ) . A sum of 7 WBS elements analysed, and their Coefficients of Variation ranged from 32.6 % to 91.6 % inclusive.Harmonizing to Statistics Canada[ 1 ], any estimation whose Coefficient of Variation is below 16.6 % can be considered dependable for general usage ; those that fall between 16.
6 % and 33.3 % contain high degrees of mistake – and users should be cautioned – while if the CV is greater than 33.3 % , it is deemed to be undependable. When compared with the consequences of the survey, it is really clear that none of the estimations derived utilizing the non-standard WBS is dependable.The usage of standard WBS should be encouraged and adopted for cost appraisal intents. Its benefits have been carefully highlighted in the Paper.Keywords: Cost Estimate, Work Breakdown Structure ( WBS ) , Standard/Non-standard WBS, Variance, Standard Deviation, Coefficient of Variation
7.1 Project Scope and Execution Strategy DevelopmentAppendix A- AACEI Recommended Practice No.
11R-88, Section I-2
A system of best patterns has been laid out, which, when followed, will take to the development of accurate and believable cost estimations. These best patterns represent an overall procedure of established, quotable methods that result in high-quality cost estimations that are both comprehensive and accurate ; and that can be easy and clearly traced, replicated, and updated[ 2 ].Several methods of cost appraisal exist, but the most dependable and accurate is the “ bottom-up ” attack[ 3 ], which relies to a great extent on the undertaking ‘s Work Breakdown Structure ( WBS ) . This shows that there is a strong relationship between a undertaking ‘s WBS and its cost estimation.The WBS simplifies the cost appraisal procedure, as it allows for the dislocation of the undertaking into simple undertakings / deliverables to which costs can be attached. As a cost calculator, the Author has witnessed several disparities in the figures presented as estimations for occupations: figures which are based on extremely faulty WBSs ( a sample of which is shown in this Paper ) .
In a peculiar instance, an Owner asked Contractors offering for a occupation to fix and subject to her a WBS ( based on the work range issued to them ) , before project executing ; contrary to the best pattern where the Owner is supposed to develop a WBS before plan induction[ 4 ]. The effect of this action was that different Contractors prepared different WBSs for the same occupation. Where the WBSs were similar, they did non hold the same sum of deepness or item, since there was no standardization of any sort.
In my position, it is necessary to rectify the wrongs caused by the usage of non-standard WBSs for our undertakings.This Paper seeks to set up that there is a strong nexus between a undertaking ‘s WBS and its cost estimation, and besides demo how the estimation is affected when the WBS is faulty i.e. , non-standard.
Ultimately, the constitution or acceptance of a standardized WBS is seen as a major factor that will assist re-align cost estimations and guarantee an addition in their truths and dependability.An illustration WBS that was prepared for a existent undertaking has been adapted and presented in the paper, together with its associated cost informations. This will be used as a instance survey, and will organize the footing of the treatment.
5. Statement OF THE PROBLEM
One ground for utilizing a WBS is to let for a better appraisal of cost[ 5 ].
It will hence be safe to assume that the budget estimation for a undertaking will be every bit faulty as the WBS used in calculating it. This state of affairs is loaded with hazards, as the possibility of doing errors or skips are high. For the Contractor, the opportunities of losing out in a command procedure will be high, while an Owner will barely hold an accurate baseline WBS on which to compare the monetary values of different bidders.
Cost estimations have been said to function two general intents[ 6 ]: ( a ) they assist the Program Manager to measure the plan ‘s affordability and public presentation against programs, every bit good as usher in the choice of alternate systems and solutions, and ( B ) they support the administration ‘s budget procedure by supplying estimations of the financess needed to expeditiously and successfully put to death a plan. When an estimation can non adequately run into these two demands, it would n’t be advisable to set it to utilize.
6. Methodology OF THE STUDY
The methodological analysis adopted in this paper is a mostly quantitative attack in analyzing the challenges that face the Cost Estimator when set uping the cost of a undertaking that is based on a non-standard WBS.The paper relies on informations from a undertaking which is used as a instance survey. The existent WBS for the undertaking is presented, and the ensuing cost estimations given.
The estimations of both the Owner and the Contractors are presented, from which the Standard Deviation of each WBS component is calculated. Use is so made of the relationship between standard divergence and the Coefficient of Variation, to gauge the dependability of the estimations.The undertaking being reviewed was carried out in the oil and gas industry, in the Niger Delta part of Nigeria.
7. THE WORK BREAKDOWN STRUCTURE AND COST ESTIMATION
7.1 What is a Work Breakdown Structure?
A Work Breakdown Structure ( WBS ) has been defined as “ a tool used to specify and group a undertaking ‘s distinct work elements in a manner that helps form and specify the entire work range of the undertaking ”[ 7 ]. It has been described as “ the basis of every plan ”[ 8 ]due to its importance in saying a plan ‘s demands, specifying the work elements that have to be done in order to develop the plan, and, supplying a platform for placing all the resources and undertakings required to develop the plan ‘s cost estimation.
A WBS breaks down product-oriented elements into a hierarchal construction that shows the relationships between the single elements, and between the elements and the overall terminal merchandise.As a best pattern, a WBS that will be satisfactorily used for cost appraisal intents is created utilizing the 100 % Rule[ 9 ]which states that “ the following degree decomposition of a WBS component ( child degree ) must stand for 100 per centum of the work applicable to the following higher ( parent ) component ”[ 10 ]. This ensures that the costs for all deliverables are identified.
Figure 1: An Example Work Breakdown Structure
WBS for Offshore Field Installations
Offshore Field Installations
Wellhead & A ; Riser Area
Gravity Base Structure
Mud Handling & A ; Drilling Utilities
Beginning: Norsok Standards, Z-014, Rev.
1, October, 2002.
7.2 Types of WBS
There are two chief types of WBS: the Program WBS and the Contract WBS[ 11 ].
7.2.1 The Program ( or Project ) WBS ( PWBS )[ 12 ]
This type of WBS is structured to encompass the full plan or undertaking. Its chief characteristics are:It is normally made up of 3 degrees of merchandises / elements, with all their associated work clearly defined:Degree 1 comprises the full plan or undertaking.
Degree 2 elements represent the major merchandise sections or subdivisions.Degree 3 contains definable constituents, or subsets, of the degree 2 elementsB ) The Owner ‘s control of the PWBS usually stretches up to the top three degrees.degree Celsius ) It is a foundation on which Contractors set up their Contract Work Breakdown Structures ( CWBS ) .
7.2.2 The Contract WBS ( CWBS )
The CWBS is the complete WBS for a specific contract. The Contractor extends the appropriate elements of the PWBS and defines the lower-level merchandises, get downing from Level 4 and working downwards. Its chief characteristics are:it is developed by the contractor in conformity with the contract Statement of Work ( SOW ) .it is made up of the WBS elements for the products/deliverables/services that are the Contractor ‘s duty to bring forth and/or perform.A CWBS provides a dependable and seeable construction that facilitates unvarying planning, assignment of duties, and position coverage.
3 Standard and Non-standard Work Breakdown Structures
A WBS can either be standard or non-standard. A standard WBS has been defined as a “ impersonal work dislocation construction that can be used more than one time and serves as a templet for making operative work dislocation constructions ”[ 13 ].A non-standard WBS is one which is neither impersonal nor can be used as a templet for subsequent operations.
7.3.1 Why standardize a Work Breakdown Structure?
The undermentioned are among the grounds for standardizing a West by south:It helps to simplify the development of the top-level plan WBSIt helps guarantee the systematic aggregation and sharing of informations from common WBS elements across all plans.It provides a footing for Program/Project Managers to hold a better position of a plan ‘s position, and facilitates continual betterment.It allows for more consistent cost estimations and efficient plan executingIt facilitates both the development of cost gauging relationships and allows for the comparing of common cost steps across multiple contractors and plans.It helps the aggregation and rapprochement of contractor cost and proficient informations in a consistent format
2 Examples of Standard Work Breakdown Structures
Examples of standard WBS systems which have gained international prominence include the Norse Standard ( Norsok ) , the Omni Class and the MasterFormat.The Norsok Standards are developed by the Norse crude oil industry to guarantee equal safety, value adding and cost effectivity -for crude oil industry developments and operations, and are intended to replace oil company specifications and serve as mentions in the governments ordinances.The criterions are usually based on recognized international criterions ; nevertheless, proviso was made to include the wide demands of the Norse crude oil industry[ 14 ].MasterFormat: this is the specifications-writing criterion for most commercial edifice design and building undertakings in North America. It lists rubrics and subdivision Numberss for forming informations about building demands, merchandises, and activities.
By standardising such information, MasterFormat facilitates communicating among designers, specifiers, contractors and providers, which helps them run into edifice proprietors ‘ demands, timelines and budgets[ 15 ].The OmniClass Construction Classification System is a new categorization designed to supply a standardized footing for sorting information created and used chiefly in the North America and Europe by architectural, technology and building industries throughout the full installation life rhythm from construct to destruction or re-use, and embracing all of the different types of building that make up the built environment[ 16 ].
4: An Appraisal of the Case Study, Non-standard WBS
Figure 2: The Case Study WBS
WBS for a Piping Construction Undertaking
1.1 Detailed Construction Agenda1.2 Detailed Field Engineering & A ; Drawings, Work Procedures, HSE Plans, Quality Plan, etc.1.3 Material rapprochement for the plants1.
4 Other technology Plants
2.1 Consumables2.2 Shrieking stuffs and all associated adjustments2.3 Flowline support stuffs – home bases, pipes, etc2.4 Shrieking Valves2.5 V-cone Gas metre2.
6 Other stuffs
3.0 Workshop Fabrication Works
3.1 Bobbins3.2 Supports and structural members3.3 NDT3.4 Hydro trial3.
5 Anticorrosion Works3.6 Other prefabrication activities
4.0 Mobilisation & A ; Demobilisation
1 Mobilization of forces and equipment4.2 Mobilization of prefabricated Structures4.3 Demobilization of forces, equipment and stuffs4.4 Other mobilization and demobilization activities
5.0 Site Plants
5.1 Decommissioning plants5.2 Replacement / alteration of the drain lines from thirty to yyy5.
3 Alteration of the shrieking upstream of thirty5.4 Replacement / alteration of the drain lines from palatopharyngoplasty to qqq5.5 Alteration of the lines upriver and downstream of thirty5.6 Valve chamber for new valves5.7 NDT and hydro trial of field dyer’s rockets5.
8Touch-up picture for pipe supports5.9 Pre-commissioning and commissioning plants5.10 Other site plants
6.0 Mobilisation & A ; Demobilisation
6.1 Mobilization of forces and equipment6.2 Mobilization of prefabricated Structures6.3 Demobilization of forces, equipment and stuffs6.4 Other mobilization and demobilization activities
0 As-built Documentation
7.1 As-built drawings and certification7.2 Project Quality Control paperss7.3 Other certificationBeginning: Confidential. Tree agreement by the Author.
The undermentioned defects can be identified in the case-study, non-standard WBS above:The highest degree is Level 3, and its elements do non decently specify the undertakingsThe Level 2 WBS component 4.0 is repeated as 6.0. Omissions, repeats, etc. are effects of non-standardisation.It is a PWBS issued to Contractors for command, without the Contractors fixing their CWBS.
8. DATA PRESENTATION & A ; ANALYSIS
1 Data Presentation
The information for the instance survey undertaking cost appraisal is presented in Table 1 below. The estimations shown are for Level 2 WBS elements as prepared by the Company ( Owner ) and 3 Contractors, A, B and C.
Table 1: Cost Estimates of Level 2 WBS Elementss for the Case-study Project
Cost Estimate ( N ) *
612.0Procurement9.006.7020.4211.853.0Workshop Fabrication Works6.
007.0119.018.164.0Mobilisation & A ; Demobilisation8.
0Site Plants8.0016.6048.679.426.0Mobilisation & A ; Demobilisation02.005.331.
*Currency is the Nigerian Naira, N. The units have been changed to keep confidentiality.
Table 2: Mean Estimates for the Level 2 WBS Elementss
Cost Estimate, x ( N )
Estimate Mean, Aµ
( N )
8511.993.0Workshop Fabrication Works6.
1610.054.0Mobilisation & A ; Demobilisation8.002.0015.871.806.925.
0Mobilisation & A ; Demobilisation02.005.331.252.
065.001.902.99For every WBS component, the Estimate Mean, Aµ is calculated from: Aµ =where n = figure of entries for the WBS componenteleven = the ith point of the WBS component, represented by the several estimations for each company
8.2 Data Analysis
1 Discrepancy of the Estimates
The Variance, I?2, for each WBS component is calculated in Tables 3 and 4 below, where:I?2 = a?‘ ( x-Aµ ) 2, n = 4
Table 3: Discrepancy of the Estimates ( 1 )
ten ( N )
Estimate Mean, Aµ
( N )
( X-Aµ )
99-5.298.43-0.14Workshop Fabrication Works6.007.0119.018.
96-1.89Mobilisation & A ; Demobilisation8.002.0015.
25Mobilisation & A ; Demobilisation02.005.331.252.15-2.15-0.153.
Table 4: Discrepancy of the Estimates ( 2 )
( X-Aµ )
( X-Aµ ) 2
= a?‘ ( x-Aµ ) 2
00Workshop Fabrication Works-4.05-3.048.96-1.8916.409.2480.
283.5727.37Mobilisation & A ; Demobilisation1.08-4.928.95-5.121.
00126.56271.91Mobilisation & A ; Demobilisation-2.15-0.
8.2.2 Standard Deviation of the Estimates
Standard Deviation, I? , is calculated as the square root of Variance.
I? = [ I?2 ] 1/2 = [ a?‘ ( x-Aµ ) ] 1/2
Table 5: Standard Deviation of the Estimates
West by south
Estimate Mean Aµ
I? = [ I?2 ] 1/2
203.0Workshop Fabrication Works10.0527.375.234.0Mobilisation & A ; Demobilisation6.
0Mobilisation & A ; Demobilisation2.153.891.977.0As-built Documentation2.991.521.
8.2.3 Coefficients of Variation of the Estimates
The Coefficient of Variance, CV, calculated for each WBS component is given as the ratio of SD to the mean expressed as a per centum ; i.e. :
CV = ( 100 ) %
Calculated values for CV are shown in Table 6 below.
Table 6: Coefficients of Variation for the WBS Elementss
I? = [ I?2 ] 1/2
Coefficient of Variation
CV = ( 100 ) %
4 %3.0Workshop Fabrication Works10.055.
2352.0 %4.0Mobilisation & A ; Demobilisation6.925.7482.9 %5.0Site Plants20.6716.
4979.8 %6.0Mobilisation & A ; Demobilisation2.151.9791.6 %7.
0As-built Documentation2.991.2341.1 %
9. RESULTS & A ; INTERPRETATION OF THE STUDY
9.1 Consequences of the Study
The consequences of the survey can be summarized in the Table below:
Table 7: Summary of the Consequences
ten ( N )
Estimate Mean, Aµ
( N )
( N ) 2
Standard Deviation, I? ( N )
Coefficient of Variation,
1.0Engineering6.003.147.003.614.942.591.6132.6 %2.0Procurement9.006.7020.4211.8511.9927.005.2043.4 %3.0Workshop Fabrication Works6.007.0119.018.1610.0527.375.2352.0 %4.0Mobilisation & A ; Demobilisation8.002.0015.871.806.9232.925.7482.9 %5.0Site Plants8.0016.6048.679.4220.67271.9116.4979.8 %6.0Mobilisation & A ; Demobilisation02.005.318.104.22.1681.9791.6 %7.0As-built Documentation3.002.065.001.902.991.521.2341.1 %
9.2 Interpretation of Consequences
Standard Deviation is a step of the scattering of informations from the mean value[ 17 ], and varies straight as the grade of scattering of the information set. As can be seen for the values of SD derived for this survey ( Table 5 ) , the estimations for As-built Documentation have the smallest SD ( hence the least scattering or spread from the mean ) , while those for Site Works have the largest SD ( hence the most scattering or spread from the mean ) .TheA coefficient of variationA is really utile in leting a comparing of the grade of fluctuation from between informations sets, irrespective of the difference in their agencies[ 18 ]. The undermentioned statements are true refering the CVs of estimations[ 19 ]:Estimates with a CV less than 16.6 % are considered dependable for general usage.Estimates with a CV between 16.6 % and 33.3 % contain high degrees of mistake, and users should be warned consequently.Estimates with a CV higher than 33.3 % are deemed to be undependable.It can been seen from Sections 10.1 and 10.2 above that the deliberate values of CV for the WBS elements range from 32.6 % to 91.6 % , and that when the consequences are interpreted based on the three statements above, the undermentioned illations can be made:There is no value of CV that is less than 16.6 % , hence, none of the estimations can be said to be dependable.The CV for Engineering ( 32.6 % ) has a really high degree of mistake and can non be trusted. Its usage should be accompanied by a warning about these high degrees of mistake.The CVs of all other WBS elements ( apart from Engineering ) , are higher than 33.3 % , considered to be undependable, and can non be said to hold been decently estimated.From the foregoing, it is really apparent that none of the estimations under reappraisal is dependable plenty to be used with any sensible grade of assurance.
10. Conclusion & A ; Recommendations
The constitution of a believable cost estimation utilizing a non-standardised WBS remains a really great challenge. It is my sentiment that the usage of a standard WBS should non merely be encouraged, but should besides be adopted for cost appraisal intents.Standardization of WBSs, allows for ( I ) cost and agenda coverage to be made in a consistent mode and guarantee standard formats across the full portfolio of undertakings ( two ) obtaining cost and agenda informations by any degree of direction at whatever degree as pertains to their demands ( three ) development of a database to consolidate on the consistent and dependable cost and agenda informations[ 20 ].Cost estimations are fundamentally anticipations of attempts, stuffs and clip, and should be subjected to statistical ratings to happen out their most likely truths.
11. Restriction OF THE STUDY
The survey looked merely at the consequence of utilizing a non-standardised WBs and how it affects the constitution of cost estimations. It does non see other factors that may every bit impact the estimations.The statistical population, n, for the analysis is 4. This is instead little, and may hold affected the quality of the consequences. However, the presented figures and WBS are existent.The survey is limited to initial estimations. Life rhythm costs are non considered.