To use a leading estimate type

Estimate types enable you to switch between top-down estimates and bottom-up estimates. Initially, project estimation is determined using a top down structure as detailed information of project costs is not available.

As a part of estimating, you create a feasible bid for your customer by calculating the approximate target cost price for your project. You can use this cost amount to allocate the estimate for the required work or the departments involved.

For example, a customer requests for the approximate cost for a luxurious yacht. The shipyard evaluates the request for the quotation. The sales price is determined to be approximately EURO 65 million. The yacht must be built, using the expertise of the Project Management (PM) and the Construction department. The PM department is required for redesigning an existing CAD drawing of a ship, which costs EURO 9 million. The Construction department requires approximately EURO 50 million to build the yacht and a subcontractor is assigned for the yacht's decor.

Specify the following estimates in the Estimate Versions (tpest1100m000) session:

  • Version: 1a Estimate Yacht
  • Version amount: EURO 63 million
  • Profit fee: EURO 3 million
  • Management reserve: EURO 0 million
Note

The distributed amount is displayed as Euro 0 million and the undistributed amount as Euro 60 million.

Top down estimate (usually defined at a later stage of the estimation process):

Define an amount for TOP as EUR 60 million. The distributed amount is EUR 60 million.

The activity structure for building the ship:

  • TOP = The Yacht
  • 01 = Redesigning
  • 02 = Building ship
  • 03 = Decorating

01, 02, and 03 are linked as child activities to the TOP.

To structure the estimate

To create an estimate, the structural element with a top-down leading estimate type is required. In the Structural Elements (tpest1120m000) session, you can define the estimate type as top down or bottom up. The leading estimate type of a structural element determines the method of calculation of the estimate and you can also modify the estimate type.

Enter your top-down estimate in the Estimate Lines (tpest2100m000) session such as the line number, activity, description, estimate type, line level type, and amount in EURO.

Line 5TOPYachtTop downTotal60 million
Line 1001RedesigningTop downTotal9 million
Line 2002Building shipTop downTotal50 million
Line 2503DecoratingTop downTotal1 million

 

Element 03, Line 25, is subcontracted to another company. A request for a quotation is sent to the subcontractor, but the estimate for the cost is EURO 1 million.

Estimate lines

You must specify detailed estimate lines and you must define the entire estimate structure. Child activities, for which more bottom-up information is available, use the Bottom-Up leading estimate type option:

Structural ElementLETLaunch Level TypeCost Level TypeSales Level Type
TOP = The yachttop downdetailtotaltotal
01 = Redesigningtop downdetailtotaltotal
02 = Buildingtop downdetailtotaltotal
03 = Decoratingtop downdetailtotaltotal
011= CAD reworktop downdetailtotaltotal
021= Steelbottom updetaildetailtotal
022= Yard workbottom updetaildetailtotal
023= Enginebottom updetaildetailtotal

 

The structural element 011 is linked to 01. The structural element 021, 022, and 023 are linked to 02. Based on the linking, the 02 Building ship parent activity remains a top-down activity because of expected overhead costs.

Line numberActivityEstimate TypeLine Level TypeAmount in EURO
30021top downtotal30 million
35022top downtotal15 million
40023top downtotal2 million
45011top downtotal5 million
50011top downdetail3 million
55011top downdetail2 million
6002top downcost type (labor)4 million
6502top downcost type (material)46 million

 

Estimate details

In the example, a top-down estimate is used and amounts are allocated. However, the two internal departments involved in this project provide their own estimates for building the yacht. Based on their evaluation, they provide a more detailed calculation. Specify these lines and the related details in the estimate version.

Line numberActivityEstimate TypeLine Level TypeAmount in EURO
70011bottom uptotal5 million
80011bottom updetail2.7 million for engineering
81011bottom updetail0.3 million for project management
85023bottom updetail1 million
90022bottom updetail15 million
95021bottom uptotal40 million
10003bottom updetail0.5 million

 

If you view the details of the activity 011, a top-down total of EURO 5 million is expected. However, if you add the two bottom-up detail lines of 011, that part of the ship adds up to EURO 3 million or 5 million, depending on the Line Level Type. If all required estimate lines are specified, you can aggregate the totals and view the estimate amounts for the leading estimate type. For the formulas, refer to Estimate Lines (tpest2100m000) session.

To use level types

If the leading estimate type (LET) in the Structural Elements (tpest1120m000) session is Bottom Up, you can calculate estimate totals for Total and Detail level types. If the leading estimate type is Top Down for a structural element, you cannot apply level type aggregation, but you can use level types to check the consistency of top-down lines.

Level types for a top-down estimate line:

  • Total
  • Cost Type
  • Detail
  • Other Structures
Top-down level types

In the User Profiles (tppdm0101s000) session, you can define the settings for a consistency check. You can also define, if the check of the Verify Top-Down Estimate Consistency (tpest2220m000) session is performed for each field or each record. Using the Level field types entered in the Estimate Lines (tpest2100m000) session, the check is performed in this order:

  • Total: For the Total level type, the consistency check is done to determine, if the parent’s structural element amount exceeds the structural element amount. Example, Line 10 + Line 20 + Line 25 must be less than or equal to Line 5. In top-down estimating, you must always use the Total line amount.
  • Cost type: For the Cost Type level type, the consistency check is done to determine, if the amount does not exceed the Total amount of the same structural element. Example, Line 60 + Line 65 must be less than or equal to Line 20.
  • Detail: For the Detail option, the consistency check is performed to determine, if the line amounts of the same cost type do not exceed the Cost Type amount with the Total level type. For example, Line 50 + Line 55 must be less than or equal to Line 45.
  • Other Structures: For the Other Structures level type, the consistency check is performed to determine, if the line amount does not exceed the amount of the structural element with the Total level type.
Note

The Cost Type - Detail lines amount check is only performed if you run the Verify Top-Down Estimate Consistency (tpest2220m000) session.

Bottom-up level types

A bottom-up line can only have two level types: Total and Detail. Enter and add the costs, in the Structural Elements (tpest1120m000) session you can determine which level type must be used in the bottom-up estimate. The values of the Cost Level and Sales Level fields determine the lines that are aggregated for cost or sales. The Launch field’s level type determines which estimate lines linked to the defined level type are launched to budgeting. If the level type is set to Total, all estimate lines of that level type are launched to the project budget.

Leading estimate type (LET) calculations

Click Aggregate Totals in the Estimate Lines (tpest2100m000) session, the structural elements’ total amount of the leading estimate type is calculated using the estimate lines. The amount is displayed in the various LET Total fields. If you use bottom-up estimating, the calculation also depends on the settings of the level type in the Structural Elements (tpest1120m000) session. For example, the LET of element 011 is top down and you have three top-down lines for 011 and two bottom-up lines. Consequently, only the top-down lines are used in the LET calculation.

Total level type calculation

In the Estimate Lines (tpest2100m000) session, the calculations of estimate lines totals are displayed. For example, the LET is EURO 60 million; the amount displayed is based on the setting of the view. When the setting of the view is TOP element, the value is displayed in the Top Down Total: EURO 60 million.

The calculation of the Bottom Up structure differs. The structural elements amounts are added (011 + 023 + 022 = 5 + 15 + 1 = EURO 21 million) and the Cost Level field type is used to determine the selected amounts.

For the bottom-up estimating, you can also calculate a total with the Detail level type. If Cost Level field type in the Structural Elements (tpest1120m000) session is set to Detail, the following result is displayed: 3 + 1 + 0 + 15 + 0,5 = EUR 19.5 million.

If you view the bottom-up lines of 011, there is a difference in amount; the Total line amount is an approximate amount, whereas the Detail lines are accurate labor hours. If the Cost Level field type is Detail, the total for 011 is 3 million; based on the combination of 2.7 and 0.3 million that is set for 011.

Detail level-type calculation for leading estimate type (LET):

  • LET of 01 = top down => estimate is EURO 9 million.
  • LET of 021 = bottom up => estimate is EURO 40 or EURO 30 million, depending on the Cost Level field.
  • LET of 03 = top down => estimate is EURO 1 million.

You can use the LET total and the cost total to calculate and recalculate different estimates before you send a bid. The aim is to create a cost estimate. With the same estimate, you can present a sales estimate with the required level of detail.

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