Project Location Factor Tool

By Carlos Alberto Fuenmayor Rincón

HAVE YOU EVER NEEDED TO JUSTIFY A WELL SUPPORTED LOCATION FACTOR CALCULATION ?

To develop a project cost estimation in a different country of origin from the database available on materials, equipment and labor, a good Cost Estimator should be familiar with the main sources of data on the costs of their own country, but this is not always the case for estimate databases applicable to other nations. While cost engineers and project managers are generally very familiar with the main sources of data on the costs of their own country, they are often not aware of the useful sources of cost data and related information elsewhere. This problem is compounded by the lack of time to conduct a proper search, publications in several languages, and the lack of information on the key factors that can affect the estimate for certain geographical areas.

If the database used in your cost estimate is a USGC (Gulf of the United States) or GOM (Gulf of Mexico) reference and your Project will be developed in another region-country, an International Project location factor must be applied. This is one of the issues that frequently appears when we handle databases with USGC reference, the change in the relative levels of construction costs-productivities within different countries, makes this issue of vital importance when starting a cost estimation.

Much of this fluctuation between the reference database and the local costs can be attributed to the characteristics of the labor component in the locality, both in productivity and in the monetary value of the mix of labor crew, together with changes in exchange rates for the majority of countries. The world currencies compared with reference value (dollar), on the other hand it is always well known how the "political-social-bureaucracy-cultural behavior" factors contribute greatly in this context.

The model shown below intent to calculate a "Factor" to be added in your Project Cost Estimation" supported with a methodology and reliable data, suitable to be included in your CE report with an International Standard approach. Averages have been weighted and adjusted for anticipated economic conditions to arrive at the forecasted data. Assumptions have been modelated with a default value to be adjusted by the Estimator, or much better by an ad hoc task team, in order to obtain a more accurate result when having better and updated information from the local source.

My Recommendation as Estimator

Involving the Project Team in the calculation of such a "Subjective Factor", you share and distribute this huge responsibility and everybody is happy with the final "Factor"..... CAF

WORLDWIDE LOCATION FACTOR MODEL

PARAMETERS AFFECTING THE LOCATION FACTOR

1. COUNTRY DRIVERS PARAMETERS
2. PROJECT PERFORMANCE PARAMETERS

• Procurement
• Labor-Construction
• Engineering-Design-PM

How this model measures the Location Factor?

This model is based in 4 steps that represent the main targets to focus in the process of assessment, there are some similar methodologies .... but this has my particular style:

1. Country General Drivers
2. Procurement
3. Labor-Construction
4. Engineering-Design-PM

STEP 1 - Parameters affecting the measurement of the Location Factor (Country Drivers)

All these parameter are assessed in a sort of grouping or ranking, where the criteria is based on a list provided by  The World Bank - TheGlobalEconomy.com

(Example) -------->

STEP 2 - PROCUREMENT FACTOR

LOGISTIC PARAMETERS ASSESSMENT:

* This action is highly recommendable to be performed by an ad hoc task team in order to have a consensus result.

According to the findings in our searchings, there are many procurement parameters affecting procurement and supply chain performance, these include, bureaucracy and time consuming methods of procurement, training on cost effectiveness and timely delivery of projects, stakeholders involvement, failure to involve suppliers at the early design and specification stage leading to frequent changes of design and specifications and cancellation of contracts, etc.

We have selected the following drivers or criteria to measure or evaluate the Procurement and Logistic Factor:

• Procurement and Supply Chain Practices Evaluation
• Level of Cooperation from Supplier Evaluation
• Quality of Company’s Procurement Evaluation

All these parameter are assessed in a sort of grouping or ranking, where the criteria is based on a list provided by  The World Bank - TheGlobalEconomy.com

(Example) -------->

DUTY, FREIGHT & VAT ASSESSMENT:

It contains all related to the cost of local material as a percent of cost at the country-city base location

• Duty Value in %  compared with USGC
• Freight Value in %  compared with USGC
• VAT Value in %  compared with USGC

STEP 3 - LABOR / CONSTRUCTION FACTOR

WEIGHT ASSIGNMENT

 * This action is highly recommendable to be performed by an ad hoc task team in order to have a consensus result.

DISCIPLINE FACTOR ASSESSMENT

DISCIPLINES

1.- Earth W. & Civil; 2.- Concrete; 3.- Structural Steel;4.- Architectural; 5.- Mach. & Equip. 6.- Piping; 7.- Electrical; 8.- Inst. & Cont.l Syst; 9.- Paint & Insulation

* This action is highly recommendable to be performed by an ad hoc task team in order to have a consensus result.

Parameters to be applied:

• Lack of material
• Supervision delays
• Rework
• Absenteeism
• Interference

RATES COMPARISON & RATE FACTOR CALCULATION

GENERAL WEIGHT ASSIGNMENT

The locally weighted average craft rate for a construction worker divided by the USGC in U.S. Dollars, which includes Fringe Benefits, Overhead and Profit .

USGCRate= XXXX

AVERAGE LABOR PERFORMANCE FACTOR RATIO (LPFR):

This includes the average labor performance factor attained in the country as a percent of that for the base location open shop operation. This reflects typical labor saving construction tools and equipment used in the host country.

USGCPF= 1.00

STEP 4 - DESIGN & PM FACTOR

WEIGHT ASSIGNMENT

 * This action is highly recommendable to be performed by an ad hoc task team in order to have a consensus result.

DISCIPLINE FACTOR ASSESSMENT

DISCIPLINES

Project Engineering; Project Management; Project Control Management; Project Construction Management

* This action is highly recommendable to be performed by an ad hoc task team in order to have a consensus result.

Parameters to be applied:

• Decision Making
• Communication and commitment
• Project management ethics
• PM Autonomy
• Tech. and behavior competition
• Project office support

WEIGHTED AVERAGE DESIGN & PM RATE RATIO (DRR):

The locally weighted average rate for Design & PM divided by the USGC in U.S. Dollars, which includes Fringe Benefits, Overhead and Profit .

USGCDRate= XXXX

AVERAGE DESIGN PERFORMANCE FACTOR RATIO (DPFR):

This includes the average Design performance factor attained in the country as a percent of that for the base location Engineering & Design.

USGCDPF= 1.00

OUTPUT REPORTS