This is the second post in a string of three that will look at how to develop a budget for implementing an improvement you have identified in the course of a retrocommissioning project. The first post looked at how you can leverage:
- The utility data for a facility along with
- The LNBL commissioning cost benefit report, and
- The Owner’s financial metrics, and
- Clues you observe when you walk the facility the first time,
all tied together by your personal engineering savvy to come up with big picture ranges for the savings potential potential and the potential implementation budget for an existing building commissioning project.
In this post, I will look at some of the techniques I use to develop implementation budgets for the individual measures as I identify them. In the next post, which is currently the last one I anticipate in the series, I will focus on how to develop costs for the control work that usually is part and parcel of most of the improvements we make.
These links will jump you to a specific topic of interest so you don’t have to read the entire post if something in the list below catches your eye. Each major section has a link that will bring you back here at the end of it.
- It’s an Estimate, not an Exactamate
- Cost Projection Components
- Developing Hardware Installation Costs
- An Example
It’s an Estimate, not an Exactamate
At one point in my career, I worked for Murphy Company, a mechanical contractor in the St. Louis area. The title for this section are words I frequently heard Pat Murphy (the lead estimator) say to us younger folks. I think its stuck with me because it gave me some perspective on what I really was trying to do at the point in a project were I was establishing what it might cost to do something.
If you’ve never done an estimate before, doing one can seem pretty overwhelming. After all, how can I possibly know how much it will cost to weld together a bunch of 12 inch schedule 40 pipe and fittings when the only welding I have ever done is weld aircraft structural tubing, something I learned to do to get my airframe and power plant mechanic’s license years ago?
And what about the cost of all of that stuff? Its not like there is a welded schedule 40 pipe aisle at Home Depot and Lowes where I can go to compare prices.
Fortunately, over the years, I have discovered there are a number of resources available that can help solve the problem. And remembering Pat’s mantra has always been helpful to me as I learned to use them. To some extent, Pat was saying that what mattered was that the price we put together reflected the requirements of the documents we were bidding with enough margin for error to cover us if one of the details was different than what we understood it to be at the time of the bid.
For a a run of 12 inch welded pipe, that meant we needed to have a pretty accurate count on the number of fittings because that is were the cost was in terms of materials and the labor associated with the welds. Whether or not the run was 41 feet long, 40 feet long 40 feet 8 and 3/4 inches long really didn’t matter.
Elevation, on the other had, was pretty important because the higher the pipe was, the more challenging it was going to be to put it in for a number of reasons including the potential need for lifts, safety requirements that became more stringent as the elevation increased and the nature of the seismic restraints. I could go on but I think you might be getting the idea.
Until you have done it for a while it can be really easy to spend a lot of time on things that are not that important when you are doing an estimate. I remember one time getting all wrapped up in figuring out how many feet of pneumatic tubing I would need with the red color code stripe vs. the blue color code stripe vs. the green color code stripe, etc.
I got myself there because when I called to get a price, the guy at the other end of the phone asked which color I needed because he needed to look up the price based on that since each color was a different part number. So, I dutifully said I would call him back after I figured that out.
Turned out that it was all the same price, just a different part number, and maybe a different availability. Since we didn’t even have the job yet, all I needed was how many feet of tubing, period; it was an estimate.
Where it turned into an exactamate was when we actually got the job and had to order the materials. Now knowing how much of each color was a bit more important, especially since the specs required color coded bundles and some of the stuff was out of stock.
But even then, ending up with 100 extra feet of something that cost about $.07 per foot was not going to be the end of the world on a $150,000 control project, especially if I spent several hours figuring that out.
So for now, we are going to be talking about developing budget estimate numbers, not firm prices. For one thing, unless you are going to do the actual work, you will likely turn to a contractor to give you a firm price. At that point, your role will be to develop a document to define the work so the contractor can price the work. But to get to that point, you need to understand how to come up with the budget in the first place, which is the point of this post.
At some point, I may write something about how to develop scopes of work to obtain the firm quotes that then can be used to define a purchase order. It is not unusual to be asked to do that in this business. And that is an important skill to develop in order to ensure that you get what you need.
But it can also take quite a bit of effort. So before going to that step, we need to understand a technique that will allow us to determine conservative project costs in a timely manner so we can run the cost benefit numbers out.
If the project pans out, then the extra effort to define the scope and get firm pricing will be warranted. But if the project does not pan out, you may find that you spent a lot of time and effort developing a scope of work that you have no immediate need for. And you would have caused the folks you asked to respond to it to do the same, so their time is also wasted.
Cost Projection Components
Before getting into the techniques I use to get an actual price for something, I though it might be good to touch on what your cost projection should include.
The Parts and Pieces
This component may seem fairly obvious, but there are some details that you need to be sure somebody has covered which may not be so obvious.
Does the Price Include the Hardware?
That may seem like a dumb question. But, if you are asking a contractor for a price and didn’t tell them that you expected them to include the cost of the equipment in their price, they may have assumed you were providing it for them.
Have Applicable Taxes Been Included?
Here in Oregon, we don’t have a sales tax, so a lot of the quotes I get from local representatives do not include tax. If I am going to apply them to a project in a different state then I need to add something to cover the tax.
Has shipping been included?
The cost to get a network card for a condensing boiler shipped cross-country probably won’t break the bank if you forgot to include it in the estimate. But the cost to ship a new condensing boiler across the country could be a problem if you forgot to include it.
Does the Price Include Installation?
Typically, a vendor quote will not include installation. But, for example, I know several filter representatives who think of themselves as selling clean air, not just filters. So when you get a quote from them its for an installed filter in the frame in your air handling unit with the old filter removed from the site, and the frames inspected for integrity with minor repairs to seals made as needed and general clean-up in the filter plenum.
Their competition is often quoting the price of a pallet of filters delivered to your loading dock. That is obviously a big difference and if you didn’t realize why, you might base your budget on the low price thinking you were getting the service included with the high price and then be in trouble.
Does the Price Include any Additional Work Required to Support the Parts and Pieces That Are Your Primary Focus?
Let’s say you ran into some oversized pumps and, when you did the analysis of your options for optimizing them, the one with the best energy savings was to add a new pump that was selected for peak efficiency at the actual operating conditions the system sees based on your functional testing.
When you are exploring the cost for that option, it is important that you recognize that there is the cost of the pump, then there is the cost of the installed pump. In the picture below, for those who are not familiar, the pumps are the round red things sitting on the concrete pad with the pipes connected to them. The installed pump is that and everything connected to them, including the VSDs on the wall in the background.
The list of things required to install the pump includes:
- The pump
- A maintenance pad
- Pipes and fittings
- Seismic restraints
- Service valves and balancing valves
- A check valve
- Trim for the pump (gauges, drains, vents)
- Conduit and wire
- Electrical distribution hardware at the distribution panel board like a main switch and fuses or circuit breaker if there are no spares
- A local disconnect if the pump is not with-in line of sight of the main switch
- A variable speed drive if your application requires one
- Control system hardware to start and stop the pump and perform any other functions like prove it is running and control its speed.
- Control system software to integrate the pump into the operating sequence of the system it serves.
When you add in all of the items on the preceding list, the cost of the installed pump will certainly be significantly more than the cost of the pump. Further on in the post, there is an example of the actual take-off and pricing for just such an installation if you want to see what that looks like. My point here is that even though we are talking about estimates, not an exactamates, the price you use still has to be a reasonable reflection of what your feature is going to cost. Otherwise, you may make a bad decision.
Incidentally, you may be surprised to learn that even with all of those added costs, a right sized pump addition can still be attractive relative to the other options, especially if you look at it from a life cycle cost perspective. This table is from a slide set that does the math on just such an example from past project where I looked at a number of different options (if you want to see the entire case study, it is available on my Google Drive).
As you can see, even though the installed pump was the most expensive option, it also provided the best energy savings and still had an attractive simple payback. But if you had done the analysis and only used the cost of the pump, not the installed pump, you would have significantly overstated the savings and payback; The cost would have been about 25% of the number in the slide and the simple payback would have looked about the same as the impeller trim.
If the Owner had selected the project for implementation on that basis, they could have become quickly disillusioned with you and the project when it came in at 4 times your anticipated cost, even though at that price, it has what many would consider an attractive simple payback and ROI. As a result, in their disappointment (and perhaps shaken confidence in you), the Owner may elect to walk away from the project.
In addition, for the case of the example, the EBCx project was being implemented under a utility program that, in addition to paying for the engineering, would buy down simply paybacks if they were attractive but over two years. In return, the Owner was obligated to do any project with a simple payback that was less than two years with-out a buy down.
So, in this case, had the Owner selected the pump replacement, option and then had it come in at four times their anticipated cost, they may have lost the opportunity to have the payback bought down and could legally be obligated to do the work anyway because of the agreement they signed.
Does the Price Include any Overtime Work that May be Required Due to the Nature of the Facility?
If you are doing work in a mission critical facility like a hospital or data center or clean room, you may need to make the changes you are proposing during non-normal working hours. For example, when I was a facilities engineer at Komatsu’s silicon wafer fab in Hillsboro, Oregon we could only make major changes and do service work on systems when the clean rooms were out of production.
That often meant working at night or on the weekend. If they were running three shifts, seven days a week, we usually had to do the work during holiday outages (meaning while everyone else was having thanksgiving dinner, you were trying to figure out why the interlock wiring change you made didn’t work because the system had to be up and running by midnight so the clean room could go into production when the Friday morning shift arrived)
In putting your proposal together, you need to be aware of these issues and make sure they are reflected in your cost projection. So be sure that you discuss what you think needs to happen with the operating team so they can advise you regarding when a particular system can be taken out of service for modification.
Does the Price Include Desirable Options and Features?
Most of the equipment we use has standard features and optional features. As a result, it’s important to make sure that you have included any necessary or desirable options in your cost projection.
For example, the manufacturer’s standard product offering for a VFD may be just fine for a heating hot water pump in the boiler room of a strip mall where, if the building gets cold, they call the service contractor. But if that same VFD was going to be applied to the cooling tower fan serving the towers for a full service hotel, then the following optional features may be desirable or even mandatory.
- A weather proof enclosure with a cooling system (to keep the drive electronics from overheating on a hot, sunny day) and a heating system (to prevent condensation in and on the electronics on a cool foggy morning).
- A bypass contactor to allow the operators to keep the cooling tower running even if the drive electronics had failed.
- A network card to allow onboard diagnostics to be picked up by the control system via a pair of wires instead of multiple physical points.
Does the Price Include Mobilization?
Mobilization is a term that contractors use to reflect the fact that there is more to doing the work associated with a project than the work itself. For instance, I recently did a blog post about system effect where you could significantly reduce the static in a system by changing the duct fitting on the discharge of the fan as illustrated below (existing condition first, then the desired change).
The cost of the tin itself was about $ 1,500 – $2,000 to provide the materials and fabricate the replacement fitting. The problem is, with a duct fitting like this, you just don’t drive up to a project site, walk in the door, and plop it into the system. You have to:
- Get the project team together an up to speed. This is a large piece of galvanized steel so its bulky and heavy. It will take at least two guys in the field to do the work. And even if it were smaller and lighter,work rules may require more than one person to do the work if a fire watch is need during welding operations, etc..
- Build the fitting (the $1,500 – $2,000 part mentioned above).
- Coordinate with the Owner for a time to do the work. The system will likely be out of service for a day, which may mean you have to do the work at night or over the weekend.
- Show up at the project site.
- Set up your work area, including getting any power for tool like welders and things like that in place. Tapping a panel to get power for a welder will likely require the services of an electrician unless the Owner has someone in house that can make the connection for you.
- Make sure the duct leaving the existing fitting is supported so that when you pull the fitting out, the duct downstream does not fall down.
- Pull out the old fitting and dispose of it. Note that if this work is occurring in down town San Francisco, you probably have costs associated with parking your dump truck or pick-up truck outside the building so you can get to the new fitting, get to your tools, toss in the old fitting, etc. This is in contrast with what you would have to deal with if the work was being done at a school where you could just park outside the mechanical room in the school parking lot.
- Get the new fitting into the facility; not as easy as it sounds. For instance, if the AHU is on the roof, you need a crane. Or you need to bring the fitting into the building in pieces that are mall enough to fit through a single width door and/or into an elevator and/or up a stair well. The weight of the pieces will come into play when you are figuring this out because a crew of two or three people needs to be able to lift and maneuver the fitting through the maze to the roof.
- Install the new fitting, including bolting or otherwise connecting it to the system, sealing the joints, supporting it properly (including any necessary seismic restraints),and possibly painting it if that is the standard in the facility.
- Installing insulation if the fitting was externally insulated, including patching the existing insulation where it meets up with the new insulation you are adding.
- Remove your equipment from the work area.
- Clean up the work area.
- Go have a beer (or a nice Cabernet). (Probably not in the price but I have bought a few drinks at the end of the day as a thank you for a job well done).
These costs are not insignificant. In this particular case, the installed cost of the fitting was going to be in the $8,000 – $10,000 range as a result of factors like I outlined above, so a multiplier of 3 to 4 relative to the actual cost of the fitting itself.
Of course, if you were doing a lot of ductwork, that would all change because you would only be mobilizing and demobilizing once and at some point the price of the tin would become the predominant part of the cost. But either way, there will be mobilization costs associated with doing work like this.
The Labor to Install the Parts and Pieces
I covered this fairly well in what I outlined above. But the point I wanted to make here is that even a simple thing like making a control system modification will require that somebody do the work. If you do the work yourself, there is the cost of your time. If the Owner has someone on staff that can do the work, they may have to bill those hours to a project which, in turn, needs to be supported by a budget.
Its also important to remember that labor rates can vary significantly across the country. So, if you are projecting a price for something in San Francisco, California based on a figure for an identical piece of work in that you recently completed in Cape Girardeau, Missouri, you probably need to adjust the labor costs to reflect the higher wage rates on the West Coast, where the cost of living is higher. You probably also need to adjust the mobilization costs because my bet is that its easier and cheaper to park in Cape Girardeau than in San Francisco.
Shipping and Taxes
I covered these fairly well above also. What I wanted to highlight here is to caution that if you are using a price from Project A to project the price for Project B, then you may need to add an adjustment factor to reflect different tax rates or shipping distances if the ones for Project B are significantly different from those associated with Project A.
Engineering and Technical Support
Most of the things want to do to implement a retrocommissioning improvement will require some sort of technical support up front if they are doing to succeed. If nothing else, someone needs to write down exactly what it is you want to do so that contractors and vendors can give you a price reflecting your intention. This is especially important if you are bidding the work because if you do it properly, it levels the playing field, meaning everyone bidding the project is targeting the delivery of the same installation. So bottom line, including some time in your budget to develop a scope of work is important.
It would also be wise to include some time for a knowledgeable person to review submittals. To my way of thinking, they are critical documents in the delivery cycle, the last cross-check before things move from ideas on paper to pieces of hardware bolted, welded, or otherwise attached to the building and its systems. Catching a problem and making a change in the submittal change can be painful and cost some money. But its not nearly as painful or expensive as discovering the problem after everything is in place. In a similar vein to the preceding, including a bit of time to do some construction observation may be desirable.
Finally, it is wise to include some time for some sort of commissioning process to make sure that the modification you made is in fact delivering the intended function.
One of my very early experiences with this involved doing what we would now call retrocommissioning in a 10 year old, large university library building the design of which included a mechanical time clock similar to this (image courtesy amazon.com).
The clock was wired to shut down non-essential systems at night and reduce the ventilation rate on the systems that remained in operation since the building was unoccupied and the systems were only being operated to protect the contents of the library.
You set the “On” and “Off” times by moving the “trippers” around the dial. The trippers rotated with the dial and a little lever on them engaged another lever which would change the position of the electrical switch which was wired to your control circuit. The silver tripper’s little lever was arranged to close the control circuit to start things up in the morning and may have been the inspiration for the Beatles song “Day Tripper”. (I’m here all week). The black tripper caused the circuit to open up to shut things back down at night and never was immortalized as far as I know (until now I guess).
Ten years after the project had been placed on line, I broke the seal on the little envelope that the trippers were in. It was sitting inside the clock, which was fully wired and did what it was supposed to do if you manually tripped the lever. Problem was, nobody ever installed the trippers, something I would like to think a new construction or ongoing commissioning process might have uncovered.
Some of the equipment we use to implement retrocommissioning measures can be fairly sophisticated. Variable Frequency Drives (VFDs) are a prime example. Budgeting for a factory start-up for this type of equipment can go a long way towards ensuring it functions as you intended.
Overhead and Profit
I’ve seen people cringe when this line item comes up. But the reality is virtually anybody who is in business has overhead; things they need to pay for to stay in business that are not a direct function of any particular project, like accounting functions, reception, etc. And people are generally in business to make a profit. I worked for a not-for-profit for a while (PECI) and while they operated as not-for-profit (and I did a lot to ensure that status), they were not particularly in favor of loosing money.
Sometimes, this line item is rolled up in the numbers you have collected to use for your cost projection. A prime example would be a situation where you asked a contractor for a quote. I would just about guarantee there is overhead and profit in the number they gave you.
In contrast, if you built your projection up based on vendor quotes, estimate of labor hours, etc. then you probably need to include some sort of factor for overhead and profit to reflect what the price will actually look like when you go out to procure the work.
Including some training time in your budget will go a long way towards ensuring that you’re the improvement you made persists. Some retrocommissioning programs actually make this a compliance requirement, which is a good thing.
Typically, the costs associated with documentation are part of what you get when you by a piece of equipment; it should come with manuals, wiring diagrams, operating sequences, etc. especially if you make that part of the requirements when you get to the procurement phase and write the scope of work.
The exceptions are things like special software packages that, for instance, allow you to connect your laptop to a VFD and dump all of the set-up parameters to a file or the video training DVD for the VFD. So, this is another area where you might want to see what the options are and if there are options that are attractive to you and the Owner, include a bit of funding in your cost projection to cover them.
Owners, in particular, large owners often have internal costs that need to be supported by any project they implement. Examples of things that the project budget may need to carry to cover internal Owner costs include:
- Costs to cover project management by someone from the Owner’s staff.
- Costs to cover support from the facilities operation group to coordinate shut-downs, attend training sessions, etc.
- Costs to cover the contracting office to the extent they need to be involved to cover procurement items like advertising for bid, writing a contract, handling pay requests, etc.
- Outside consultant costs (your fees associated with providing commissioning services)
- Equipment costs associated with retrocommissioning program requirements; things like a requirement for whole building metering that does not exist, etc.
- IT department support; frequently, our projects will involve adding Direct Digital Controls (DDC) to a building or system and we may want to explore using the existing IT infrastructure to support the DDC system. Thus, there may be some level of effort required from the Owner’s IT group to support the project.
These items can add up to a significant percentage on top of the actual cost associated with providing the intended feature. So, it is a very good idea to review your proposed implementation strategy with the Owner and gain some insight into what these costs might be so you can include them in your budget.
As humans, we tend to believe things will go better than what will actually happen (my opinion, based on my experience, in particular, my recent transition to a new laptop). Murphy’s law says may opinion is flawed. At the age of 60, I still hope for the best, but include contingency in my cost projections, especially at the point in time we are discussing, where the requirements are not well defined and a lot of things can change between when you have the idea and when the idea becomes a reality.
Frequently, for the budget pricing we are talking about, many of the items on the list above, like taxes or shipping, or optional features have already been rolled into the basic price for what ever item you are discussing by the person you are discussing it with. But it is good to ask the question if you didn’t personally develop the price or have a break down of what is included, just to be sure.
And at this point, you probably don’t have the time, or maybe even the resources to do a detailed takeoff for each of the items I mentioned. But you do need to be sure they are covered in some manner. My guess is that if you are involved with a project to the point where you needed to develop budget numbers, you likely had an inkling that these factors existed and needed to be covered.
I think that’s why doing this the first time can seem so overwhelming; I know that is part of the reason it seemed that way for me early on in my career. Addressing these items and getting comfortable with the budgeting process is how the resources I cover next will come into play. My point so far is just to make you aware of the issues.
Developing Hardware Installation Costs
More often than not, for a retrocommissioning project, we need to identify the cost to install a few hardware items, not an entire system. The latter is a totally different undertaking in terms of developing an estimate all though the same concepts we will be discussing here apply.
But for the purpose of this post, I am going to focus on what it takes to price up the installation of a piece of hardware or make a modification to something, things like adding a Variable Speed Drive (VSD) to a motor or adding a new pump to a system or modifying a duct fitting.
A number of the options I will suggest will involve asking others for assistance. Its important to remember when you do this that essentially, you are asking someone else to help you do your job. But there is one key difference most of the time; you probably have a contract in place covering your time and effort, and they don’t.
Vendors and contractors will have a vested interest in helping you because it gives them an inroad to potential sales or work. Mentors and friends are doing it because of their relationship with you; more on that in a minute. But the point here is to respect people’s time when you are asking for help and let them know you appreciate it.
Using Past Experience
Over the years, I have developed the habit of putting any pricing information I get into a file so I can reference it easily in the future. This information can be a really fast and fairly reliable way to come up with a budget. But there are a few constraints on this technique that you need to recognize.
Compare Apples to Apples
The price you are using as a basis for your projection needs to be for a fairly similar piece of equipment or machinery to the one you are going to apply in your upcoming project. For example basing the budget for:
- Your new project, that requires a 150 hp 208 vac VFD that needs to have a bypass contactor, a harmonic filter and needs to network with a Siemens P2 bus, on
- What you spent for a 5 hp, 480 volt VFD that was used on a non-mission critical machine and was simply set for a fixed speed by the operator,
will probably not work out, at least not with out some adjustment. While both items are VFDs, they are very, very different VFDs.
If you have prices for a number of different VSDs covering a range of sizes and options, then you may be able to some rough approximations of in-between sizes and/or the price of accessories and options. For instance, if you had a price for a 10 hp 460 vac VSD with and with out a bypass, you could turn the added cost of the bypass into a percentage and then apply that to a different drive size.
Or if you had a price for a 10 hp 25 hp and 75 hp 460 vac VSDs with no bypass, you could develop a dollars per hp metric for each one and then use a curve fit through those points to determine the price for an intermediate size in between the others. But you need to be careful when when you start extrapolating data because the relationships may not be linear, and there could even be step changes in the pricing vs. hp curve.
Account for Inflation
Prices tend to increase with time due to inflation. So if you are using an older price, you need to adjust it for that. One tool that comes in very handy for this sort of thing is the United States Bureau of Labor Statistics inflation calculator.
If you enter $1 as the value and pick your reference years, the result can also be used as multiplier to project the difference between the known and the unknown cost.
You need to be a bit cautions when applying an inflation factor to some things. For items that haven’t changed much, things like dampers, pipe, valves fittings, etc. near as I can tell, it will give you a reasonable result.
But for things with a lot of technology in them, things like computers or control systems or variable frequency drives, I think applying the inflation factor to an old price may overstate the current price, perhaps by a lot.
For example, my very first variable speed design used a 40 hp eddy current clutch, not a variable frequency drive. That’s because back in 1981, when I did it, the eddy current clutch cost about $20,000. In contrast, a variable frequency drive cost $50,000 and was about the size of two motor control center sections.
If I enter $50,000 into the inflation calculator with 1981 as the reference year and ask it to tell me what that much money would be worth in 2015, it says that its equivalent to about $129,000 currently. But you can probably buy a really nice 40 hp VFD with a bypass contactor and all the bells and whistles for $8,000 – $15,000 dollars depending on if you were installing it indoors or outdoors.
Draw On the Past Experience of Others
Just because you haven’t purchased a pink with purple polka-dot widget doesn’t mean that someone you know hasn’t. The relationships you develop in your workplace, in training settings, and in the course of life in general can provide access to knowledge that you don’t personally have, especially if the relationship is with an older, more experienced person or a mentor.
Frequently, at least in my experience, you will find mentors are happy to help. They want to help, because they are thrilled that somebody wants to understand, because they like you and believe in you and they like and believe in the industry you both are working in. They probably appreciate that you respect them enough to ask and they may feel it’s the opportunity to return a favor granted to them in the past by a different mentor.
But remember, when you are doing this, you are asking a favor and may be diverting them from a fairly critical task in their universe. You just don’t realize it because you are not currently in their world. These things become apparent many years later.
I can remember numerous times where with the passion and, probably a bit of the arrogance of youth, I burst into Jerry’s or Phil’s or Al’s or Chuck’s or Bill’s or Jim’s or Bud’s office (or the office of any one of the countless people who have helped me out over the years) with a question that was extremely pressing in my little world.
In fact, I recall one very specific instance where, in hindsight, I probably saw Jerry cringe a bit, but then patiently set aside what he was doing and spend the next hour or so explaining something to me and solving my little dilemma. I also remember walking out of the office around 6:30 and saying good night to him as I left totally clueless that the reason he was still sitting there was probably that he had set aside his deadline to address my problem. But his deadline had not gone away.
So don’t be afraid to reach out and ask someone you know and respect if they happen to have an idea about the cost of something you are considering. If they don’t, you still will be richer for the experience because you will have spent a bit of time with them. But be prepared to do that; i.e spend the time, so they know you appreciate them and are not just there for the handouts. I am fortunate enough to be treated this way frequently; a call that starts with a sincere “how’s things in your neck of the woods” and then eventually moves to the technical discussion and then moves back to life in general. And it always makes my day.
Contacting a Vendor
Another way to get a budget price for a piece of hardware is to call a vendor for the product that you are interested in and ask. But tell them that you currently are developing a budget so you need an estimating price, not a firm price. Frequently, they can answer the question over the phone if you have some basic information regarding the size of the equipment and the features you are interested in. And they may even be able to tell you what a typical installed price might be for their particular product.
With regard to the features, I have found it handy to take a look at the product brochure and see what is offered before making the phone call to get an estimating price. That way you can be sure that the budget you set up covers everything you “dream” of having, like support software, training tools, interface cables, etc. I realize this takes a minute or two, but I doubt if any of us would go buy a car, a computer, or some other form of technology without doing a bit of research on what the options where. The equipment purchases we recommend for our clients deserve the same measure of consideration.
If the equipment is something you have had little exposure too, this may be an opportunity to learn something. Most if not all of the really good vendors that I know are happy to come by and show you their products and educate you about them. Its not unusual at all for them to offer to provide a lunch time training session for you and your team, maybe even spring for the pizza.
So, if you have the time, get in touch with a vendor or two, let them know what you are thinking of purchasing, and see what they offer to do to help you make your decision. At a minimum, they should want to talk about their product with you a bit. And, they may want to take you someplace to see it in action, offer brown-bag session, etc.
To my way of thinking, the ones that are anxious to help you understand their products are the ones you will want to work with. While it may be possible to demonstrate that products from two different manufacturers are technically equivalent, competent, timely, knowledgeable support for the product will have a lot to do with your success in using it.
Using a Rule of Thumb
One rule of thumb that has worked for me in this industry is that the hardware will represent 40-60% of the over-all installed cost. So I occasionally project the installed cost from the hardware cost using a rule like that.
Of course, you should be pretty cautions using a rule of thumb like this. And certainly only use it to develop a general range of costs. The approach is probably best applied to simple projects with only a few parts and variables rather than complex projects where a lot of parts and variables can come into play.
Contacting a Contractor
Working with a contractor to develop a budget price will be similar to working with a vendor from your perspective. But for the contractor , it probably is a bit more work than what might have been required of the vendor to answer your question. For instance, they may have to go through the process of contacting a vendor if you haven’t done that already.
Recognize that calling up a contractor and saying:
I need a price for installing a new boiler by tomorrow morning.
is different from calling up a contractor and saying:
I’m working to develop an rough budget to install a new condensing boiler in the hot water plant at the Grand La Dee Da Hotel. I have a pretty good feel for the size and a sketch of how I think it will integrate with the system they have. But I need some help with developing the installation cost. Would you have time to meet me there and take a look. I know from talking to them that you are their preferred contractor.
You could even offer to buy lunch or coffee afterwards to allow some time for discussion. That aside, in the first case, as far as they can tell from the request, you are asking them to do a lot of work on a speculative basis with very little time to react and they may not be the only person you are asking. If they decide to participate in your proposition and provide a meaningful price, they will need to figure out the boiler size, visit the site to understand the constraints and how to integrate it with the system and develop a plan of some sort.
In the second case, you are demonstrating that you have done some work to establish some important metrics and are looking for some help from the contractor to understand something that they have expertise in. And you are indicating that in return for the favor, they will get a first look at the project, perhaps even have the work handed to them because of their favorable relationship with the Owner and the assistance they provide to you.
You may even offer to pay a contractor for their time to help develop a solid estimate for a complex implementation; I have done that on occasion, either because I did not think I had the expertise to assess the impact of some of the physical constraints on the labor required or because I was short of time myself or both.
In a situation where this approach is merited, in my experience, what a contractor will ask for in terms of compensation will be no more than what the time you would have spent trying to do it yourself would have been worth. And on occasion, I have had them thank me for offering and then simply do the work anyway at no charge. Sometimes, people just need to know they are appreciated, that’s all.
Using the Internet
Some of the equipment we use these days has been refined to the point where it is a commodity of sorts. If you go on line, you can easily find pricing for basic items like conduit, wire, pipe, valves, fittings, sensors, actuators, and even variable speed drives. Sometimes, you have to submit a request for a quotation. But frequently, you can fill out a form and get an automated quote right then and there.
You may even be able to set up a regular, repeat order for the same item …
… although personally, I would be a little skeptical of a product like a VFD where they thought I might need to buy a new one every couple of months.
Pricing an Itemized List
If you have the skill, or want to develop it, you may consider developing your own itemized list (frequently called doing a take-off) and putting a price together on that basis. While this will take a bit more time and effort on your part, in terms of over-all timeline, it may be the most expedient approach when compared to getting a price for a vendor or contractor because they have to fit your request into their work flow.
It also will give you a better result than a rule of thumb or pricing from a similar project simply because it will reflect the actual work of your project. Finally, you probably will learn something by doing it. I always do.
When you use this approach in essence, what you are doing is thinking through the process of installing the equipment and making a list of what it will take to do that. So you need to have enough familiarity with what might be involved in the process to make the list.
One way to get that familiarity is experience. Another way is to go look at how someone else did it. For example, if you wanted to add a pump to a system, you might spend some time out in the field looking what is involved with installing a pump. Having done that, you likely would come up with a list similar to the one I used in the discussion earlier in the post.
Many of the items on that list will turn into lists of their own if you do a take-off. For example, the “Pipe and fittings” line item will turn into a list of so many feet of pipe, so many elbows, ,so many tees, so many weldolets, etc.. If there are different sizes of pipe involved, then there will be multiple lists, one for each size.
Once you have your list, the next thing you need to do is populate it with quantities, and costs for each item. While coming up with quantities simply involves counting things, coming up with costs can seem like a daunting task. You probably can use vendor quotes and the internet to fill in the costs for most of the materials and equipment. But assigning labor hours to items on the list can be a bit more challenging. Fortunately, there are pricing guides published that provide itemized tables that include equipment prices, labor hours, labor rates, etc.; everything you need to populate your list.
Years ago, the information was published annually in the form of a book. Now-days, you can still get it that way or you can get it as a CD that has an annual subscription fee, or you can set up an online account with an annual subscription fee that lets you work with the database anywhere you have internet access.
The latter approach is probably the most convenient, but it usually is the most expensive. And, after having tried all three, for my particular needs, I find that buying copies of the books I need every couple of years is the best compromise for the way I use the information, which is occasionally, rather than every day. In fact, I just recently updated my paper copies of the RS Means Mechanical and Electrical cost data.
For someone doing this everyday, I am sure the CD or web based approach would be the hands down winner.
The data is generally organized by specification section and the books include extensive indexes. So, for example, if you were trying to price up a VFD installation, you might start by looking up VFDs in the electrical pricing guide. When you did that, you would find a table like this.
Next, you would look up the price for the conduit, wire, hangers, junction boxes, distribution switch gear, etc. all of which would have a similar table with the data you need, either on a per unit basis, like so many dollars per foot, or on a per item basis, like so many dollars per junction box.
Read closely; sometimes a price will include the basic items required to support it, like hangers, beam clamps, etc. But you may have to use a multiplier provided at the end of the table to accommodate installations above a certain height and other factors like that.
The Mechanical Cost Guide contains similar tables, but for things like pumps and pipes, valves and fittings. Here is an example of a table for steel pipe.
Once you find the item you are looking for, simply copy the relevant data into your spreadsheet or what ever you are using for your tabulation. Then, move on to the next item on your list until you have assigned a value to each of them.
Here is what that looks like for the take-off I did to establish the price for adding the pump in the case study I mentioned previously.
Note that there probably are things you might need a price for that are not part of the current tabulations. For instance, I can find prices for Variable Frequency Drives (VFDs) which are a very common type of Variable Speed Drive (VSD) in my 2015 electrical pricing guide. But so far, I have not found a price for a something like a FluxDrive eddy current clutch, which is an emerging speed control technology in our industry.
Incidentally, if you are curious about what types of VSDs are out there, we take a look at the more common ones in the Class we do on the topic at the Pacific Energy Center. You’ll find a link to the most recent set of slides from that class and others in the links on the sidebar under 03 – Materials from Classes and Presentations.
The first time you try doing an itemized take-off, I would suggest trying it on something fairly simple, like adding a pump or a VFD to a system rather than trying to price an 8,000 ton chiller plant. And until you have done it a few times and developed some confidence in the approach, I would use a bit more contingency than you might otherwise.
And I would read through the information in the pricing guide regarding how to use the tables. You may even want to cross-check your answer against what you get using a rule of thumb. Or, maybe you ask a contractor friend to lunch and show them your estimate and get their input.
The reason I say all of that is the tables are based on average conditions with an average labor rate. So you need to adjust for non-average conditions and the costs in your area. Really complex installations require a lot of expert judgment to understand the true cost of doing the work. I learned this lesson very early on when my first chiller design came in at twice the budget we had projected using an itemized take-off approach.
The reason for that was the access route you had to use to get the chiller in, which involved shutting down a street, a crane, removing the generator cooling duct, a steel ramp over the emergency generator into the below grade mechanical room, tearing up the garden outside the exit point of the generator cooling duct, etc. The bottom line was that the cost just to get the chiller in the room was about as much as the price of the chiller, something I had not considered when I slide a little outline of the chiller on tracing paper over an existing boiler room drawing from the place where the louver was to the place where the chiller went. That proved (maybe) you could get the machine in place one you got it in the room. But it totally understated (ignored) what it took to get it into the room.
Point being that if you go to RS Means or a resource like that, you will not find a table called Installing 390 Ton Chiller in Building-locked Below Grade Hospital Mechanical Room. This is a situation where paying a trusted contractor for their time to help you price the work would be worth its weight in gold.
I’ll close with an example of a cost projection I did recently that used a number of the techniques I described in the course of this post. The project we were contemplating involved replacing four 1949 vintage AHUs that served lecture halls in a physics building in the Bay Area.
The original systems were 100% outdoor air systems with no mechanical cooling. The project started out as a part of a retrocommissioning effort where we wanted to add economizers to the existing systems to reduce the preheat load, which was significant in the mild Bay Area environment since you didn’t really need 100% outdoor are to adequately ventilate the rooms. To minimize the cost and complexity of the economizer implementation, we wanted to convert the mechanical room to a return or relief plenum, so there were some code issues involved and if we did it, we would need to seal up the room. We also planned to improve the control systems to provide demand controlled ventilation and run the systems based on occupancy instead of a schedule.
As things moved forward, money became available to replace aging systems on the campus, and the systems we were looking at fit the bill. So the scope expanded to include replacing the original systems and incorporating our improvements into the new systems.
But the question was, in general terms, how much money did we think we needed for the additional work? The image that follows is the spreadsheet I put together to “ballpark” the project cost. This first image captures the assumptions I made.
I include this because its really important, in my opinion, that you document how you came up with a conclusion. For one thing, a year from now, you may not remember. But for another thing, it lets someone else reviewing your work understand the thought process behind it. Part of what was going to happen with this was that I was going to send it to other members of the team for their review and comment and it was important to me that they understood my thought process so they could cross-check it.
The second image is the actual estimate. The comment column documents how I arrived at the number or some other piece of information I thought was important to convey to others.
Notice that I did not come up with an exact number, rather I proposed a range. And also notice that I applied a fairly hefty contingency to the bottom line. Both of those approaches were used because the current metrics on the project are far from firm or well detailed. But by using some of the techniques I described in the post, I was able to develop the bottom line in about 3- 4 hours.
If you study the estimate, you will notice one of the line items is a control system budget. In my next post, I will describe the technique I use to come up with a control system budget that I can use for cost benefit assessments.
Senior Engineer – Facility Dynamics Engineering