Before a project cost estimate can be prepared, it is necessary, first, to have a clear definition of the FEMA eligible scope of work, defined as the repair, restoration or replacement of a facility as it existed prior to the disaster. For estimating purposes, FEMA has organized and coded the typical work and materials normally needed in disaster recovery situations into a unit price list. These prices are generally based on the current average costs obtained from state and local governments, local contractors and regional costs from existing studies. These initial estimates (or base costs) do not include what are commonly referred to as factors applied to the base cost (e.g. design and construction contingencies, mid-point of project escalation, etc.).
FEMA has developed a forward pricing methodology called the cost-estimating format (CEF) to better estimate the cost of large projects. The CEF will be used for uniform, cost estimating purposes and not as a final cost settlement instrument. Eligible costs will be reimbursed on an actual, incurred expense basis and final costs reconciled based upon the overrun or underrun realized.
The concept was first pioneered and developed for use at the Northridge Long Term Recovery Area Office in Pasadena, California, where a version for earthquake damaged facilities has been used to make final grant offers to applicants owning facilities damaged during the 1994 Northridge earthquake. A version for all disasters has since been developed for all types of infrastructure damages. The new version has been tested against data from large project closeouts and undergone a peer review by an independent group of industry experts who evaluated the methodology, substantiated its component factors and recommended improvements necessary to apply the CEF nationally.
Typically, large construction projects are performed utilizing an owner, general contractor, and a number of subcontractors. The structure of the CEF mirrors that owner/general contractor/subcontractor relationship for eligible work in that:
Part A costs are representative of subcontractor(s) construction efforts,
Parts B, C, D and E represent the general contractor or equivalent non-construction costs, and
Parts F, G and H represent the owner's markups and non-construction costs.
The CEF consists of eight parts. Part A is an estimate of the base construction cost (known as work-in-trades). This cost reflects the labor, equipment and material required to perform the work and is also referred to as permanent and non-permanent work. Part A is developed in much the same manner as estimates are developed under the existing program. This part of the model includes consideration for subcontractor's overhead and profit based on contracted work. For force account applications this overhead and profit is stripped from the general contractor's cost (see factor D). The estimate is developed using unit costs reflecting components of the project as derived from the inspection process. The construction-estimating guide published by R.S. Means is used as the model's default to estimate costs for Part A. When the construction-estimating guide is not applicable, local data (average weighted unit prices) or FEMA cost codes may be used. The process is more thoroughly explained within the Cost Estimating Format for Large Projects Instructional Guide.
Parts B through H are component factors of the formula that are applied to Part A. These factors are general contractor or equivalent costs, and owner's mark-ups and non-construction costs (or the costs not included in the base cost estimate). When included, they determine the total cost of completing the work.
General Contractor or Equivalent Costs
Part B reflects the job site costs, including temporary services and utilities, safety and security measures, field supervision, quality control and administrative submittals.
Part C accounts for construction cost contingencies. They are determined on the basis of the amount of design work completed at the time the estimate is prepared, the complexity of the project and the degree of difficulty for site access and staging.
Part D is the general (or prime) contractor's home office overhead, insurance, bonds, and profit (applies to contracted work and is not considered under a force account application.)
Part E accounts for cost escalation over the duration of the project and is based upon an inflation adjustment from the time the estimate is prepared until the mid-point of construction for the eligible scope of work.
Mark-ups and Non-construction Costs
Part F is for fees for building permits, plan checks and special reviews.
Part G provides an owner's reserve for change orders and differing site conditions.
Part H reflects the applicant's project management and design costs. This is not part of the administrative cost allowance provided to the states and the applicants to manage their overall recovery effort.
Benefits of the Cost Estimating Format
The applicant knows how much FEMA money to include in a project's budget up-front.
The applicant can manage large projects with a greater degree of confidence.