The role of the independent estimator

The title Independent Estimator (IE) suggests a professional who undertakes an independent estimation of a settled scope of works.

Historically the IE's role has been to provide an independent assurance and/or validation to all the alliance participants that the TOC is fair, reasonable and defensible. In current alliance practice, the IE is often selected by and reports to the alliance participants collectively. To provide greater transparency and accountability the IE should be engaged by the Owner, at arm's-length to the alliance, to protect the Owner's commercial interests.

The brief for the IE is commonly focussed on estimating skills including elemental analysis and pricing, quantity surveying, scheduling and risk assessment, across the required disciplines of a project. While this ordinarily dictates a team of estimating resources to provide the specifics and requisite skills and experience, the IE role often falls to one dominant/lead resource with general industry skills. The IE is often engaged on a limited resource and minimal fee basis to assess and advise on the work for an alliance with uncapped resources and (within reason) uncapped fees.

In the absence of price competition, when determining the TOC for an alliance, the IE role has become the default for demonstrating that the agreed TOC represents VfM. The relatively close correlation between AOC and TOC in many cases has been used to support this approach.6 However, as noted elsewhere, an equally valid argument exists that this close correlation reflects a TOC that is extremely conservative.

The IE as sole arbiter of price will often come under intense pressure from both Owner and NOPs to agree to a TOC value close to the alliance TOC estimate. The alliance, as distinct from the Owner, may decide to proceed regardless of unreconciled differences between IE and alliance TOC estimates due to external pressures to commence the physical works. The commercial position of the Owner in that situation may be less than ideal.

The role of IE, as currently applied, may be too narrow and poorly defined. The title suggests a focus on price estimation of a settled scope rather than an holistic approach to VfM at the alliance level. The approach taken by an IE can vary from a simple check of overall rates to a more detailed review of the estimate developed by the NOPs and in some cases a full independent estimate. Similarly, the form of the PAA may reflect a TOC prepared as an alliance estimate or alternatively a proponent's estimate. The difference is significant and needs to be understood. IEs are encouraged to work collaboratively with the NOPs when undertaking review and verification giving rise to possible compromise of independence. It also raises possible confusion as to whether the IE is required to act in a positional sense or under the auspices of alliance principles (win:win etc).

Contractors and to a lesser degree designers will have in-house systems that provide a verification of scope and costings for the scope that gives their senior management confidence that the project has been planned and contracted in accordance with its corporate benchmarks. The Owner should similarly engage (reporting directly to it) services whose scope of service mirrors that of the NOPs' advice to its management.

To improve VfM from current alliance practice, the role of the IE should be reconsidered. A more comprehensive approach to overall VfM is required at the project/alliance level, rather than a price-only review, involving:

•  Renaming the role to Owner's VfM Advisor.

•  Extending the role to include value based reviews of scope of work, design standards, design efficiency, construction methodology and resourcing before NOP mark-ups for overheads, risk and margin are applied.

•  A first principles risk adjusted estimate prepared by the IE in parallel with that prepared by the NOPs.

•  Full reconciliation against both the business case estimate and alliance TOC.