Application Of Analytical Cost Estimating Method (ACEM) In International Projects Bidding

The international project tender estimating involves many factors. Even forprojects that are similar in type and scale, costs might vary greatly due to differenttechnical specifications and conditions in different countries. The Unit Price CostEstimating Method (UPCEM), commonly adopted in China, can neither accuratelyreflect the effect of the host country’s political, religious, economic and naturalenvironments on costs nor evince the changes to costs brought about by the projectcomplexity, technical challenges and market conditions. This is why this method isshowing more and more drawbacks in international project bidding, and is posinggreat risks for business operation.In America and Europe, where market economy is highly developed, mostenterprises adopt the Analytical Cost Estimating Method (ACEM) in internationalproject bidding. This method, focusing the research on the specific works in theprojects, all required resources (i.e. labor, materials, and machines) are taken intoaccount and direct construction costs are estimated based on the client’s requirements,and in accordance with the proposed construction method, and then indirect costs arealso calculated as per expected management resources before total construction costsare figured out. The ACEM, compared with the UPCEM, can reflect in a morescientific and accurate way, the actual resources required under different constructionconditions as well as the relationship between three major project’s objectives (quality,progress and cost). This in order to bring the estimated budget closer to the actualconstruction costs.This article, based on my years of experience in overseas project tenderestimation, summarizes the definition, cost composition, tender estimating process,and practices of the ACEM, and attempts to reach a set of tender estimating methodsand a estimating system suitable for Chinese enterprises following this method. It alsoproposes a two-step strategy for the application of the ACEM in international projects:first, with the whole project as the subject, the budget for the whole works areestimated based on the client’s requirements and construction conditions, and inaccordance with the consumptions of construction resources in the simulationimplementation; second, with each item works specified in the Bill of Quantities (BOQ) as the subject and in accordance with certain principles, the resourcesdeployed in the first step are rationally allocated to individual works listed in the BOQ,the prices are allocated and the comprehensive quoted unit price for each item ofBOQ are build, so that the cost distribution and quotation for the total estimatedbudget determined in the first step can be completed through the priced BOQ.Finally, for the reference of bidding and cost estimating personnel and in the hopeof better popularizing and promoting the application of the ACEM in domestic andoverseas projects, this article uses a complete international project bidding case toillustrate the above-described system of methods and elaborate what to do, how to do,who is supposed to do, and what are the expected results in the case of quoting in theAnalytical Cost Estimating Method.