Cost Esimating against GAO and NPS

Indonesian State Owned Oil and Gas Company Cost Estimating against GAO and NPS Best Practice: A benchmarking study


By Ardiansyah

Medan, Indonesia



The estimation is an important part of the process of a project stage, where this process contributes to the success of a project. The company is always faced with the problem of a low estimated value of the value offered by the contractor, consequently is the objective of the project to be completed on time to be hampered. In this paper, a comparative study has been conducted using the approach of both the US Government Accountability Office (GAO) and the US National Park Services (US-NPS). Based on benchmarking study company estimation process must be improved by considering GAO best practice (1) conduct risk and uncertainty analysis, (2) conduct sensitivity analysis and (3) Identify ground rules and assumptions, and based on US-NPS Estimation Template company suggest to considering (1) Design Contingencies, (2) General Conditions and (3) Bonds & Permits for reliable estimate.

Keywords : cost estimate, benchmarking, oil and gas construction project, national park services (NPS), government accountability office (GAO), estimation process, estimation template

  1. Introduction

1.1 Indonesia Oil and Gas Project Downstream Sector

Indonesian state oil and gas company is obliged to fulfill fossil energy needs in all regions of Indonesia. In order to maintain the continuity of supply of fuel, one effort that can be done is by improving the infrastructure and addition of new facilities. The decline in world oil prices to below US$40/bl requires companies to innovate by making variants of products that the market needs in the downstream oil industry. The downstream oil industry in Indonesia has an important role in providing energy sustainability throughout Indonesia. The characteristics of Indonesia which is a country with thousands of islands make the distribution of oil to every tip of Indonesia becomes a challenge and complicated. Development projects in the form of upgrading facilities at the downstream oil industry are routinely conducted to support the increase and reliability of oil distribution. The dynamics of changes in the market in Indonesia’s downstream oil industry led to an increase in the number of projects.

1.2    Project Cost Estimation

Each project will pass through the estimation phase, a process that has an important role in producing a successful project. Each project has purpose and methodology and how far the project defines. The Project Estimating process is not a stand-alone process, it depends on results of execution of other processes and in many cases it runs simultaneously. On Figure-1 and Figure-2 adopted from GPACar it explains each level of estimate class, how far the project scope definition classifies and estimating tools/technique to used.

Figure-1 Level of Cost Estimation from Various Guidelines

There are two approaches in the estimation process, namely top-down approaches and bottom-up approach. The top-down approach puts forward the whole process in one project which is then estimated. However, in the bottom-up approach, the estimator prepares the job breakdown from the bottom or in other words a Work Breakdown Structure / WBS.


To read entire paper, click here


About the Author


Medan, Indonesia



Ardiansyah is a senior project engineer, working in state owned oil and gas company in Indonesia, has experience in oil and gas project for 9 years. He holds a bachelor degree in Gas and Petrohemical Engineering from University of Indonesia (UI) and a master degree with honour in Project Management from Institut Teknologi Sepuluh Nopember (ITS). He lives in Medan, Indonesia and can be contacted at [email protected]