A project passes through several distinct stages between the time of inception and the time of completion, and its progress involves several or possibly numerous estimates of cost. The various estimates, each with its function and value, may be based upon more and more accurate data gathered during the progress of the investigation, may result from the employment of different or more specialized engineering talent or may be due to different interests active in any of the various functions of promotion, financing or construction.
Thus, to illustrate briefly the nature of the estimates accompanying the various phases of a project. Assume that a promising site for a dam is known to or discovered by some person who forms a conception of a project for developing hydro-electric power, or for irrigation, or both. Then there immediately arises the question of cost" of an adequate dam. Such an estimate, which we will call Estimate No. 1, is most informal and is based upon very little information that would be considered data from an engineering point of view. In fact it may be no more than a rough comparison with the reported cost of some similar project, ignoring many important elements of difference, and usually most optimistic in character.
The project is next taken up by some person or persons of the locality who have some standing and substance; not professional promoters but people who have some appreciation of the professional promoter's function, and who finally find it desirable to associate a professional with them in the enterprise. The head of the promotion syndicate thus formed has some though often an inadequate appreciation of the necessity for and value of the services of an engineer. Capital must be approached with a logical statement, and an estimate of cost that bears some stamp of engineering accuracy.
The engineer of the syndicate is usually a man in general practice in the locality, honest and of some or even considerable ability. However, his estimate, which we will call Estimate No. 2, is almost invariably subject to considerable revision for one or more of the following reasons:
The amount of money available may not have provided for thorough or exhaustive surveys, borings, test pits, etc., nor for well-considered plans and accurate determination of quantities.
Unless the engineer has had rather more than average experience, the scope of the entire project as well as the size, location and character of the various features may be in error. Even if quantities are approximately correct the estimate of cost may be little more than a guess, with no sign of appreciation of the various elements which enter into it.
His interest in the project and association with the promoters may often cause him to be unduly optimistic himself, and may unconsciously affect his opinions as to quality of the materials to be encountered or the cost of various operations.
However, Estimate No. 2 is usually based upon a survey or at least a profile of the site, some information as to depth to rock, and the character of the rock. It also contains some appreciation of the manner and cost of procuring the principal materials, of the source of power, the cost of labor, amount of water to handle, etc.; in fact, the information upon which an experienced man can base a very fair estimate.
With Estimate No. 2 in hand the promoter seeks to interest capital. It is unnecessary here to trace his adventures. If the project appears to be a good one it finally secures consideration at the hands of some individual or organization in position to supply the money necessary to finance it. A very critical stage for the project is its examination at the hands of the financier's engineer; and its progress may be outlined about as follows: The prospectus and Estimate No. 2 are handed to an engineer for an office examination, a scrutiny which in a few days or possibly a few hours develops whether or not it is worth while to go into the matter further. The general scheme is first examined to see if it has been outlined in the best way, and with a proper conception of the size, location, design and function of the various main features. The data collected by the promoters' engineer, such as surveys, plans, borings, etc., must (and usually may) be taken at their face value. Plans and specifications of proposed structures are generally rather sketchy, but they should show that structures adequate in design and of suitable materials may be accomplished at about certain mentioned total quantities. Quantities are roughly checked and proper unit prices applied, thus arriving at Estimate No. 3. Before being financed the project may of course be submitted to the consideration of several parties. In each case some process such as outlined is or may be gone through, resulting in an equal number of estimates on the same information and basis, and corresponding to No. 3.
Estimate No. 3 is accompanied by the engineer's analysis of the prospectus. He corrects and supplements its usually meager and inexact information, investigates more or less thoroughly the most important collateral questions, such as rain-fall, run-off, land and crop values, markets for produce or power, transportation facilities, tributary population and industries, labor supply and prices, cost of fuel and power, natural resources, climate, etc. The fate of the project is much more often determined at this stage than at any other. It is highly desirable, therefore, that Estimate No. 3 be conducted by an engineer of experience and good judgment; all the more so as there is a distinct tendency to ascribe to the estimate an importance and weight in excess of its pretensions or desert. The reason for such exaggeration is not far to seek. In the circle, narrower than supposed, where such projects are examined and financed, the progress of the project is usually pretty well known; and if submitted to a second or third party it often labors under the handicap of being suspected to contain some "nigger in the wood-pile." Indeed, after one or two rejections, whether warranted or not, it is often difficult for the project to obtain further consideration.