In order to accurately match budget and scope, one might suggest that the early phases of the project be developed before the budget is set. Is that possible in the real world? Consultants would need to be hired before their fees can be reasonably established—and most clients are concerned about such an open-ended relationship. Significant dollars would be expended before the project became real, and early costs would be wasted entirely if the project is stillborn.

The normal process today is to define the project conceptually, then guess the price at predetermined points in the process. At these milestones, design ceases for several weeks while an estimate is prepared. If it exceeds the budget, the project is redesigned to reduce scope. These steps are repeated endlessly until the final project bears little resemblance to the original concept. It may only marginally conform to the intended function. “Scope creep” and increased costs leave everyone unhappy, and the decision makers are suspected of being less than competent.

Out of Sync

Most construction professionals see the estimate as a legal document supported by a set of design drawings that show the architect’s intent. The trouble is that the early estimate is a static “snapshot in time,” always several weeks behind the decision-making process. During the design phase, the scope can change from day to day. Each decision about need and every line on paper advances the knowledge base of the project, but has a cost directly associated with it. As a result, the estimate is never current with the design and never really correlates with the intent.

Furthermore, the referenced drawings will not and cannot show everything. Assumptions must be made, and these err on the conservative side. Ultimately, there is hell to pay when the project comes in over budget.

Is There a Better Way?

Actually, there is. Put simply, the estimate must be viewed not as a legal document attached to a design, but as the numerical version of the design. You might say the estimate is the design. It must be continuously reviewed, updated, analyzed and discussed so that all parties understand the scope. It can be used to challenge and inform design decisions on various products and systems. It can also be used to drive construction decisions on means and methods of producing the same outcome with fewer resources. This requires that the estimator and designer work side by side, decision by decision. Some architectural firms are adding estimating capacity to their staff to provide this service.

The most important ingredient of early conceptual estimates is not accurate quantity take-offs, refined unit prices, or subcontractor quotes. It is the experience and judgment of the estimator. The estimator must work closely with the design team to define intent and budget individual line items. This requires close collaboration on a regular basis.  It simply cannot be accomplished by handing off partial drawings to an estimator who works alone to interpret the intent.

Following is an abbreviated plan of action contingent on collaboration between the designer and the estimator.

Define the project. The first hurdle in project initiation is describing the need for a new facility in the first place. What are the existing building’s inadequacies? What are the proposed space needs? And where are the proposed locations for the building?

At this stage, try assigning a cost based on known comparable projects or statistical history. Conversely, the organization may simply determine how much of their scarce resources are available for new construction. In the latter case, the project scope must then be “backed into” based on the resources available.

Either way, you’ll need to consider basic parameters such as the size of each room, contemplated use and net-to-gross area ratio. Code constraints will likewise have a huge impact on the resulting cost model. This is the time to pay close attention to such essentials as exit paths, fire protection systems and handicapped accessibility.

Build the cost model. There are two formats for an initial cost model: Uniformat II and CSI Masterformat. The first allocates cost based on major building systems; the second attempts to break down the cost by trade contractor. Directly comparing these very different ways of looking at the project cost is difficult. Components of work do not match up well and are difficult to separate. We have found that the actual data produced on previous projects is usually readily available in the CSI Format, so it is more appropriate for the cost model. In addition, it can then be compared with the final buy-out results and tracked throughout the construction phase.

Compare it with completed projects. Finished projects should be your benchmark, so select them carefully, making certain that similar elements are included and site-specific issues are adjusted. The actual site cost should be considered separately from the actual building. Other unique elements should be rolled into the anticipated cost; for instance, security cameras, custom lighting, solar panels or gray water piping. Remember to adjust all costs for inflation and add in a contingency for future inflation. You should also consider geographic adjustments.

Add in the soft costs. An unavoidable fact: the “total project cost” is usually between 25 and 50 percent greater than the construction cost.  While some owners treat this information as confidential, these additional “soft costs” should be itemized for the benefit of the whole team. This will help you avoid duplicating part of the cost, or, worse yet, missing something entirely.

Determine the delivery method. Three basic methods are in common use, each with its own risk and responsibility for cost control. With traditional design-bid build, the onus for design rests on the owner and architect, with the contractor left out of the initial stage entirely. Since contractors don’t bid until designs are complete, the process is fraught with potential mistakes if a vendor or subcontractor should misinterpret the design plans.

Much more integrated is the construction management process, in which the contractor is engaged in the design phase from the outset. Parallel estimates by the architect and construction manager provide a “second opinion” and a more refined cost estimate.

With design build, both design and construction become the responsibility of one party—either the architect or contractor. Although this method often includes major sub-trades in the design cost, providing cost control early on, the owner relinquishes some control in the process.

Tailor your cost model to reality by continuous refinement. The estimator should continually update the cost model with new information. As each material is selected, the unit price and approximate quantity for that item can then replace the “budget estimate” for that item. This keeps the numbers in sync with the design, so decisions can be based on reality. Gradually, the model will become a quantified “conceptual estimate” of the probable cost, ultimately validating the budget cost. Logical? Yes. Yet, this process is foreign to most estimators today. Instead, a set of drawings is cited as the basis for cost assumptions. This legalistic approach is unrealistic and invariably out of sync with the ever-changing design scheme. Each new piece of data must be factored into the cost model so that the “bottom line” remains as current as possible.

Let the contingencies weigh in. Neither the design nor the estimate is wholly complete at a given point in time. So it’s essential to include allowances, assumptions and contingencies in the estimate. (Due to the difficulty in predicting inflation, best to keep this prediction separate from all other assumptions.)

Initially, it’s wise to include a 15 percent contingency for undefined design elements or eventual refinements. By the end of design development, only 3 to 5 percent need be earmarked for undefined elements.

You should also set aside a contingency amount for items not recognized by the estimator when evaluating actual quantities. This amount should start at about 10 percent of each system and gradually be reduced until the documentation is complete.

Finally, the estimator should allow for change order amounts of up to two to three percent of the construction cost--and this should be maintained until construction is at least 75 percent complete.

When design development is complete, it’s time to develop a new quantity take-off estimate. The process can be repeated as more information is added, with allowances defined, actual costs assigned and contingencies adjusted.

If cost predictability is paramount, bring the major trade contractors to the table early. As part of the team, they will have a vested interest in getting the most value for the money available.

Litmus Test

The cost should match the design intent. The real test is the development of a GMP that matches the owner’s intended investment of resources and produces a project that meets all other criteria. And that can happen only if the numerical “design” and the drawings are in lockstep.

True success is a final construction cost that closely matches the original design intent while fulfilling the user’s needs for space. Architects can achieve that only when the math and the design are on the same page. And, the estimator is an integral part of the design team.

By Jim M. McManus, FAIA

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