Cost estimating is required to set, adjust, and then manage the budget for a building project. It is an integral part of the project effort, starting with early program development. For green buildings, early design stage estimating can be a more complex process, since an integrated design is so crucial to the facility’s successfully meeting its sustainability, budget, and building use goals.
Different techniques are used to create estimates at various stages of the project. As the program evolves, the method of estimating should progress, from conceptual and approximate, to specific and detailed. The process begins with the Order of Magnitude estimate, followed by the Occupant Unit, the Square Foot and Assembly estimates and, finally, the Unit Price, or detailed, estimate. Estimate accuracy should increase as details about the project are defined. A general rule is to be as precise as the details will allow, and to spend the time required as the details warrant.
The budget’s line items should be appropriately categorized as the level of detail increases. (The term line item in budgeting and estimating refers to the description and costs associated with a particular item. The word line is used because these costs are usually represented on a single row or horizontal line in a budget or estimate.) The line item can be as broad as the foundation, walls, or roof in preliminary estimates, or it can be as specific as rebar ties, drywall taping, or snow guards in detailed estimates.
One useful tool to manage these line items, or details, is called a work breakdown structure, or WBS. This is a hierarchical breakdown of a project that contains successive levels of detail. Each level is a more narrowly defined breakdown of the preceding level. The estimator can use either an existing WBS or a project specific system. The WBS provides a way to incorporate project details as they become available without having to prepare an entirely new estimate or budget at each new level. The first level, 1, can further be defined in a second level of detail that will begin with 1.1, 1.2, and 1.3, etc. The next would be 1.1.1, 1.1.2, and 1.1.3, and so forth.
The two most popular WBS formats used for construction are the Construction Specifications Institute’s (CSI) MasterFormat and the UNIFORMAT II system, adopted by the American Society of Testing and Materials (ASTM). MasterFormat is based on materials for the related installation tasks, such as wood, concrete, and masonry, whereas UNIFORMAT II is based on installation of complete building systems, such as substructure (a basement foundation or slab), building shell (a roof, exterior wall, or window), and so forth.
In addition to these popular formats, some architectural, engineering, and construction firms use their own form of WBS. Most top-level divisions in any WBS will follow a logical sequence. For example, in UNIFORMAT II, Substructure – Division A, precedes Shell – Division B. The advantage of using an established WBS is that they are usually used for project specifications and cost databases, so the estimate will be more efficiently prepared and better coordinated with the project documentation. When working on a LEED project, you will find that project literature is often arranged on a WBS that is based on the LEED credit numbering system.
Before any construction budget is developed, a figure must be established as a starting point to begin discussion of costs for the proposed project. This type of “ballpark” figure is typically referred to as an Order of Magnitude estimate and may be somewhat anecdotal in nature. Costs may be estimated per classroom and derived from recent projects, or from published sources, such as RSMeans cost data. Order of Magnitude estimates should be expected to fall in the range between 30% below to 50% above what the actual cost of the project will turn out to be. This estimate may or may not include owner costs, such as legal, architectural, and engineering fees; changes to the original plans and specifications; or other post-bid-award costs.
As a building design evolves, the number of occupants the facility will serve is a key piece of information. Estimates that use a common unit relating to the facility’s occupants are called Occupant Unit, End Product Unit, End Unit, or Capacity estimates. Costs are expressed in terms of costs per the common unit, which can be seats for auditoriums, beds for hospitals, rental rooms for hotels, or students/desks for schools.
Square foot construction costs are based on the gross square footage of building area. Generally, basements, sub-basements, mechanical spaces, stair bulkheads, and other enclosed spaces should be included in the total square footage. Balconies, canopied areas, and open terraces should be counted as one half of their total square footage. The space above auditoriums and gymnasiums or the like that extends beyond the first floor should not be included in the square footage. If there is an interstitial (between floors) space without any equipment in it, it should also not be included. If, however, the interstitial space houses equipment that would otherwise need dedicated space, the area should be included in the square footage. When working with square foot costs, square foot costs will tend to be lower for larger buildings because of the decreasing relative contribution of exterior walls and the economies of scale that come with a larger building.
At the design development stage, after the program and schematic design have been completed by the architect, and preliminary plans are starting to be prepared it is time to consider the major systems to be used in the facility. Will the building be air-conditioned? What type of heating system will be used? Will the exterior of the building be brick, concrete block, or another material? During this stage of development, cost estimates are necessary to determine not only the overall building cost, but the cost for major building systems. The Assemblies (or Systems) estimating method is often used at this stage to evaluate the relative costs of major systems and their impact on the project budget.
The Unit Price estimate is the most detailed and accurate of the estimating methods, and should be used when the plans and specifications are more than 65% complete. It is not uncommon to have two or three versions of an estimate prepared as the level of plans and specifications progresses to completion. For example, estimates may be prepared at the 75%, 90%, and 100% levels of completion.
Unit price estimating is also useful for estimating renovation work, because there is such a variation of existing conditions and scope of work from project to project. For preliminary estimates, sizeable allowances and contingencies are advised, because of the many unknowns, such as unforeseen existing conditions that will affect the renovation cost. Occupant unit, square foot, or assemblies estimating methods can be used to derive preliminary renovation costs for spaces like kitchen and administrative areas, but this approach requires access to a large database of similar projects.