Assigning costs is necessary in every stage of planning, and, ultimately, constructing a building. Sometimes, unfavorable budgets, zoning requirements, or a tricky economy might preclude a building from being constructed. However, understanding the planning process and the key differences between the various types of estimating strategies (including conceptual estimates, budgets, and design-build) will help you determine where the proposed building is in its planning cycle — and help you make a more informed decision about your participation in the project.
Conceptual estimates, budgets, and design-build estimating all involve assigning a monetary value to a construction project. Conceptual estimates and budgets may or may not result in a building being constructed, while design-build estimates are much more likely to do so. Because they're all based on varying degrees of information, the following three distinct estimate types each have their own characteristics and should be bid in different ways.
The description of a conceptual estimate can range from a feasibility study, which carries ±20% margin of error with regard to the actual project cost, to a complex conceptual design estimate, which only carries a ±6% margin of error. Typically, conceptual estimates happen before a specific approach is decided for the project.
Conceptual estimating is part art and part science. The estimator has to have a “big picture” view, looking for long-range solutions rather than shortsighted projections. Conceptual estimators hone their craft with practice and experience, basing their estimates on real-world examples and past projects. According to the Design-Build Institute of America, Washington, D.C., a conceptual estimate is “the skill of forecasting accurate costs without significant graphic design information about a project.” However, the lack of information does not negate the importance of a conceptual estimate, because it can make an appreciable difference in the cost effectiveness, feasibility, efficiency, and outcome of a project.
In developing a conceptual estimate, working with the developer can bring about the best possible outcome. But keep in mind that this approach may not necessarily be the least expensive. An estimator must look to the lifetime cost, which may include higher up-front costs but a lower lifetime cost of the building. You must also be aware that the best interest of the building owner may be at odds with the desires of the developer, who may want to get in and out of the building quickly with the least amount of cost.
For example, let's consider “green” building techniques. The use of photovoltaic panels, green roofs, geothermal wells, and other energy-efficient building materials still cost more than a conventionally built structure. However, the payback of reduced energy costs and reduced carbon footprint over the life of the building can outweigh the initial increased costs.
Research is always part and parcel of the conceptual estimating process, as there is no “outline” for this process. Each estimator must forge his own way and stretch the imagination to put his proposal into an interesting, understandable and usable format to move the project to the next level.
One reason to complete a budget is to obtain full funding for the project and to provide a cost-control mechanism for the fabrication and construction process. Developers can minimize exposure to cost overruns by accurately developing “real” costs. There are many new and exciting tools that can be used to anticipate how a building will look, function, and be built most effectively. By developing an accurate scope of work for the project, contractors can avoid disputes that almost always result in cost overruns. In other words, the budgeting phase is essential.
Construction budgets can be tedious, but the fiscal element of any project can never be underestimated or overlooked, especially in today's economy. The constructability of a design results in a cost-effective budget and smooth construction processes. The Empire State Building in New York City is often referred to as the epitome of this concept, as it was completed on time and under budget, taking just one year and 45 days to complete.
There are at least four types of budgets used in the construction field: conceptual, schematic, design development, and working drawings. Because we've already discussed conceptual budgets, we'll move right into schematics.
Schematic budgets signal the start of work by the architect, allowing him to illustrate the design concept, including the site plan, floor plans, exterior elevations, and key building sections. Design development budgets depict a coordinated description of all aspects of the design, including fully developed floor plans, sections, exterior elevations, interior elevations, reflected ceiling plans, wall sections, and other key details. The basic mechanical, electrical, plumbing, and fire protection systems are also defined in this stage, becoming the basis for the construction documents that follow. Working drawing budgets are the most detailed in the budgeting process. Any information missing from previous budgets will be added at this phase, and the modified drawings will become the construction or bid documents.
A budget can develop in two different ways. A budget can turn into a design-build project, whereby the contractor continues to develop the design and adjusts based on additional information as the project progresses. In most cases, an electrical contractor engages in a design-build project with the anticipation of actually completing the project. Although this is not always the case, it's usually a risk worth taking.
The other avenue is for the budget to develop into a conventional design-bid-build project. In this case, an electrical contractor might have been involved in the budgeting of a project, which was being designed in a conventional manner with an architect, engineer, and team. Once the working drawings are completed, the job moves on to the bidding phase. The electrical contractor who originally budgets the job might have an advantage, but this is not always the case. He will now be bidding against anyone who meets the requirements of bidding the job — be it bonding capacity, staff level, or experience. The contractor who successfully bids the job — and is ultimately awarded the job — will be the contractor who completes the job, regardless of his prior work on the project.
The least like the other two methods, a design-build project approach requires the construction team to be responsible for taking a concept that is developed with the owner, complete the detailed design, and then proceed with the construction. This is different than the conventional design-bid-build process, whereby contractors bid on a design that has been completed before their involvement. If they are the successful bidder, they will build the project. Conceptual estimating often opens the door to the design-build process.
A design-build project is one that is not necessarily drawn or engineered but one that has some sort of written scope and building footprint upon which to build. Design-build estimates are often confused with budgets, but they are not the same. Because most owners have fiscal restraints that affect their capital investment, they depend heavily on the estimator to develop accurate cost forecasts at every stage of the project. Therefore, an estimator must have a comprehensive understanding of the costs of labor, materials and equipment, not to mention the means and methods of both design and construction in order to accomplish the design-build task.
Often, a design-build project will result from a municipal or state request for proposal based on a written scope. Relationships between general contractors, building owners, and an electrical contractor may also result in the parties developing a design-build project. Relationships are not only vital to developing a solid business, but can lend a comfort level to owners or general contractors, to the point where that comfort level influences project development. An electrical contractor might be in the right place at the right time or submit a budget price for a project based on a conceptual estimate, which we already discussed. Conceptual estimates can definitely turn into design-build projects. In addition, the design-build process may be faster and more efficient than a conventional design-bid-build project.
The goal of a design-build project estimate is to identify the true costs of items and to determine along the way if the cost of that item is feasible to the owner or developer. Identifying the proper scope will always be a crucial element of this process. A minimum/spec job will cost less than a building designed to purpose/function. Code issues and utility company requirements must be considered. Some key questions to consider include: What kind of building is it? What is the building construction? What are the needs of the potential tenant(s)? Did the customer give you a list of equipment that needs to be wired?
Cost efficiencies and energy rebates of certain types of fixtures may be important as well. If the design-build project were to be based strictly on “cost to install,” the developer may be satisfied but the owner or tenant may not be. In the long run, the total life cost of the fixture will be more important, especially as energy costs rise. The largest risk an electrical contractor takes in a design-build project is doing all of the work, only to have the developer take the design and proposal and put it out to bid, back to the traditional design-bid-build.
Candels is president of Candels Consulting, an electrical estimating consulting firm in Niantic, Conn. She can be reached at [email protected].