It Is All About Money
One of the ways in which we attempted to distinguish ourselves from other firms was by taking care of our client’s money questions. In my opinion, and in my experience, too, money is usually the main thing that will undermine a project.
I don’t want to have the money conversations after it has become an explosive topic. So right from the beginning we attempted to help our clients set up a sound budget.
I have been ’plugged-in’ to cost estimating ever since an early successful experience. So I never shy away from the issue of how much something costs. Eventually I noticed that this tendency of mine was creating these little mini projects as I chased down client requests for the costs of things - doing actual estimates. Finally I got my head out of the sand and looked around. What I saw was that the cheapest way to do things is what you see all around you.
Nature encourages economy and so does human nature.
Rather than charge off into a study of costs, I realized I could usually answer the question by just pointing out what everyone else was doing about the issue in question. If it was reasonable to use the requested 'ABC' material, you would see lots of 'ABC' around you.
Here are a few of the snipe hunts that I went on.
About the time I was getting out of college, John Portman, an Atlanta architect, was designing the first Hyatt Hotel with an atrium lobby, pictured above. Unlike most architects, Portman was deeply involved in the development of his projects, not just the design. I was fascinated. And when I came across an article describing all the costs that went into one of his projects, I typed it up. Yep, this was the pre-electronic (caveman) era and electric typewriters were all the rage. Photocopiers were the size of a VW bus and the entire country shared three of them, one per time zone.
The list was really an eye-opener. I had never imagined there were so many things outside of design and construction that went into a project. The construction cost was just one simple line item, and the article explained that construction cost rarely exceeded 2/3 of the total cost. Even though these projects were major commercial undertakings - hotels, merchandise mart, office high-rises - there were many similarities to the schools that I was working on. We didn't consider hardly any of the items in the list, but the Owner had to. Here is the list I typed up.
I don't remember ever hearing about the inherent extra cost of a two-story building compared to a one-story building. We were designing a high school once when the client had a change in leadership. The new leader mandated a one-story, pre-engineered metal building for cost savings. We had completed schematics based on a two-story building. The site was hilly and earthwork and conservation of useable area for athletic fields seemed to dictate at least two stories. Anyway, I think I looked into whether a one-story building was cheaper, and I found that it was. Inherently. (But a PEMB had 'issues'.)
"Why is that?", you ask.
A few reasons are obvious. A two-story building is going to need stairs and an elevator. Besides the cost of these things, more square footage is required to accommodate them.
Less obviously, you will probably need more area devoted to toilet rooms and janitor closets as the fixture count is spread out over two floors. Another cost increase is that you end up trading the relatively inexpensive costs of slab-on-grade and roof of the one-story building for the heavier structure and elevated slab of the two-story building.
But the real increased cost comes from the additional exterior wall area of a two-story building. This is not at all obvious, but here is how it works.
Let's compare 20,000 SF one and two story buildings. For simplicity let's start with square footprints for the buildings. The one-story building will be 141.4’ on a side for a perimeter of 565.7 LF. With a building height of 14’ the exterior wall area is 7,919.6 SF.
The two-story building will be 100’ on a side for a perimeter of 400 LF. With a building height of 2 x 14’ the exterior wall area is 11,200 SF. This difference of 3,280 SF is about 40% more exterior wall! Exterior wall is fairly expensive, and would cost at least $82,000 additional (at a low $25/SF wall cost).
It may not be obvious but the area of the exterior walls goes up for other non-square building proportions. For instance 4:1 proportions gives you 9,898 SF of wall for a 1 story building and 14,000 SF for the 2 story building. Now the cost difference is over $100,000.
So is this just "fun facts to know and tell"?
Yes, when the design of a building is driven mostly by other considerations than cost. But when you are driven by low cost, the single story solution will be inherently less expensive because it uses less stuff. I think you can say that one-story buildings are inherently more accessible, and more inexpensive. It wouldn't surprise me if they were also more environmentally friendly.
So here is how Construction WorkZone works.
Register for free to look up 10 items; or sign up for monthly use - $.99/first month, then $3.95/mo., cancel anytime.
The data search looks like the screenshots below.
The localized cost modifier seems to be a constant percent when I spot checked it. So you could do that just once on your subtotal.
The key features of cost estimating don’t require exact unit costs, which don’t exist anyway. Just look at the bids you receive for proof.
SUMMARY - PROs
Lots better than guessing
Low learning curve
SUMMARY - CONs
A little more time-consuming than I would like
Must transcribe costs, which is error-prone
Results not saved for you (so take screenshots??)
The graph showing contingency plotted against the amount of scope that is known came from a RedVector course on estimating. I like the way the size of contingency is related to the level of scope that has been developed. What I don't like is the amount of contingency that is suggested as being needed. Surely as architects we can come closer than 35% contingency at the end of Design Development.
Contingency is very helpful in preparing construction or project estimates for a client. My experience is that if you give a client a range of potential cost, they immediately forget the higher number and begin acting as though the lower number is a fact. Including a contingency for "what we don't know yet" tends to work better. In my mind the goal is to prepare the client for reality rather than tell him/her what they want to hear.
It is very rare that a client is unhappy about a project coming in under budget. The the opposite almost always creates a serious problem for everyone.
The contingency amounts that I am comfortable with at the start of various phases are:
I find that explaining the purpose of the contingency and how it becomes lower as the project progresses is accepted as logical. You will want to develop your own list of contingencies for use at different stages of the work.
orig post date Oct 2012
When you are embarking on a new project, it is crucial to have a plan for the project. You need to know the goals you need to achieve for success. This building planning process has six parts that build upon each other:
From that point of view the whole planning process is about money. Each of the six areas of the planning process, while necessary in its own right, are also needed to answer that bottom-line question about cost. Space needs translate directly into construction costs; and so do the building characteristics and land use. These might also affect design costs. Project constraints and implementation issues can affect design costs as well as other "soft" (non-construction) costs. Finally, budgeting is about bringing all this cost information into alignment with the money that is available to fund the project.
It really is all about money.
To keep nasty surprises at bay, we've found that, if your budget is comprehensive, then surprises are much less likely to occur. "Comprehensive" means lots of detail; and lots of detail also makes your budget more accurate. Besides the main costs of construction there are many issues that are easy to underestimate or overlook altogether. Construction costs are the "hard" costs. The "soft" costs fall into two categories: Design, Development. All these costs are listed in our template for a comprehensive Project Budget. Strive to incorporate all of these budget concepts into an integrated process for answering "How much will the building cost?"
The accuracy of estimating project costs relies on just five concepts. Strangely, detailed plans of the proposed building are not necessary - what is necessary is as much inclusiveness as possible. The accuracy that matters is the bottom line. Individual line items only matter to the contractor performing the work.
Concept One: Size
Size is fundamental to estimating cost. Most, but not all costs are related to size. Normally lack of space is what drives a project. Quantify how much space would solve the problem and you have the basis for estimating project costs.
Concept Two: Breakdown
The more line items you have in your estimate the more accurate your estimate will be. This is really just the mathematics of the problem expressing itself. For instance if you have just three line items - construction, design, and soft costs - you cannot be far off on any one of them and still hope for an accurate estimate, say less than 5% too high or too low. On the other hand if you have 200 line items, each one is significantly smaller than the first example; and you can be too high or too low by quite a bit on any line item without major impact - and your errors elsewhere will likely offset one another.
Concept Three: Research
If you don't have any idea how much something will cost, find out more about it. Blind guessing will eventually overwhelm the Breakdown Concept.
Concept Four: Bracketing
This concept comes from field artillery. The first shot isn't expected to hit the target - it is a range finder. The second shot corrects for the first shot, and in turn adds critical information for hitting the target. The third shot is the hit. When you are estimating project costs, the first "shot" is what you think the minimum cost will be. The second "shot" is what you think the maximum cost will be. The line item cost that you go with is the average of these two extremes.
Concept Five: Contingency
You always know more about your project at the end than at the beginning. You compensate for this lack of knowledge by using a contingency that is sized for the level of information that you have. If you don't have drawings yet, use 15%-20%. At each succeeding phase reduce the contingency until you have bids in hand. Even then 2%-3% for a large project is wise to budget for problems during construction. Small projects are very hard to estimate accurately, but a larger contingency will keep you from being surprised by higher than expected costs.
While there really isn't a better or more accurate way of estimating project costs than outlined above, an interesting thing about estimating project costs is that early in the planning for the project you can steer the costs dramatically in the direction that you want. If you use those line item estimates to guide your decision-making, it is amazing how close you can come to the target that you set for the project.
It's easy. For the past fifteen years we have used an all-inclusive template for documenting our estimates of project costs. The first embedded template shows our format. This part summarizes every cost that we think the client will face. The construction costs are pretty obvious, and even the breakdown isn't very unusual.
However even during Pre-Design we are able to create this level of detail. The reason we can do that is the second embedded document - the assumptions and the quantities we derive from those assumptions. From there we feed the quantities into an RS Means CostWorks model for the construction type that we anticipate. The result is surprisingly accurate.
Having created a project cost projection, it is important to live within the assumptions that you have made. Very few architects do this and our reputation regarding cost control is a result. There are all kinds of weasel words to hide behind, but you don't see contractors shying away. It's not FM. It takes a little time, but you recoup it on every estimate you do thereafter.
The secret sauce is the quantity takeoff without drawings. This is done once and rarely needs to change. Special features just become new line items. You set up formulas in your spreadsheet to calculate every element of construction that you have. Many of these are very simple. For instance, the quantity of flooring usually equals the net area of the building. The amount of carpet flooring is simply the net area times the percent of the floors you think will be carpet. The quantity takeoff spreadsheet refers to the assumptions that you have documented on the assumption sheet of the workbook.
Another example is windows. This is more complicated because it works with assumptions about gross area, building proportions, number of stories, story height, and percent of exterior wall that is glass. The trickiest calculations are square feet of interior partitions and number of doors. These require factors pulled from a table. The factors can be found with some digging. If you work with just a few building types, you can develop your own from past projects.
Once the data is entered, we have all the quantities. The last step is to transfer the quantities to the model you built in Means CostWorks. With a little forethought this is a simple transcribing exercise that takes twenty minutes. When you have your system set up, which will take about three man-days, an estimate can be pulled together in an hour, including the twenty minutes of transcription. You are probably spending more time than that and getting poorer results.
SINCE THIS ARTICLE WAS FIRST PUBLISHED a lot has changed. So it's time for an update.
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Updated: September 28, 2013