In this day and age there are many complications that come with projecting costs on construction projects. With the rise and fall of material and labor as well as the ups and downs of the economy, estimating construction projects becomes a moving target. In the Last 25 years (specifically at the start of the information age) many companies have discovered different types of technology that has emerged. This has allowed them the ability to improve their efficiency, minimize costs and increase their competitive advantage. However, it has also impeded them from using one of the most accurate cost data implementations out there, which I would say is their own actual historical cost data. This historical actual cost data is what drives the estimating trifecta approach.
When you walk into a hospital or clinic, typically you are taken through a series of events where data is collected and recorded before you actually meet with the doctor. This data is recorded so the physician can better understand his patient’s needs. If a physician were to prescribe medication to a patient that is allergic to that particular medicine, it may cause some discomfort, pain or even cause death. Historical data for estimating is very similar to the physician getting to know his patient. The historical data collected for many different types of projects allows us to know the type of project and the cost associated with it. Building projects will often have similarities which will allow them to fall into general patterns of cost. It is important that the estimator maintain a database that will track the historical information in a way that will allow the estimator to use that information for future projects. The cost data collected at the end of the project is known as the historical actual cost data and is a very important step to the trifecta approach. This data will include all owner requested changes, agency required changes, architect errors and omissions, unknown conditions, etc. Historical actual costs can be broken down, picked apart, categorized, in many different ways in order to help estimate future projects and enable you to get closer to actual project costs during the conceptual and design phase. Tracking the cost for each project in the traditional CSI categories will help to identify the patterns of cost. Every company should establish the best way for them to collect actual cost data. If this data is collected in an organized controlled fashion your subsequent estimates will be closer to the actual cost after every project! Escalation is another variable that will need to be addressed in order to make sure that the historical data is normalized for comparison. Escalating the cost for each project to a common time period is one method of evolving the cost. An alternative approach would be to identify the cost for each CSI category as a percent of the total cost. Either approach will allow the estimator to compare the historical data to the new project that is being considered. Obviously the estimator must also be able to look at the new project and ask himself, “What makes this project different?” and then make the adjustments to the conceptual CSI categories in order to more accurately reflect the anticipated cost.
The first step in defining a project usually starts with the creation of a “program”, where the architect will review with the owner the functional needs of the building project. The program will typically be distilled down to a room by room description, where the area and function of each room will be described. Next the architect will put together a space program that corresponds with the owners needs. At this point the second part of the trifecta approach will be utilized which is, the room-by-room estimate. The room-by-room estimate is comprised of historical cost data that gives a cost per square foot for each room depending on the function of the room. Again, this historical data is part of the estimator’s arsenal in predicting cost. This information becomes valuable in helping the architect and owner determine cost vs. benefit of each room. Room-by-room estimating has proven to be extremely valuable in defining the scope that fits within budget on complicated programs such as hospital, laboratory and education projects. For example, if the architect is designing a hospital, it will be helpful for an owner to know just how much it will cost to add another operating room or to delete a conference room in order to help pay for the additional operating room. Being able to accurately predict those differences is important. It is also important to be able to provide that information quickly at a conceptual level in order to help guide the final decision.
Since the estimator at this point is dealing with very little detail the estimator must be able to anticipate what is not yet shown on the plans. Again, the trifecta approach to estimating, allows the estimator to use the historical data that has been created with the CSI categories and the room-by-room cost analysis to make sure that the cost is still within the predictable range of what is expected at each stage of the design.
As more detail is presented to the estimator the estimate should be refined. The architect typically will publish three stages of drawings; (1) schematic, (2) design development and (3) construction documents. Each stage has a level of detail that allows material, labor and equipment costs to be developed. In some cases the estimator is forced to skip all the way to the construction document level of detail to provide an estimate; however, just as a patient recovering from a surgical procedure, it is not recommended that the patient skips the stages of rehabilitation. The estimator should be involved from the most conceptual stage through the construction documents, in order to be absorbed in the design and make the necessary updates to each stage of the estimate.
When a physician suspects that a person has broken a bone, they will typically take an X-ray of the area that appears to be fractured. The X-ray does not show all the ligaments, tendons, nerves, etc.; however, it does show the bone structure, where the fracture can be identified. The schematic design is much like the X-ray. It should give a level of detail that establishes the general scope, conceptual design, scale and relationships among the components of the project but will not get into in-depth detail. The schematic level of design provides a little more detail than the space program; hence, the estimate should be updated with the adjustments made to the design.
The design development expands upon the approved schematic design to develop more detailed drawings that illustrate other aspects of the proposed design. Floor plans should show all rooms in correct size and shape. Also, outlined specifications should be prepared listing the major material and room finishes. The architect will also verify that the design complies with building codes and will work with the engineers to design the structure, mechanical and electrical systems. Detail quantity take-offs should be developed at this stage which will identify the units and quantities for the different building and site components illustrated in the design development drawings and outlined specifications. It is also critical that the estimator performs a constructability review in doing the design development estimate. The comments from the constructability review will then be presented to the architect to make the necessary updates to the design. This will allow the architect to “brush up” on the design before the construction documents are submitted and in the end eliminate the amount of change orders requested during the bidding and construction phase.
Once the owner has approved the design development drawings the architect will than prepare the construction documents. The construction documents should illustrate the level a detail necessary for the contractors to provide their complete bids. The drawings and specifications that make up the construction documents will than get incorporated into the construction contract. Any changes made to the construction documents will than need to go through the change order process. Once the level of design has arrived at the construction document stage it is important to continue the detailed estimate with any additional take-offs that may be necessary. Historical cost data will again emerge and become a tool to develop the detail pricing for material, labor and equipment. The detailed material, labor and equipment estimate can be extremely helpful for owners in many different ways, including confirming the proposed budget, negotiating contracts, verifying contractors bids, etc.
Developing the wrong budget with estimating errors may not result in death, like errors in the operating room; however, budget errors can be catastrophic to the success and return on investments of building owner’s. The estimator needs to get to know and understand the project, just as a physician knows the patient through historical data collected. Each estimate needs to be dissected and surgically evaluated at all phases, from the room-by-room estimate all the way down to the last penny of the detailed estimate. Good estimating relies upon multiple sources and trifecta evaluation throughout the project life-cycle.
