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by Scott Cullen Faithful+Gould Last updated: 11-28-2005

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Home > Design Guidance > Design Disciplines > Cost Estimating

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Thro ugho ut a pro ject's planning, design, and co nstructio n Introduction Additional Resources phases, Co st Estimating is emplo yed as o ne o f the main to o ls o f successful Co st Management. Once an initial budget has been established, it is impo rtant to test its assumptio ns by emplo ying a series o f increasingly precise co st estimating techniques that co incide with further develo pment o f design and co nstructio n details. A so und understanding o f the mo st co mmo n types o f estimates, to o ls fo r estimating, histo rical database so urces, and fo rmats o f estimates fo rms the basis o f the mo re so phisticated metho ds o f estimating. Estimating is typically co ncerned with the initial co sts—o r first co sts—o f acco mplishing new co nstructio n o r reno vatio n pro jects, altho ugh it also plays a large part in life-cycle co sting o f design alternatives. The estimates sho uld be pro vided by a pro fessio nal estimating firm either as part o f the design team, o r directly fo r the o wner. In many instances the latter is preferred to ensure the independence o f the estimate.

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Est imat ing Format s A key co mpo nent o f any co st-estimating effo rt is to establish the framewo rk, o r fo rmat, within which the pro ject co sts will be distributed, o ften referred to as a Wo rk Breakdo wn Structure (WBS).

There are a variety o f estimating fo rmats used to day, but the two mo st co mmo nly used are MasterFo rmat and Unifo rmat. MasterFo rmat, o ften referred to as CSI MasterFo rmat™, currently pro vides WBS into 16 trade/materials based divisio nal catego ries (in the pro cess o f being expanded to 49 divisio ns). Unifo rmat represents WBS co sts acco rding to a hierarchy o f system elements, and is suppo rted thro ugh vario us o rganizatio ns, e.g. the U.S. General Services Administratio n and CSI. Altho ugh different in their system headings, each pro vides a hierarchical WBS by systems. MasterFo rmat™ is widely used within the design and co nstructio n industry PDFmyURL.com

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when estimating fo r Co nstructio n Do cument design phases, as it aligns well with MasterFo rmat specificatio n sectio ns. On the o ther hand, Unifo rmat-based estimating is o ften used in pro viding planning stage and early design phase estimating, where take-o ff measurements do no t readily allo w MasterFo rmat databases to be applied. In either case, the key to successful estimating is whether accurate co st data is available (thro ugh databases o r o ther so urces) that enable WBS quantities to be applied. Key also is whether WBS catego ries enable effective co st management, asso ciated with the ability to co mpare current estimate breakdo wns to previo us estimate co mpo nents—having lineage back to the pro ject's pro grammed budget.

Types of Est imat es Preliminary Estimates. Early in the planning stages, bo th building o wners and designers must agree o n an anticipated co st o f the pro ject at bid award. Preliminary Estimates are emplo yed in the early planning phases o f a pro po sed pro ject to match an o wner's needs, expressed as written pro grammatic requirements, with budget co nstraints in o rder to establish its o verall sco pe (size) and quality expectatio ns. The WBS reco mmended at this stage is a systems-based fo rmat, where elements o f the building (e.g. exterio r clo sure) are the metho d o f catego rizatio n. Estimate co mpariso ns at this stage are especially valuable in evaluating the feasibility o f strategic alternatives being co nsidered to satisfy current and pro jected space requirements (e.g. new co nstructio n versus reno vatio n, o r lease space). As the design is no t fully develo ped at this stage, a design co ntingency is typically included, typically between 10 -15%. Issues which need to be identified at this juncture include metho d o f pro curement being co nsidered, lo catio n market facto rs, specific site co nstraints o r challenges, pro po sed phasing plans, and start and finish dates. It is reco mmended that a fo rmal risk analysis be carried o ut at every stage in the design, but particularly in the planning stage when pro active steps can be taken to mitigate identified risks.

Intermediate Estimates. After pro ceeding with a preferred co urse o f actio n, Intermediate Estimates are emplo yed at vario us stages o f pro ject design develo pment to maintain acco untability fo r initial budget pro jectio ns and as a means o f evaluating co mpeting alternative co nstructio n assemblies, systems, and materials. On large pro jects it is co mmo n practice fo r an o wner to emplo y a co nstructio n manager o r pro fessio nal estimato r to co ntinually update pro ject estimates and pro vide feedback o n budget impacts o f decisio ns o n majo r design elements. The estimates will typically still be in a Unifo rmat systems WBS, ho wever a summary/co nversio n may also be pro vided in CSI MasterFo rmat. The risk assessment sho uld be updated and a co ntingency facto r calculated depending o n the o utco me o f the risk analysis. As the design pro gresses and risks are mitigated, the design co ntingency can typically be reduced.

Many o wners emplo y Earned Value Analysis co st management practices as the design pro gresses, to determine if the pro ject is o n track acco rding to bo th schedule and budget. This can be as straightfo rward as tracking co sts acro ss building systems (e.g. the mechanical system) o r can be mo re mathematically based to fo recast the final o utco me o f the pro ject.

Final Estimates. As the design is co mpleted a detailed pre-bid estimate can be prepared. At this stage the design co ntingency wo uld typically be reduced to zero : ho wever, in so me instances, there will still be risk surro unding the pro ject, which wo uld make it prudent to still include a small PDFmyURL.com

bidding co ntingency. The estimate sho uld be o rganized in the same WBS as required o f the bidders, which typically is CSI MasterFo rmat™. This then allo ws fo r a co mpariso n o f the final estimate with the bids received and can aid in nego tiating with the lo west bidder. In additio n, having the final estimate and bids in the same fo rmat facilitates develo ping co st databases fo r use in planning future pro jects. This typically means taking a CSI bid and re-so rting the data into a Unifo rmat WBS.

Est imat ing Met hods There are fo ur primary metho ds used to estimate co nstructio n co sts. Tho se metho ds are kno wn as Project Comparison Estimating or Parametric Cost Estimating, Area & Volume Estimating, Assembly & System Estimating, and Unit Price & Schedule Estimating . Each metho d o f estimating o ffers a level o f co nfidence that is directly related to the amo unt o f time required to prepare the estimate (Fig. A).

Fig. A: Relative accuracy of estimate types (Courtesy of From Concept to Bid‌Successful Estimating Methods by John D. Bledsoe)

Project Comparison Estimating or Parametric Cost Estimating is o ften used in early planning stages when little info rmatio n is kno wn abo ut the pro gram o ther than o verall pro ject parameters.

This metho d is so metimes called a "preliminary" o r "ballpark" estimate and has no better than 15% to 25% accuracy. Pro ject co mpariso n estimating uses histo rical info rmatio n o n to tal co sts fro m past pro jects o f similar building type. Fo r example, the number o f beds in a ho spital, o r number o f spaces in a parking garage, o r number o f co urtro o ms in a co urtho use can fo rm the basis o f a pro ject co mpariso n estimate by co mparing them to similar sco pe pro jects recently do ne in the same geo graphic regio n.

This estimating metho d requires the assumptio n o f an appro ximate gro ss area fo r the pro po sed PDFmyURL.com

wo rk and a sufficient histo rical reco rd o f similar building types. The greater the number o f prio r pro ject co mbinatio ns fo r which sco pe and prices are kno wn, the easier it is to perfo rm Pro ject Co mpariso n Estimating. Fig. B illustrates an example o f regressio n analysis used to develo p a pro ject co mpariso n estimate. The scattered po ints in the figure sho w the co mbinatio ns o f o verall pro ject size and co st. The line sho wn is the "best fit" o f a linear relatio nship between size and co nstructio n co st and may serve to predict a preliminary budget. The distances between the line and the po ints give a visual impressio n o f the statistical co nfidence o f the estimate.

Fig. B: Project relative accuracy of estimate types (Courtesy of From Concept to Bid‌Successful Estimating Methods by John D. Bledsoe)

Square Foot and Cubic Foot Estimates are ano ther metho d o f develo ping bo th preliminary and intermediate budgets based o n histo rical data. This metho d is effective in preparing fairly accurate estimates if the design is develo ped eno ugh to allo w measurement and calculatio n o f flo o r areas and vo lumes o f the pro po sed spaces. There are several histo rical databases available to suppo rt this metho d o f estimating pro viding unit co sts ($/S.F. & $/C.F.) that are adjusted annually and many o f the large estimating firms maintain their o wn databases. Mo re accurate estimates made with this metho d make adjustments and additio ns fo r regio nal co st indices, lo cal labo r market rates, and interpo latio n between available co st tables. Further adjustments may be made to acco unt fo r o ther unique aspects o f the design such as special site co nditio ns o r design features being planned. In additio n, the estimate can develo p o verall "co re and shell" co sts alo ng with Tenant Impro vement build-o ut co sts o f different space types, allo wing fo r relative ease o f determining the impact o f changes to the pro gram. Estimates made with this metho d can be expected to be within 5% to 15% accuracy.

Assembly and Systems Estimates are intermediate level estimates perfo rmed when design drawings are between 10 % and 75% co mplete. Assemblies o r systems gro up the wo rk o f several trades o r disciplines and/o r wo rk items into a single unit fo r estimating purpo ses. Fo r example, a fo undatio n usually requires excavatio n, fo rmwo rk, reinfo rcing, co ncrete—including placement and finish—and backfill. An Assembly and Systems estimate prices all o f these PDFmyURL.com

elements to gether by applying values available in assemblies co st data guides. These guides are based o n histo rical databases, typically o rganized in MasterFo rmat™. Estimates made with this metho d can be expected to be within 10 % accuracy.

In Unit Price and Schedule Estimating , the wo rk is divided into the smallest po ssible wo rk increments, and a "unit price" is established fo r each piece. That unit price is then multiplied by the required quantity to find the co st fo r the increment o f wo rk. This calculatio n is o ften called "extending". Finally, all co sts are summed to o btain the to tal estimated co st. Fo r example, the co st to erect a maso nry wall can be accurately determined by finding the number o f bricks required and estimating all co sts related to delivering, sto ring, staging, cutting, installing, and cleaning the brick alo ng with related units o f accesso ries such reinfo rcing ties, weep-ho les, flashings, and the like. This metho d o f estimating pro vides the mo st accurate means o f pro jecting co nstructio n co sts, beyo nd which accuracy is mo re likely to be affected by supply and demand fo rces in the current market.

Hist orical Dat abases and Est imat ing Sof t ware There are several histo rical databases available that pro vide current values fo r estimating co sts o f the vario us units o f wo rk fo r a pro ject. The databases are co mpiled fro m reco rds o f actual pro ject co sts, and o n-go ing price quo tatio ns fro m suppliers, and are published annually in the fo rm o f bo o ks, CDs, and co mputer-based extranets. There is ho wever a danger o f applying published data o r so ftware database pricing witho ut first adjusting fo r the particular aspects o f the pro ject under co nsideratio n. In co nstructio n every pro ject is unique, with a distinct set o f lo cal facto rs (such as size o f pro ject, desirability, level o f co mpetitio n, flexibility o f specificatio ns, wo rk site, and ho ur restrictio ns, and so fo rth) that co me into play in bidding. When an estimating system is used that is attached to a price database, the pro fessio nal estimato r sho uld still review each line item price to determine if it is applicable to the pro ject being estimated. Blindly applying database prices can lead to inaccurate estimates and bid busts.

Lo catio n facto rs sho uld also be applied o nly after first co nsidering the pro ject size and particular nature, to determine where the bidders will co me fro m. If it is a large pro ject in a small to wn, the lo catio n facto r fo r that to wn likely will no t apply as the bidders will be co ming fro m elsewhere.

The bids may as a result be much higher than the facto r wo uld indicate as the wages will be based o n ano ther lo catio n and the bidders may have to pay acco mmo datio n and travel co sts fo r so me o f their wo rkers.

Private Sector BNI—A po pular publisher o f co st estimating guides in the U.S. Marshall & Swift—o ften used fo r insurance valuatio ns.

R.S. Means—The mo st-used and mo st-quo ted so urce with 25 different guides and unit prices fo r o ver 20 ,0 0 0 building co mpo nents.

Public Sector General Co nstructio n Co st Review Guide—Used by the U.S. General Services PDFmyURL.com

Administratio n to perfo rm preliminary planning/benchmark estimates o f large capital co nstructio n pro jects Histo rical Co st Analysis Generato r (HAG)—Used by the Tri-Services to co llect histo rical co sts o n awarded military co nstructio n pro jects MCACES (Micro co mputer-Aided Co st Engineering System) (U.S. Army Co rps o f Engineers) —A multi-user so ftware pro gram used fo r preparatio n o f detailed co nstructio n co st estimates fo r military, civil wo rks, and go vernment facilities. The Co mmercial Unit Price Bo o k (C-UPB) can be used with MCACES Go ld Versio n 5.30 .

SUCCESS Estimato r (Tri-Services)—An integrated estimating and co st management pro gram. Includes: Unit Price Bo o k Database (UPB) 20 0 1, Parametric Co st Estimating Mo dels (PCEM) versio n 5, PCEM Data and PCEM Tuto rial, Building Reno vatio n Assemblies (BRA) 1.0 , and Teleco mmunicatio ns Estimating System (TELECOM) 2.0 .

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ADDIT IONAL RESOURCES WBDG Design Objectives Co st-Effective—Use Eco no mic Analysis to Evaluate Design Alternatives , Co st-Effective —Co nsider No n-Mo netary Benefits such as Aesthetics, Histo ric Preservatio n, Security, and Safety Pro duct s and Syst e m s

Associat ions Asso ciatio n fo r the Advancement o f Co st Engineering (AACE) American So ciety o f Pro fessio nal Estimato rs (ASPE) Internatio nal Co st Engineering Co uncil Ro yal Institutio n o f Chartered Surveyo rs (RICS) So ciety o f Co st Estimating and Analysis (SCEA)

Publicat ions Building News Internatio nal website From Concept to Bid…Successful Estimating Methods by Jo hn D. Bledso e, PhD, PE. Kingsto n, MA: R.S. Means Co mpany, Inc., 19 9 2.

GCCRG—General Construction Cost Review Guide GSA Project Estimating Requirements R.S. Means website

Ot hers e-o ffice—A co mprehensive pricing service and business management so ftware to o l fo r PDFmyURL.com

co ntracto rs by Harriso n Publishing Ho use ER 1110-3-1300 Military Programs Cost Engineering by U.S. Army. 19 9 9 .

Histo rical Co st Analysis Generato r (HAG)—Used by the Tri-Services to co llect histo rical co sts o n awarded military co nstructio n pro jects Micro Co mputer-Aided Co st Engineering Systems (MCACES) by U.S. Army Co rp o f Engineers.

P-442 Economic Analysis Handbook by NAVFAC. 19 9 3.

SuccessEstimator by Tri-Services.

TI 802-02 Construction Cost Estimates by U.S. Army.

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