NEWS & TRENDS

Welcome to the AMHIGLEY BUILDERS BLOG, where our experts share their insights and technical expertise on the construction industry.

 This month, Adam Lantvit breaks down the process of conceptual estimating and why it is so important to the preconstruction process. By using experience, historical data, and broad project parameters, conceptual estimating helps clients and project teams understand potential costs early on, enabling informed decision-making throughout the preconstruction process.

   Adam Lantvit | Director of Preconstruction | 2 Years with AMHigley

A STRONG FOUNDATION WITH EFFECTIVE CONCEPTUAL ESTIMATING

Long before the first shovel breaks ground, the preconstruction process creates important markers for the project budget as the design progresses. One of the most critical early steps is conceptual estimating, a process that provides a financial framework for the entire project. Unlike other preconstruction estimates, which come later in the project timeline utilizing more developed designs and specifications, conceptual estimates are developed at the project's inception, often when limited information is available.

A good conceptual estimate can set the trajectory for the project and keep that momentum throughout the entire project if all stakeholders (Owner, Design Team, and Construction Manager) are in lockstep. Trust amongst the stakeholders is paramount to ensure everyone is working toward the same goal to provide a project that is well designed, meets the Owner’s needs and is within budget.

The Conceptual phase of preconstruction can be looked at in a variety of ways, from the least detailed to the most detailed option. A preconstruction team will be able to tailor an estimate to suit the Owner’s needs based on the amount of information that is available. The levels of estimating (from least to most detailed) include Rough Order of Magnitude Budget, Conceptual Budget, and a full Conceptual Estimate.

A Rough Order of Magnitude (ROM) Budget is the least detailed, providing a high-level overview of costs. A ROM budget will typically present a low-end and high-end range that a particular project is likely to fall between. Very little detail is typically known so a range is appropriate due to the variability in what may or may not be part of the project. Oftentimes for a ROM budget, the project square footage and intended use may be all that is known. Historical cost data collected on similar types and uses of the project is relied upon heavily. A ROM is helpful to understand if the visioned project is feasible given the unique financial constraints of that project.

A Conceptual Budget comes from a more detailed examination of the project and will be looked at and broken down into various building components with a budget provided for each component. Similarly to a ROM budget, little information is known. but will oftentimes include a narrative to better understand the proposed project direction in addition to the project square footage and intended use. The project would be looked at for each of the distinct aspects (e.g. foundations, superstructure, interior construction and finishes, plumbing, HVAC, electrical, sitework etc.) and given a dollar value per component. This type of budget relies heavily on previous projects to provide a baseline to start from with adjustments made to the component values based on what is known about the project.

At the most detailed level, a full Conceptual Estimate can be provided which includes detailed backup showing a dollar-by -dollar and line-by-line accounting of each item. This type of estimate would typically require a scaled conceptual floor plan, elevation, section, and narrative (including structural system and MEP systems) to be able to complete a quantity takeoff and to better understand the exterior enclosure, building systems and level of finish. This form of conceptual estimate will provide the owner and design team with the most granularity and can help in identifying certain systems and material or finish selections that have a significant impact on the overall project cost.

With Conceptual Estimating it is important to know what the typical components and systems are for each building type and use. A list of clarifications and assumptions becomes critically important due to the lack of a developed design at this early stage. Being able to “fill in the blanks” in the design during concept is where the estimator and preconstruction manager can provide value to the owner and the design team to present a conceptual estimate that is reflective of the design intention and provides a complete scope of work.

The challenges with the conceptual phase of preconstruction center around the fact that there is so little information known. The value of a good estimator/preconstruction manager will help facilitate and lead the effort to overcoming these challenges. Estimators can ensure assumptions are clear, anticipated scope is understood and an appropriate contingency is provided to cover scope development.

It is critical to meet with all stakeholders to discuss the project before estimating starts. It is helpful to know and understand where the project is headed and what is important to the project that may not be on paper yet. This helps drive decisions made during estimating to ensure that the estimate aligns with the Owner’s and design team’s expectations. Communication and collaboration are critical to provide the guide rails as the design progresses. The conceptual estimate will provide a baseline budget that can be referenced throughout the design process to ensure the design is following the stated intent at concept and the project remains on budget.

The Conceptual Estimating process can eliminate lengthy value engineering exercises since the entire project team is on the same page and knows the budget that needs to be designed to very early on. The preconstruction team can provide input in real-time throughout the design to ensure the project stays on budget based on design decisions made throughout the process.

The conceptual phase can be extremely helpful to keep the project on track and to ensure project success. Conceptual estimating is more than just an early cost approximation, it allows stakeholders to make informed decisions, mitigate risks, and set clear expectations. An experienced and knowledgeable preconstruction team able to provide a detailed conceptual estimate and facilitate the conceptual estimating process will remain a key component to deliver value from the start of a project until completion.