June 26, 2020

Why should I start planning my Spring 2021 building project now, and what goes into creating an initial cost estimate?

Jim Olson, AIA, NCARB
Director of Business Development-Southern Wisconsin

Spring and summer are peak seasons in the construction industry for good reason: The weather is generally nice, so you don’t have to worry about construction delays or added costs due to winter conditions. The same can’t be said for winter projects, especially in the Midwest, where weather can negatively impact construction progress.

There are many i’s to dot and t’s to cross before a commercial construction project can get off the ground. Generally speaking, it can take 3-6 months (or more) until your project is shovel ready. There are the obvious decisions to make: building function, size, design, location. Then there are factors to consider, like zoning approvals, permits, financing, and other items from outside agencies.

If you are considering constructing a new facility, adding to an existing building, or renovating an existing space next spring to take advantage of prime building conditions, now is a great time to get the ball rolling on those plans.

Pre-Construction Planning is Key
The pre-construction phase is perhaps the most important stage in any building process. That’s because 90% of a project’s success is determined in the first 10% of its timeline.

The key elements to the pre-construction phase include:
• Defining the objectives of the project
• Detailing the scope of the project (describing the work to be done)
• Setting the budget to allow for cost estimating and value optimization
• Setting the schedule
• Initial schematic design
• Construction site analysis
• Materials procurement management
• Acquiring proper approvals (zoning, building permits, etc.)

Clear and collaborative communications is essential during this phase. Setting clear expectations through schedules, responsibility matrices, and cost control measures provide you with the cost, time, and quality information needed to make the best decisions for your project.

Elements of an Initial Cost Estimate
It’s important to understand that an early-stage cost estimate differs from a final construction budget. An early-stage estimate relies on the contractor’s past experience, and involves a combination of art and science. This estimate allows the Owner an opportunity to organize funding sources and plan actual expenditures in advance.

For the initial cost estimate, the estimator relies on information and plans that are termed conceptually complete, but not to the level of actual construction documentation. They must blend known data (such as a building’s size and scope) with other details based on unit costs, assumptions, historical data, and best judgment based on experience and existing market conditions. Often, they will consult with our listing of trusted subcontractors to get a snapshot of current pricing. As the design is refined, the final budget is based on more solid information.

When creating a preliminary estimate, the estimator first assesses the level of detail in the plans. He’ll then consider the site and existing conditions, allowing for variables like overhead power lines, presence of hazardous materials, site grades, etc. that will require additional scope and labor.

At that point, accurate quantity take-offs can be prepared based on the plans, determining the materials needed, and factoring seasonal effects and price trends. The estimator will then extrapolate the associated labor needs, wage rates, and equipment needs to install. Finally, general project requirements such as permitting, insurance and design fees are also incorporated into the initial estimate.

Plan Now, Reap the Rewards!
As project Owner, you can take steps now to set yourself—and your building contractor partner—up for success on your next construction project. It’s important that Owners and contractors view each other as partners in this process. Neither can be successful without the other.

Plan now for Spring 2021, and you’ll be rewarded with a smooth-running, low-stress, cost-effective, and safe construction project.