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Pre-Construction Budgeting and Estimating

This presentation is for the benefit of all construction professionals that would like to have an early handle on one of the two most critical areas of construction; cost control through budgeting and estimating. The focus of this presentation is on the first point, meeting the cost requirements and parameters of an Owner through the proper use of budgeting and estimating techniques during the pre construction phase of the project.

This phase encompasses from the conceptual stage through the construction budget just prior to ground breaking. These four phases of budgeting are as follows:

  • Conceptual.
  • Schematic or Transitional.
  • Design Development or Work Scope.
  • Construction or Work Scope Award.

Additional highlights of this presentation are as follows:

  • Arrangement of a Bid Documentation Package.
  • Definition of the contents required for each phase of design.
  • Bid Forms and documentation.
  • Budget Levels and expected accuracy.
  • Budgeting and Estimating reports.
Budgeting And Estimating– Overview

During the course of a project, there are two points when the construction professional’s (Construction Manager) efforts will be sternly evaluated by the Owner. The first point is the opening of the proposals for the work. If the cost of the project is within the

The second is the date of completion. If the project is completed on schedule, the Owner will note that the CM firm performed adequately as well with regards to its time commitment. If either goal is not met, extenuating circumstances or changed conditions notwithstanding, the Owner will not be easily comforted.

This is a reality of the construction business and it must be understood by every member of the construction firm that undertakes a project for an Owner. The focus of this presentation is on the first point, meeting the cost requirements and parameters of an Owner through the proper use of budgeting and estimating techniques during the pre construction phase of the project. This phase encompasses from the conceptual stage through the Construction Budget just prior to ground breaking.

Generally speaking every proposed project has a proposed budget. We live in a costoriented
society where a capital expenditure must have a justification in the form of a return. The cost expended on a manufacturing plant must be returned through the sale of the products produced. The cost of an office building or apartment complex must be returned through rents and leases. To keep the cost of manufactured products competitive, maintain rental rates within the market, the capital investment must be a known quantity. An assured return on investment is dependent upon accurately predicting the costs involved. Construction cost is a significant expense, third in line to financing and operating expenses during the life of a facility

The estimating and budgeting activities within this process become the known quantities that guide the project from its conceptual phase to its completion. The four levels of budgeting and estimating that contain the process are:

Estimating Documentation

Once an owner has formulated an idea of a project or the concept of what is to be developed, documentation commences to become an integral part of the project. During the estimating process, the CM needs without failure to gather as much of this documentation as possible in order to produce a complete and accurate estimate and bid requests or “bid package”. If properly gathered, sorted and organized for easy retrieval and management, the CM can produce various alternatives to pricing for the project as well. It will allow for the evaluation of systems, materials, alternate methods and the changing of the project as the owner may find suitable. However without the information that estimating documentation can provide, the accuracy and practicality of the estimate will suffer. The following should be part of the CM’s documentation during the estimating process.

Bid Package

The bidding process commences the relationship with subcontractors, establishing the correct guidelines and procedures of how bids are submitted is of extreme importance. Properly prepared bid requests, or “bid package”, obtain these results. A bid package should comprise of the following

  • Transmittal Letter
  • Letter of Introduction
  • Bid Instructions
  • List of Drawings
  • Insurance Requirements
  • Bidder Qualifications
  • References
  • Standard Bid Form
  • Trade Payment Breakdown
  • Scope of work and scope sheet
Additional Documentation

Other forms of documentation which form part of the estimating process is generated primarily in support of the estimate and commonly created by the estimator. This documentation is an aid in filling the gaps of the information at hand, provides the assumptions and clarifications on which the estimate is based. Sketches and other freehand and preliminary drawings form part of this classification as well. These documents as a group provide the supportive information and until other bidding documents are more advanced and/or available is all that the budgets and estimates are> based on.

A summary list of additional documents includes but is not limited to the following

  • Meeting Notes
  • Sketches of systems, components, materials, etc
  • Explanations of assumptions
  • Alternate materials, means and methods
  • Preliminary drawings.
  • In house specifications
  • Scopes of work prepared to define the work
  • Any other documentation in text or graphical form that will assist in determining the assumptions and conclusions which are the basis of the estimate
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