The Conceptual Estimate

Methods and Improving Estimating Accuracy

THe San Jose International Airport

Best Practices

Conceptual Estimating in Building Works

Today, we are looking at conceptual estimating in building works. Building construction goes through two major phases: preconstruction and construction. The preconstruction phase spans from project conception up until the selected contractor starts building the project (the construction phase), which is the point at which the project enters the construction phase. Most building designs go through three major phases during the preconstruction stages:

Conceptual Design – Design Development – Detail Design

At each design phase, cost estimates are performed for information purposes and for decision-making. Thus, there are three or more levels of estimates performed before the project goes to bid.

The three most common types of estimates are the following:

  • Conceptual Estimates
  • Design Development Estimates
  • Construction Document Estimates

As design progresses from concept to construction, more information becomes available and estimating accuracy is improved.

Conceptual Estimates

Conceptual estimates are critical to the success of capital improvement programs, resource allocation and general construction projects. This is because the estimate occurs very early in the planning stages of a project and may form the basis of a budget for the program or project. According to AACE International recommended Practice No. 17R-97, conceptual estimates are used for schematic design or concept study. They are also used to assess early program cost for go/no-go decision programs, or are used for funding requests. The expected accuracy range for conceptual estimate is -10% to -20% on the optimistic side, and +20% to +30% on the pessimistic side. The estimates are normally based on conceptual design. Conceptual designs are mostly up to 30% design maturity level.

Methods for conceptual estimating vary depending on type of project, available information, the experience of the estimator, the industry and other factors.

In building construction, the following are common methods used for conceptual estimates:

  • Analogous Estimating: relies on the cost data from similar projects and all available information on the current project.
  • Assembly Unit Cost: based on limited design, basis of design documentation, and any other information available at the time of the estimate.

Most organizations have their own methods for establishing conceptual estimates, but using an existing project and adjusting the estimate to reflect all available information, including the basis of design documentation, provides better estimating accuracy in our experience.

Improving Conceptual Estimate Eccuracy

  • Use estimators with experience in the type of project or building to be constructed.
  • While design may not be complete, the estimator must provide a complete estimate as if design is complete. Conceptual estimates must be forward looking, incorporating all the costs of labor, material, equipment and the necessary allowances and contingencies to complete the project.
  • The more information available to the estimator, the better the estimating accuracy. Therefore, design firms must provide all available information to the estimating team. Providing a concept design on the basis of design documents greatly improves the accuracy of the concept estimate.
  • The estimator must provide basis of estimate documentation, listing assumptions, special inclusions, allowances and exclusions.
  • Estimator must include appropriate contingencies to cover the design progression. Design contingencies are established in relation to the given scope of work to cover cost increases from design progressions, predictable conditions and details within the defined project scope. It is not for scope increases or changes. Estimate contingency the concept level, may depend on type of project, location, size, complexity and available information. Rely on owner data or location data.
  • The estimate must include the basis of estimate document to give the owner visibility into the estimators assumptions, inclusions and exclusions to better cost management.
  • Review of the estimate is critical to improving the accuracy of the estimate. Design firms and management must review the estimate for completeness and ensure that the estimators’ assumptions are consistent with the project expectations.

How We Can Help

Danquah Group LLC is a professional services firm providing consulting, training programs and technology solutions to help organizations deliver their strategic objectives. We provide project management support services, including project cost management and controls. Danquah Group also provides training for construction management professionals to help them manage their construction projects. Our past projects involve some of the largest capital improvement programs, including the California High Speed Rail.

For additional information, please email us at sdanquah@danquahgroup.com