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Appendix D
Current Procedures for
Preparing Early Estimates
Prepared by Michael Morris.
Many different methods and techniques are used
to prepare early estimates for construction; that is
the pre-programming, program, concept/schematic,
and design development estimates. This appendix
discnbes the most commonly used methods. Some
of the methods discussed are also used to prepare
detailed owner (government) estimates and esti-
mates to compare with contractor bids; such as,
working drawing and contact document estimates.
However, since the focus of the appendix is on
early estimates, the methods are discussed only in
that context.
Techniques for preparing early estimates can be
categorized in various ways. In this appendix, the
techniques are grouped and discussed under four
broad headings: single unit estimates, multiele-
ment estimates, parametric estimates, and range
estimates. Information for the discussion was ob-
tained from many sources, but especially Adrian
(19X2) and Bower (1984~.
SINGLE UNIT ESTIMATES
In single unit estimates, the cost of a facility is
calculated on the basis of a unit of measurement,
which may be expressed in terms of the functional
use of the facility, areas and volume, or factoring.
*Michael Morris is President of Hanscomb Associates,
~c.
33
Estimates Based on Function-of-Use Units
Among the function-of-use units sometimes used
to prepare early estimates are the number of bed-
rooms in a hotel, the number of seats in a theme,
the number of beds in a hospital, and the number of
parking spaces in a parking garage. Function-of-
use estimates are prepared by multiplying the num-
ber of units to be included in a proposed facility by
an average construction cost per unit (e.g., dollars
per bed).
Such estimates can be prepared very easily and
quickly if an estimator has the appropriate histori-
cal data—and when an owner constructs a particu-
lar type of facility on a regular basis, historical cost
data related to a function-of-use unit for that facil-
ity can be accumulated easily. However, even with
ample historic data, estimates based on function-
of-use units: frequently are unreliable since costs
per unit are subject to wide variation.
It is generally agreed that estimates based on
function-of-use units ought to be used only for very
preliminary planning purposes (i.e., pre-program-
ming estimates) and only by people who are t}~or-
oughly familiar with the type of facility in question
and recognize the limitations of the data.
Estimates Based on Areas or Volume
Generally, one of the following three units are
used to prepare area or volume budget estimates:
floor area, building surface area, or building vol-
ume. Floor area is the most widely used unit for
OCR for page 34
34
preparing early estimates in most parts of the world.
Estimates based on floor area generally are pre-
pared by measuring the gross floor area of the facil-
ity and multiplying the area by an average unit cost
(e.g., dollars per gross square foot).
There is an abundance of data available on con-
struction costs per square foot for many types of
facility, and government agencies, developers,
contractors, and cost consultants collect, store, and
use such cost data routinely. In prepanag area-
based estimates, the estimator must be concerned
with the accuracy of available unit cost data and
have the necessary estimating skills to select the
most appropriate rate for the building being esti-
mated. Judgment is required because most cost
data at this level includes little information on the
characteristics of the buildings included in the his-
torical data base.
Area-based cost data is published by several
commercial houses and is widely used by owners
and estimators who do not have data bases of their
own. These data, which are typically generated
annually, give median costs per square foot for
various building types. The unit cost for each build-
ing type is related to a "typical" building of a par-
ticular size. If the size of the building being esti-
mated is different from the size of the typical build-
ing, the unit costs may be adjusted using a no-
mograph called a "square foot project size modi-
fier."
To improve the accuracy of floor-area based
estimates, estimators sometimes use different unit
costs per square foot for different functional areas
of a building. This is known as the functional area
method of estimating and the purpose is to account
for the fact that in some types of buildings (such as
hospitals) the cost per square foot to construct vari-
ous departments may be significantly different.
However, obtaining accurate cost data broken down
by functional area can be difficult, and developing
estimates using such data requires considerable skill.
One problem with all floor-area based estimates
is that there are no universally accepted rules for
measuring building areas. The American Institute
of Architects has developed measuring rules, but
many organizations including most federal agen-
cies~o not follow them. In fact federal agencies
cannot agree among themselves on definitions of
building areas; in a recent Federal Construction
Council study (Consulting Committee on Planning
and Design Terminology, 1988) it was found that
various agencies use at least 13 different terms to
define the areas of their buildings. Clearly, in the
APPENDIX D
absence of standards on measuring and defining
areas, area-based cost data must be used with cau-
tion.
The building surface area method of estimating
is similar to He floor area method. However,
whereas win the floor area method the estimate is
based on He area of just the horizontal floor sur-
face of the building, with the building surface
method bow vertical and horizontal surfaces are
considered. To prepare an estimate based on a
building surface areas, the surface areas of all floors,
roofs, and external and internal walls are measured
(but only one surface of an element is measured).
An average unit cost rate for all surfaces is then
selected and multiplied by the measured surface
area to compute the total cost of the facility. There
are also variations on this theme; for example, in
some cases the areas of the various elements are
multiplied by weighing factors to reflect the differ-
ences in their construction costs.
The building surface area method is not widely
used because reliable cost data of the type needed
is often not available. Furthermore, if drawings of
the building are sufficiently well-developed to al-
low use of this method of estimating, most estima-
tors tend to use a multi-element approach (see be-
low) for which unit cost data are more readily avail-
able.
The building volume method of estimating also
is similar to the floor area method. The main dif-
ference is that the height as well as the floor area of
the building is considered. The building volume
method is not nearly as popular as the floor area
method, but is sometimes used where buildings of
the same type can have significantly different floor
to ceiling heights:(e.g., hangars, hospitals, and
warehouses). The building volume method like
the building surface area method is used infre-
quently partly because of a lack of cost data; how-
ever, some published cost-per-cubic-foot data is
available in the market place.
The Factoring Method of Preparing
Budget Estimates
The factoring method of preparing early esti-
mates is most often used for major manufacturing
facilities where the cost of a single component, for
example equipment, is the most significant cost
item. Costs of the various components of the build-
ing required to house and support the equipment
are assumed to be fixed percentages (factors) of the
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APPENZUX D
cost of that equipment, as illustrated in the follow-
ing example.
Cost of Equipment: $2,000,000
Cost of construction and support systems expressed
as factors of the equipment costs:
Element/Component
Factor Estimated Costs
Arc hi tee turallS tru c tural . 3 0
Mechanical .25
Electrical .10
Equipment Installations .15
General Conditions .10
Total Estimated Cost
$600,000
450,000
200,000
300,000
200,000
$1,750,000
The type of cost data used with the factoring
method is relatively inexpensive to collect and use,
and the factoring method can produce reasonably
accurate estimates provided a good data base is
available. The factoring method does not, how-
ever, lend itself to the type of facilities ordinarily
constructed by the federal agencies.
MULTI-ELEMENT ESTIMATES
The multi-element approach is a popular method
of preparing cost estimates for construction: First,
each of the various elements, systems, and compo-
nents of the proposed facility are identified, sized,
and priced separately in accordance with recog-
nized procedures; next, the costs of the individual
items are added to determine the total direct cost of
the facility; finally, allowances are added for over-
head, profit, and contingencies to determine the
overall estimated cost of the project.
Most estimates of the multi-element type are
based on one of two recognized formats: an ele-
mental format in which most costs are related to the
systems and physical elements that make up a build-
ing; and a trade format, in which costs are broken
down by specification sections, most of which are
related to construction trades or materials.
Elemental Format
Probably the most widely used elemental format
is Uniformat (a contraction of"uniform" and "for-
mat"), originally developed by the American Insti-
tute of Architects (AIA). It was later modified and
adopted by the General Services Administration
(GSA). The GSA version is now a nationally rec-
ognized method for analyzing building construc-
35
lion costs on the basis of 12 standard building sys-
tems or elements: foundation, substructure, super-
structure, exterior closure, roofing, interior con-
struction, conveying systems, mechanical, electri-
cal, general conditions and profit, equipment, and
site work.
As developed by GSA, each of the 12 Uniformat
elements can be fewer broken down into sub-ele-
ments, and each sub-element can be further subdi-
vided into components to permit the preparation of
highly detailed estimates. However, in practice,
most estimators use the Uniformat breakdown for
preparing early estimates and the CSI approach
(see below) for preparing working drawing esti-
mates. Some commercial houses and several fed-
eral agencies publish generalized cost data for early
estimating purposes on the basis of the 12 Unifor-
mat elements, but also have available detailed cost
data for preparing more detailed estimates in accor-
dance with the CSI format.
The Uniformat approach has been widely adopted
for the preparation of early estimates because own-
ers, architects, engineers, and others involved in
making broad decisions about construction tend to
relate more to the cost elements used in Uniformat
than to the work items in the CSI format. The
usefulness of the Uniformat approach has been
enhanced by the development of computer programs
that permit cost data in the CSI format to be sorted
into Uniformat elements and vice versa.
CSI Format
The most widely used format for storing and
presenting construction cost data is the 16-division
specification format of the Construction Specifica-
tions Institute: general requirements, site works,
concrete, masonry, metals, wood and plastics, ther-
mal and moisture protection, doors and windows,
finishes, specialties, equipment, furnishings, spe-
cial construction, conveying systems, mechanical,
and electrical.*
By design, the CSI format reflects the scheme
used by most contractors to organize and manage
construction projects, account for costs, and award
subcontracts. Consequently, the CSI format is
widely used by contractors to prepare bids and by
*The 16-division specification format of CSI is based on
the 16-division "Uniform Construction Index" that was
jointly developed in the late 1960s by a number of or-
ganizations including the American Institute of Archi-
tects, the Associated General Contractors, and CSI.
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36
estimators to store cost data for working drawing
estimates. However, while there is considerable
historical cost data available in the CSI format on
venous building types, it is often of little value for
early estimating purposes because it is usually in
such detail that it cannot be used until the design of
the facility has been developed to a significant
degree. A detailed estimate using the CSI format is
prepared by measurement of the quantities for all
labor, materials? and equipment required for each
item included in each of the 16 divisions. These
quantities are then priced at appropriate rates, ex-
tended, and totaled. Allowances are then included
for general conditions, overheads, profit, and con-
tingencies to arrive at a total estimated cost. The
preparation of such estimates, generally known as
the quantity survey method, is labor-intensive and
needs time to complete. It should be noted that
detailed working drawing estimates can be pre-
pared in CSI or elemental format or indeed in other
formats to suit an owner's code of accounts.
As mentioned previously, the managers and
professionals who make decisions in the early stages
of a project do not think in terms of the work items
in the CSI format. Rather, they tend to think in
terms of systems, like those in the Uniformat. Thus,
whereas detailed estimates are usually in the CSI
Format, program and concept/schematic estimates
tend to be in Uniformat.
PARAMETRIC ESTIMATES
To a certain extent all methods of estimating are
parametric in that they are based on the use of cost
parameters. However, the term "parametric esti-
mating" is generally understood to mean the tech-
nique of developing estimates based on a limited
number of important features that are the major
cost drivers of an estimate. Parametric estimating
is most applicable to relatively standard facilities
since the starring point is a data base containing
detailed estimates of various specific facilities. The
premise underlying paramedic estimating is that
the cost of the facilities in the data base will vary as
a function of certain values (parameters). Thus, by
assigning new values to the parameters associated
with the detailed estimate from a particular facility,
a new detailed estimate for that facility can be
generated. The concept is sound and produces rea-
sonably accurate estimates provided the algorithms
and statistical data used in connection with the
parameters are accurate and extrapolations of the
estimates in the data base are not excessive.
APPENDIX D
The major advantage of paramedic estimating is
that it provides detailed cost breakdowns in either
Uniformat or CSI format depending on how the
prototype estimates in the data base are format-
~iquickly and at relatively low cost with only
limited analysis of the facility to be constructed.
Thus, wig parametric estimating, budget estimates
can be prepared that include similar detail as work-
ing drawing estimates.
The disadvantages of parametric estimating are
that it can be used only for facilities similar to the
facilities for which there are estimates in the data
base, and the computations are performed by com-
puter, making it very difficult for estimators to
verify the results. In addition, many parametric
estimating systems are proprietary, and developers
will not divulge the algorithms used; consequently,
their validity must be taken on faith.
The U.S. Air Force has developed a parametric
estimating system called the Construction Cost
Management Analysis System (CCMAS) for esti-
mating costs of venous types of Air Force facilities
that are constructed on a regular basis.~The devel-
opers of the system, the Construction Cost Man-
agement group at Tyndall Air Force Base, report
that the system has been tested and found accurate
and reliable (Bridges and Gregory, 1987~.
PROBABILISTIC ESTIMATING AND
RANGE ESTIMATING
Construction cost estimating traditionally has
been treated as a determinate problem; that is, a
problem in which the answer can be expressed as a
specific, definite value. However, since a cost esii-
mate is really a prediction of what an item or group
of items will cost in the future, many assumptions
must be made in preparing an estimate, which in-
troduces a degree of uncertainty into the process.
In the case of early estimates, which usually are
prepared before most design decisions have been
made (and often many months before bids are re-
ceived), the level of uncertainty may be high.
Traditionally, estimators and owners have dealt
with uncertainty about the accuracy of estimates
through the use of contingency factors, which in
essence provide funds to cover cost overruns up to
a certain amount. Although the contingency-factor
approach has worked reasonably well, in recent
years a number of estimators have developed alter-
native methods of quantifying the uncertainty that
is inherent in almost all cost estimates. These meth-
ods are usually referred to as either range estimat-
OCR for page 37
APPENDIX D
ing (Curran, 1988) or probabilistic estimating
(Consulting Committee on Cost Engineering, 1983~.
While there are significant differences in the
venous range estimating and probabilistic estimat-
ing techniques that have been developed, they tend
to have several features in common; specifically:
(1) they require that an estimate be made of the
potential variability of each element in an estimate;
(2) they employ the laws of probability to deter-
mme me impact of possible variations in the cost of
individual elements on overall costs; (3) they re-
quire tile use of a computer; and (4) they present
the results in the form of a histogram or a cumula-
tive distribution showing either the probability of
37
various estimates proving to be the actual cost of
the project, or the probability of cost overruns of
various magnitudes.
Opinions vary on the value of range estimates
for budgeting purposes. A number of users have
enthusiastically endorsed the range estimating con-
cept (see Curran 1988~. However, several federal
agencies that used range estimating on a Dial basis
encountered opposition from estimators on the
grounds that He range estimating process as too
time-consuming and from managers on the grounds
that they did not want more complexity in the deci-
sion-making process (see consulting Committee on
Cost Engineering, 1983~.
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Representative terms from entire chapter:
csi format
