Construction Solutions

Conceptual Estimating

By: Mark Chang

Jul 15, 2022

What is a Conceptual Estimate?

Conceptual or Rough-Order-of-Magnitude (ROM; ballpark/napkin) estimates are a first cost check against the project budget. Conceptual estimates help envision the project and provide cost perspective for preliminary construction budgets and feasibility decisions before formal design begins. They are essential in high-level strategic planning, evaluating options, and reviewing project viability.
When produced by a skilled construction cost professional, conceptual estimates can be much more predictive than what the nickname, “napkin estimate,” implies. A well-executed estimate can serve as critical pivot point for a “go” or “no go” decision.

Basis of Estimate (BOE)

Expectation management is key, and this is where the conditional parameters of the estimate are defined. A Basis of Estimate (BOE) qualifies the estimate by describing the available project information and associated limitations, assumptions, inclusions/exclusions, and their influences on the accuracy of the estimate as presented.
Setting the baseline helps stakeholders understand the data limitations and subsequent accuracy constraints. By doing so, the BOE enhances the value of the estimate by clarifying how and to what extent it should be applied.

The ROM Estimate

Conceptual estimates are:

  • Not exact, but rather a mix of science (pricing and construction knowledge) and art (visualizing, inferring, and interpreting)
  • Often developed with limited scope and design details and little time for early feasibility assessments and budgetary planning
  • Constrained by the data available and must be qualified by describing the limitations imposed by incomplete project information and subsequent accuracy ranges and applied contingencies

A methodological, insightful approach will enhance the predictability of conceptual estimates. When skillfully composed, they can end up remarkably close to what the project ends up costing.

Can pricing be a representative with little to no hard project data or plans? With early and open information exchange with the Owner and designers, yes. A truly engaged estimator will extract insight on scope from the owner and designer and anticipate details for:

  • Site
  • Structural systems
  • Shell and envelope
  • Interior architectural systems and finishes
  • MEP requirements
  • Other materially unique, project-specific systems and attributes

The best ROM estimates are more than Square-Foot-of-Building costs based on comparable projects or historical data. Even with limited scope and design, experienced estimators will break pricing approximations down into rough, line-item detail for primary building systems according to the project type and associated programming (office, multifamily, healthcare, warehouse, etc.). These estimated costs are then rolled up into a composite total project estimate.

In the barest of scenarios, the available project information may be a mix of conceptual ideas or desired programming, end use functions, capacity, and levels of service. In such cases, a potential strategy would be to extract the essential, cost-intensive elements that are expected to comprise the largest portions of the project cost and focusing pricing efforts on these areas to set the project cost backbone.

Developing the ROM Estimate

To develop a conceptual estimate, some basic information is needed to start:

  • Location
  • Facility type or desired end use
  • Approximate size and/or conceptual massing
  • Conceptual mix of programming
  • Overall quality expectations

After the baseline project information is compiled, the pieces of the project puzzle are assembled to “build” the building:

  • Scale (Programming to Space): Conceptual programming is reviewed to infer proposed general project attributes.
  • Scope (Space to Facility): Conceptual specifications and levels of intended services are used to further define the project and point it toward the desired end use.
  • Quality (Facility to Systems): Data derived from above is analyzed to refine the concept and infill gaps in scope a much as possible.

Once the building is conceptualized, quantity and pricing metrics are applied to derive a total project cost estimate.

  • A rough takeoff is conducted to quantify the conceptual massing, programming, and building systems, if enough information is available.
  • Analogous, parametric, and unit cost approaches are integrated across elements and systems.
  • Estimated indirect costs, markups, and fees are applied to construction costs.
  • Appropriate adjustment factors for time, location, and risk are applied.

The final pass will be to adjust the conceptual estimate. The following factors should be tailored to the project:

  • Time: Market conditions for materials, labor, and the construction industry fluctuates over time.
    • Escalation multipliers should be incorporated into the estimate that are relative to the time in which the work will take place.
    • Cost indexes are a valuable resource to anticipate and accommodate any variances in prices of the above, especially nowadays.
  • Location: Costs for equipment, labor, and materials vary across regions/cities.
    • Location factors can be found through published construction cost data sources or requesting vendor cost opinions, the latter being the most accurate.
    • Project location can also influence the available means and methods according to regional preferences or best practices.
  • Scale: Influence of economies of scale should be accounted for when using historical data from previous projects.
    • As the scale of a project increases, unit costs typically decrease.

Conceptual Estimates: The Early Warning System

Conceptual estimates are primary risk mitigation tools. Given the current market conditions and supply chain issues, the validity of construction pricing is short-lived, and contingencies will be inflated. In such times of price volatility, a sensible project cost perspective is even more important. A skilled estimator will use a combination of various estimating strategies and finesse to introduce a level of certainty into an intrinsically uncertain stage of the project. Getting a quality look at early project cost is instrumental in determining whether to move forward on a project and knowing what to expect. Enlisting the help of a construction cost expert that not only knows the numbers, but also understands conceptualization, planning, and forecasting, can take much of the guesswork out of budgeting for a project.

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