Landis: Estimating Construction Budgets—A Critical Friend

by Kyle Clapham

From the client’s point of view, a building project is about a number—and it is usually not a realistic number—for the cost of the project. Rarely will a client tell you their real budget, nor will they tell you if their budget is hard and fast, a number not to be exceeded. Little does the client know, but budgeting at the beginning of a sizable project is as much an art as it is a science.

It is interesting to me that neither lawyers nor doctors will quote their customers a total price for their services, yet clients sometimes demand a quote at the very beginning of a project. Any sales professional will tell you that you need to give your client an estimated ballpark figure as early as possible to flesh out an acceptable budget.

Doing so ensures that they will move forward. For this reason, very often right after an initial vetting phone call with a prospective client, a salesperson will have a conversation with the estimator to agree on a budget range to use during the first meeting.

Estimating so you don’t lose your shirt is the lifeblood of any design-build or construction firm. For more than 32 years in business, our estimating has always been involved from the initial sales letter through all design phases of a project—schematic design (SD), design development (DD), construction drawings (CD) and value engineering (VE).

Once a salesperson has visited with a potential client and discussed a scope of work, the salesperson then writes a design letter incorporating the estimated budget range of the work as indicated. An estimator is responsible for setting up the budget range within the design letter.

Estimators, using their experience, break down the scope of work by the amount of materials that they think they might need. They also include the cost of those materials. Once a design letter has been signed by a client, the budget is then considered to be agreed to by both parties.

Our estimating team is again engaged at the end of the schematic design phase—after the plans and layouts have been agreed to by the client. All the spaces are well defined with features and amenities drawn. Rough dimensions have been indicated. The estimator then builds an initial budget based on allowances with all the finishes represented. The structural, electrical and mechanical details—which are still to be designed—will have generic allowances assigned as well.

Setting up a “trade day” as early as possible is critical. It’s important to incorporate any costs that are provided by subcontractors into the budget equation at an early juncture in the process. These days, inflation is a consideration that needs to be estimated as well. A trade day can occur after the schematic design phase, but it definitely needs to be completed after the next phase, which is design development.

By the end of the design development phase, all finishes should be selected. At this point, reflected ceiling plans and electrical plans have been completed. Structural, mechanical and window and door schedules are also complete. At the end of the DD phase, the estimator can replace all allowances with actual costs.

At the end of the construction drawing phase, the estimator is engaged once again for a final budget to capture any changes and all final details, including all the bids from subcontractors. The estimator and salesperson then review the contract and compile a list of what the client added during design. It is at this point that they quantify any “scope creep” in order to create a narrative for the final budget.

The accuracy and thoroughness of your estimator is critical. The estimator position is also key to protecting margins from salespeople who want to better their chances of making the sale and who, thus, might reduce the margins to an uncomfortable level.

An estimator is also responsible for updating all the contractual language in the design and construction agreements. An estimator should also attend job-closeout meetings to button up the feedback loop, helping to bring the lessons that were learned forward to continually improve the estimation process.

Estimating software is not the subject of this article. But suffice it to say that any software you use needs to be easily accessible for everyone on the project team, so that they can correct mistakes and keep an eye on profitability, which is everyone’s No. 1 job. QR

Christopher K. Landis, AIA, founded Landis Architects/Builders in Washington, D.C, with his brother Ethan. He brings 33 years of remodeling design, construction and management experience to this column for the magazine. You can reach him at chris@landisconstruction.com.

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