Managing Project Budgets and Preparing Pre-Tender Cost Estimates

Preparing Pre-Tender Cost Estimates

Introduction

Preparing a pre-tender cost estimate is a critical step in the design and construction process, helping to ensure that the project stays within budget and meets client expectations. This process involves several stages, from initial schematic designs to detailed construction documents, with increasing levels of detail and accuracy at each step.

Stages of Cost Estimation

1. Schematic Design Phase
• Objective: Provide a probable construction cost.
• Method: Use cost per square area to estimate. Assign different costs per square area for various spaces (e.g., toilets typically have higher costs than hallways).
• Deliverable: Probable construction cost estimate.
2. Design Development Phase
• Objective: Develop a budgetary cost estimate for architectural and interior design elements.
• Method: Create an itemized budget based on the specifications in the plans. Assign lump sum costs for utilities based on the square area of the spaces.
• Deliverable: Budgetary cost estimate combining itemized design elements and lump sum utility estimates.
3. Contract Documents Phase
• Objective: Refine the budgetary cost estimate to serve as the basis for tendering.
• Method: Provide detailed itemized cost estimates for utilities, based on the plans and specifications from specialized engineering consultants.
• Deliverable: Final budgetary cost estimate with detailed itemization.

Cost Estimation Process

• Initial Estimates: Formulated quickly, often within a day or two, using lump sum estimates based on per square area cost computations.
• Detailed Estimates: Require about a week, assuming all necessary data is available. This involves developing the scope of work, quantifying items/materials, and pricing labor and materials.
• Value Engineering: May extend the timeline, particularly if substantial design revisions are required. Typically performed towards the end of the design development phase to avoid constraining the initial design creativity.

Role of Quantity Surveyors (QS)

Integrating a QS into the design process can streamline cost estimation and value engineering:

• Integrated QS: Works closely with the design team, understanding the design intent and making informed decisions. This integration allows for faster implementation of design revisions.
• Third-Party QS: Requires thorough onboarding, including regular meetings and detailed handovers to understand the project brief and design intent. They may also need to perform independent onsite checks and verifications.

The QS’s responsibilities include breaking down the scope of work, quantifying items and materials, and assigning costs for materials and labor. They typically work independently on estimates but collaborate closely with the design team for value engineering.

Tools and Techniques

• Building Information Management (BIM) Software: Can automate material take-offs and provide dynamic cost estimates as the design evolves. This automation can significantly streamline the estimating process and improve accuracy.
• Digital Design Files: Providing CAD or BIM files to the QS can facilitate more accurate and efficient cost estimation. This is particularly important when working with third-party QS who need to build their models from scratch.

Meetings and Communication

• Design Team Meetings: Regular meetings to discuss design progress and cost implications. The QS, if part of the team, should participate in these meetings.
• Client Presentations: Cost estimates should be presented alongside design iterations to manage client expectations and obtain necessary approvals.
• Clarifications and Updates: Continuous communication between the design team and the QS is essential for addressing any clarifications and ensuring that the cost estimates reflect the latest design changes.

Pre-Design Phase/Discovery Phase Fee Structuring

During the pre-design phase, the design team explores the current state of the project and gathers data to inform the design process. Fee structuring in this phase involves calculating costs for consultants, technical staff, and workshops, including overhead and profit margins.

Formula: Pre-Design/Discovery Fee=(Consultants’ Cost+Technical Staffs’ Cost+Workshops’ Cost)×𝑀Pre-Design/Discovery Fee=(Consultants’ Cost+Technical Staffs’ Cost+Workshops’ Cost)×M Total Cost=Fee+Reimbursable ExpensesTotal Cost=Fee+Reimbursable Expenses

CN = Consultant’s Rate/Hour multiplied by time spent on the phase

TN = Technical Staff’s Rate/Hour multiplied by time spent on the phase

WE = Workshop Expenses

M = Multiplier to account for overhead costs and reasonable profit

R = Reimbursable expenses if any

Consultants’ Cost = CN1+ CN2+ CN3+…

Technical Staffs’ Cost = TN1+ TN2+ TN3+…

Workshops’ Cost = WE1+ WE2+ WE3+…

Direct Cost = Consultants’ Cost + Technical Staffs’ Cost + Workshops’ Cost

Pre-Design/Discovery Fee = Direct Cost x M

Total Cost of Pre-Design/Discovery = Fee + R

 

Conclusion

Preparing pre-tender cost estimates is a structured process that evolves with the design stages, from initial schematic estimates to detailed construction documents. Integrating QS into the design team, leveraging tools like BIM, and maintaining clear communication with the client and team are crucial for accurate and efficient cost estimation. By presenting cost estimates with each design iteration, expectations can be managed effectively, ensuring the project remains on budget and meets all requirements.