Divisional cost estimate vs unit price estimate methods

Comments

3 comments

  • Avatar
    Michael Ermann

    We start at programming with a "rough order of magnitude" cost estimate (might be off by as much as 2X, but more likely +/- 25%), used for a "napkin estimate" before design to determine feasibility. Used in Pre-design/programming. Here, we’d look at other locally- and recently-built similar office buildings serving the same number of employees and approximately the same function. . . then estimate how much our building might cost based on those. We would run that number past our fundraising department to gauge if we could raise enough to move the project forward.

    As we move through design phases we’ll get more specific and have more confidence that our estimate is close to the final construction cost; eventually, at the end of Construction Documents, we’d prefer our estimate to be within 3%.

    Single-unit rate (SUR) estimating methods (this is what you might have meant by unit pricing, which is a bit different): This also is used for early cost estimates during programming or pre-design phases. In SUR, we’ll take a single unit—typically square footage—and use only that to come up with a dollar figure. For instance, a commercial building constructed in our area of this caliber may average $250/SF; we’re building a 10,000 SF building so our estimate at pre-design comes to $2,500,000. But the single unit explored is not always a square foot:

    Under the SUR umbrella we have a few choices:

           “accommodation method” (estimated cost per parking stall, per apartment, per arena seat, or per hospital bed);

           or the “square foot method” (cost per square foot compared to other firehouses, other warehouses, or other townhouses. . . this is the most common method used and the one I described above);

           or the “functional area method” (this is like the square foot method, but better for buildings with multiple functional areas. . . for instance, within the broad category ‘airport’ we may pay $200 per square foot for a small rural private airport or $1,000 per square foot for a major commercial hub so a broad cost-per-square-foot may not help. In the functional area method, we’ll instead add up the uses for each area: $200 per square foot of retail space, plus $300 per square foot of restaurant space, plus $150 per square foot of gate-waiting space, etc.)

    Unit-rate pricing: You may confuse this with single-unit rate (SUR), and SUR probably falls under “unit-rate pricing” in the same way that pizza falls under “dinner”. . . but don’t confuse the two. In unit-rate pricing we’re utilizing the unit cost of (typically many) elements of the building because we know many elements of the building. Early-on within the unit-rate method (Programming, SD), we know enough about the size of the building to use estimates based on cost per square foot or per cubic foot measures of our schematic building. We learned about this in single-unit rate (SUR) estimating. Then later, as we know more about the project (DD), our estimates will tally detailed units, like "cost per linear feet of interior partitions." And later still (CD), we can register still more detail, like “cost per linear foot of that particular metal 24x18 duct.”

    Parametric cost estimating: You’ve designed hundreds of <<those little equipment buildings that sit next to cell phone towers>> and you’ve tracked their costs over the years. You use a software program that seeks patterns over time, by local labor conditions, local building season (weather conditions), slope of site, experience of crew, cost of commodity materials like doors, etc.. From that software, and all that data, you can predict with accuracy early (SD, DD) what the building will cost. This obviously only works if you have a lot of data on a very particular, repeatable, building type.

    Systems/Subsystems/Elemental cost analysis: used in DD and aligned to the UNIFORMAT specifications system. We more accurately estimate the parts of the project we know a lot about, and we estimate the rest based on historical costs of similar buildings, adjusted upwards because we’re using lovely finishes on this project or downward because we currently have access to inexpensive construction labor.

    Assemblies method: Also used in DD. Do your best to calculate the cost the roof, the foundation, the partitions, etc. on a per-square-foot basis and add that to the cost of the windows, doors, bathroom fixture groups, etc. on a per-item basis. Sometimes each part will be approximate based on the square footage of drywall, and sometimes it will be more precise based on the quoted cost of a steel dumpster.

    Quantity survey method: Always associated with CD phase, this requires the most detailed inventory of each linear foot of installed refrigerant line, each linear foot of molding, and each linear foot of piping. Very time-consuming.

    Sometimes cost estimates are broken down into Level 1 through Level 5. Level 1 is for the earliest stages of programming and we progress through the other levels until we arrive at Level 5 for bidding.

    Divisional cost estimating: Using the divisions of MasterFormat specs to enumerate and organize the individual items that need to be estimated. This is what would be used as the organizing principle for the quantity survey, and therefore used in CD.

    *If you see an uncanny overlap between many of these methods, that’s because the Venn diagrams of these “different” techniques overlaps quite a bit and many of the sources that NCARB uses give different names to similar processes. In the cost estimating profession there’s not widespread agreement on what to call each of these methodologies. And even if estimators agreed on the terminology, in practice any single estimate typically pulls from more than one of the approaches listed above depending on how much we know about a building at a particular point in design: we may know everything about the rough plumbing because we received those drawings from the MEP engineer last week, but little about the wiring, because we haven’t received those drawings from him yet. I wish NCARB didn’t test us on this jargon, but they do. There are many more method names that I didn’t include because they’re not on NCARB’s radar, but they’re all used for what is basically the same thing: estimators use more detailed and more accurate estimates as we move forward through design, and use a combination of per-square-foot and per-element pricing. If you wish to memorize these terms, spend your time memorizing which estimating terms are associated with which phases of design.

     

    Programming

    SD

    DD

    CD

    ·       Rough order of magnitude

    ·       Single-unit rate

    ·           Accommodation method

    ·           Square foot method

    ·           Functional area method

    ·       Level 1

    ·       Parametric

    ·       Unit rate

    ·       Assemblies

    ·       Systems

    ·       Elemental

    ·       Unit rate

    ·       Quantity survey

    ·       Unit rate

    ·       Divisional

    ·       Level 5

     

    Talking about cost estimating without talking about RS Means is kind of like talking about web search without talking about Google. RS Means publishes the book (and software) used by almost every cost estimator and they maintain the data on everything: city cost indices to account for higher construction costs in Boston than in Oklahoma City, the cost of an anechoic chamber (specialized room used for acoustics research), the labor costs of painting an exterior stair stringer, and the daily rental cost for a 400-ton (or 800-ton) barge used in marine construction.

     

    The terms above, used for estimating the cost of a budling in design, shouldn’t be confused with real estate terms used in estimating the value of existing buildings (also important for the exams):

    Historical Cost Approach: We’ll assume the building is still worth whatever you paid for it a decade ago. . . obviously, a conservative approach in a hot real estate market.

    Unit-in-Place Approach: We’ll assume the building is worth what it would cost to replace it. Not to be confused with the unit-rate method described above for projects in design.

    Cost Approach: We’ll assume the building is worth what it would cost to replace it, minus depreciation because the building we are estimating the price of is now 25 years old and it’s looking a little dated and shabby in places.

    Sales Comparison Approach: We’ll assume the building is worth what other local comparables sold for recently.

    Market Approach: Another name for the sales comparison approach.

    Income Approach: We’ll assume the building’s worth based on what we can charge tenants and still make our desired profit.

    As you might imagine, when pricing existing real estate, developers and lenders will typically interpolate a “real” price, bracketed by the prices derived by several of these methods. No one really knows what a piece of real estate is worth or what a building will cost to build. . . economists tell us that the “real” price is what the buyer or builder pays for it, but by then it’s not an estimate.

     

    For an Amber Book : 40 Minutes of Competence video on this topic, click <<here>>.

    And for another Amber Book : 40 Minutes of Competence video on this topic, click <<here>>.

    --Michael Ermann, Amber Book creator

    1
    Comment actions Permalink
  • Avatar
    Manisha Shrestha (Edited )

    Thank you so much Michael! I am so glad that you responded to this.
    All these different cost estimating terms are confusing to me. Now I know which estimating method is used at what phase. One more question - what is the advantage of divisional cost estimate over unit price method? From your explanation above, I am thinking divisional method is more organized and detailed as it breaks down into Master spec divisions and is helpful at construction phase. Unit price is used at early phases and is easy to calculate?

    Thanks again Michael!
    Appreciate your time.

    0
    Comment actions Permalink
  • Avatar
    Rebekka O'Melia

    A good estimator is going to use 2 methods and cross check their #s.  Uniformat is based on systems, the others based on sf and units.  Folks who work for the GC will do rough estimates first, later everything is based on actual quotes from the subs.

    Hope this helps!

    Rebekka O'Melia, B.Arch, M. Ed, Registered Architect, NCARB, ​​Step Up ARE Coaching​​​

    0
    Comment actions Permalink

Please sign in to leave a comment.

Powered by Zendesk