Conceptual estimating is a method of getting the high-level cost of a construction project before breaking ground. Professionals can save hundreds of hours during the early stages by leaning into the power of pre-built and custom built parametric models. Project costs are established using various methods: this includes pulling in historical data from similar projects, industry standards, and 3rd party tools.
What’s The Purpose of Construction Cost Estimating?
Cost estimating could be defined as the process of including all the costs related to a construction project to ensure that construction projects remain within the predetermined budget and timeline. It involves the steps of gathering data, analyzing data, creating estimates, and evaluating cost estimates. The cost of a project takes into account all costs, including materials, labor, and equipment.
What Does Pre-construction Mean?
The definition of pre-construction is “the process of constructing a building or building component before any work has been done.” Pre-construction activities may include preparing site layouts, overseeing the construction of a building or structure, or helping to plan a project that has not yet been built.
Why Do You Need Estimates During Pre-Construction?
It might sound like an exaggeration, but projects can fall into disarray and companies have shuttered their doors when teams have missteps during pre-construction. Estimates help you understand what you are getting into and what your costs will be like. Is there a lot of profit, or will an opportunity ruin your cash flow? Estimates also give you an idea of how long projects will take. This way, you can better plan and budget for your project.
Conceptual estimating is critical part of the pre-construction process. This is an important step that help owners, lenders, architects, and other industry professionals price projects properly, and in turn, allow all parties involved to make better decisions. Pre-construction estimates also help project teams stay organized and on task when keeping to a timeline. One thing to keep in mind is, your estimates will evolve as your opportunities progress. It’s never a matter of doing it once and forgetting about it.
The Benefits of Accurate Estimates At Any Stage
Accurate estimates are key to success, and success should be defined as making the right decision for your business. Estimates are pivot points of the process that can be tempting to take shortcuts with, but that would be a short-sighted decision. Missteps can cost you more than just a lost opportunity. Making poor decisions based on unreliable cost estimates can result in lost profits, damage customer relationships, and in the worst situations it can kill your cash flow.
How Do You Get Accurate Cost Estimates Without Investing Too Much Of Your Own Time?
There are a few ways to get better accuracy without spending too much time in the weeds.
- Outsource/Use a service – Many of our clients come to us to help them prepare cost estimates for their construction projects. Often this work includes everything from building custom cost models to project management.
- Delegate – You have to grow your team and might want to consider the strategic hire of a cost estimator with the experience you need.
- Use specialized software/Parametric models – The act of estimating has not changed much throughout the years, but the tools available to us have changed. Specialized tools give us access to maintained data and intelligent insights. Professionals can now use pre-built models to effectively run outputs in multiple scenarios within a fraction of the time needed when compared to starting from scratch.
Types of Cost Estimates
Ballpark estimates are meant to provide a generalized idea of a concept while detailed cost estimates empower users with the full nuanced breakdown of a project– down to the cost of a single unit cost item.
A ballpark conceptual estimate is, in theory, supposed to be quick and rough, and its purpose is to facilitate quick decision-making. Cost professionals shouldn’t overlook the importance of data accuracy, but there is a level of what is considered an acceptable range of variance during the early stages of a project. On the other hand, a detailed cost estimate tells you exactly what your project will cost, right down to the nuts, bolts, and screws.
Conceptual Estimating (also known as Square foot estimating or SQFT estimating).
When creating conceptual estimates, it is important to keep in mind that not all models are created equal. There are plenty of resources that build cost models for the construction industry, but these models can be consumed in different ways: print, excel, or through an application. In addition, not all models are going to fit your specific needs and sometimes it’s beneficial to invest in custom models that you can use over time. Because conceptual estimates fill in knowledge gaps, both the parametric model and the cost data behind it must be up-to-date and produce reliable results. Those outputs are what you or a client should be making decisions around.
A parametric cost estimate is beneficial because it allows contractors, clients, and owners to spend less time on estimates and push forward profitable opportunities. It enables teams and leaders to make good decisions when it comes to bidding, and it also helps them forecast their financial plan and budgeting.