Before any retail chain or restaurant franchise developer moves forward with a new construction project, they must first conduct a cost feasibility assessment. But it’s a tricky process. Cost fluctuations, supply/demand issues, labor shortages, and local construction regulations can all introduce uncertainty and risk into the estimation process.
To introduce reliable insights into pre-construction estimates, cost estimators have increasingly turned to parametric estimating.
What is parametric estimating?
Parametric estimating helps developers determine the cost of a new project by drawing on the relationships between historical and statistical data to deliver high-level estimations quickly and with different levels of granularity.
Retail chains and franchises use parametric estimating during the pre-construction phase to develop comprehensive conceptual models to understand the budget, opportunity, and planning required. This is particularly critical for large, complex projects where cost confidence is critical during the pre-construction phase and best-guess estimates of old weren’t as informed or as accurate as they needed to be.
For instance, Publix Super Markets recently announced plans for its first store in Kentucky, with a grand opening in Louisville slated for late 2023. Before deciding whether to break ground on a project like this, developers typically establish a high-level estimate using parametric models based on actual project data from previous developments.
These conceptual models are also adjustable. As the parameters of a project change – such as the size of the building or the use of new construction materials – cost estimators can dynamically account for these variables and achieve confident cost projections.
Once the model is developed, it can be reused for similar projects and the quality of data is improved with each iteration.
Construction market dynamics create challenges – but innovation brings answers
Even with these data-driven insights, market developments and fluctuations can throw a wrench in the works, potentially delaying budget approvals and bid solicitation process. For example, before the pandemic, if a contractor requested a price from a supplier, that estimate was good for six months – today, it may only be valid through the end of the day. As a result, cost estimators often reprice a project numerous times to accommodate unpredictable environments as well as client requirements.
Modern parametric models can help streamline this process. Not only do they allow estimators to create estimates faster than ever, they also provide the flexibility for users to change their inputs and run different scenarios – making it easier to anticipate and account for price fluctuations.
Check out this earlier blog from Acuity’s Frank Richardson. Frank shares some valuable tips on how building owners can control material costs from the outset and mitigate the impact of price fluctuations.
Another challenge that developers and owners face is finding ways to mitigate the disconnect between high-level parametric estimates during the conceptual stage and detailed cost assessments as the project matures. This is an area where Acuity International continues to innovate.
CostModeler is a breakthrough in the Acuity team’s development of a strategic vision to accelerate pre-construction productivity supported by big data and analytical insights. Through the parametric application, users can develop and adjust comprehensive conceptual models in the preliminary stages of any project to better understand the budget, opportunity, and planning.
As new project opportunities progress towards later stages, parametric models built within the new CostModeler tool can be converted to a comprehensive, detailed cost estimate with just a few clicks.
This puts up-to-date cost data into the hands of developers with full transparency into the source, quote date, and direct pricing for rapid decision making – a capability that has become more critical in today’s dynamic construction market.
The future of parametric estimation
CostModeler is just the first step in our advanced roadmap for the pre-construction industry. It will soon be followed by what-if analysis, geo-mapping, the next phase of risk analysis, and forecasting.
Learn more about how parametric estimating advances facility lifecycle capabilities.
About the Author – Mark Clark, Senior Cost Consultant
Mark Clark is a Senior Cost Consultant with over 30 years of experience managing commercial and residential projects. He is experienced in all phases of construction and renovation and is knowledgeable in compliance standards relating to all government regulations and codes. Mark has supported various large and small-scale projects in the private and public sectors.
Connect with Mark at firstname.lastname@example.org.