Budgeting/Cost Analysis

Budgeting/Cost Analysis

Traditionally, Owners, Developers and Municipalities have utilized the design-bid-build method of procuring design and construction services for most of their capital outlay projects.  This approach allows the Owner/Decision Maker to determine the exact product before it begins construction.  The limitation to this method is that the project overall hard costs are not known until the bids have been received.

Projects are not bid by construction contractors until working drawings are completed by a separate architect-engineering firm and the Owner Client usually requires multiple General Contractor Bids to determine the lowest bid or proposal per the defined construction documents.

One disadvantage to the design-bid-build method is that the final or lowest bid may exceed the owner’s expected financial parameters and the project may require additional design or material changes in order to meet a pro-forma.

Another disadvantage to the owner may exist when the approved design elements do not address all areas of construction means and methods which then require time, effort and additional cost while working through the required clarifications and design change.

These changes not only add additional cost to the project through “change orders” but also extend the total duration of the project delaying the completion date..

In design-build (and many CMR) projects, design work is usually performed by the same entity that constructs the project or within a teamwork structure combining the Owner, the Design Staff and the Contractor, and the design-build contract award is made in a lump sum or Guaranteed Maximum Price determined after the final plans have been developed through multiple budget efforts.  The contractor has been preselected selected based upon their own competitive proposal of General Conditions, Soft Costs and Fees.

Initially, the Owner specifies the project parameters to the design professionals within the team which include function, size and preliminary design requirements.  The design professional then produces a schematic design which is reviewed with the owner for acceptance.   Once the direction of the Architectural design, function and size is determined to the owner’s approval, the schematic design is forwarded to the Contractor for initial budgeting.

The initial budgeting of the schematic design provides the additional information and confirmation to the owner that the design direction and function are within a predefined budget which meets the “not to exceed” expectations of the owner and falls within a clearly defined functional “proforma” or projected cost versus projected income or benefit analysis.  Additionally budget comparisons and cost analysis done at the “design development” and “final construction stages” insure that the project remains within the projected cost determined or “set” at conception. Consequently, there are no separate phases—or appropriations—for preliminary plans, working drawings, and construction.  The client is responsible for providing a project definition which the design-build team/firm uses as the basis for its final cost.

Design Build (and most CMR*) advantages are the expediting/reduction of construction time frames or durations and the reduction of the number of change orders during construction due to design element changes and cost associated with means, methods and materials which exceed the cost parameters.

TBC Commercial provides ongoing budgeting and cost analysis throughout the course of a construction project to assure owners, architects and municipalities that their projects will be completed on time and within budget.

*CMR – Construction Manager At-Risk