Architectural services are expected to grow at a compound annual growth rate (CAGR) of 4.7% from 2021 to 2028 and it’s driven largely by construction investments. The economic importance of design services is undoubtedly growing and with this growth, owners and developers are recognizing the importance of integrating construction estimates into the design life cycle.
A construction estimate is a statement of the probable costs to build a project. Owners and developers receive help from construction estimates to predict costs, manage risk, and understand how much funding they need for their projects.
There are several types of construction estimates and it is important to know when to use each type. It is also important to note that construction estimates are fluid. Regardless of type, a construction estimate serves as a critical tool for planning, executing, and managing construction projects – and although their intent is the same, each estimate offers various levels of detail and accuracy throughout design and planning stages.
With this in mind, we will highlight the value of integrating construction estimates into each phase of the design life cycle:
- Preliminary / Feasibility Estimate
- Conceptual Design Estimate
- Schematic Design Estimate
- Design Development Estimate
- Construction Documents / Bid Estimate
Preliminary / Feasibility Estimate
The preliminary design phase sets up the first idea about what the building will look like. The preliminary design absorbs just enough ideas to provide teams with a rough understanding for what the owner wants to develop in terms of size, function, and its location. In parallel, estimators develop preliminary estimates at the very beginning when they have limited to no design information.
Although there is a lack of plans and specifications, preliminary estimates approximate figures based on historical costs for similar projects. Preliminary estimates are important at this phase because they confirm the vision behind the project and whether you should move forward.
Conceptual Design Estimate
Conceptual designs aim for translating an idea into a workable, realistic design concept. As owners, developers and design teams work closely to gather thoughts and ideas, the outcome of their efforts is to confirm the project’s feasibility while considering location, budget, schedule, and regulatory factors. At this point in time, the conceptual design makes more information available about the project that includes a handful of sketches delivering programmatic and geometric information of the project (e.g., size, overall area, interior/programmatic areas, and building height).
As more information becomes available, preliminary estimates can evolve into conceptual design estimates. Using the conceptual design, estimating teams adjust preliminary budgets and fine-tune assumptions around structural, façade, interior and site elements. As you begin to develop more refined concepts, you can move on to more detailed estimates such as schematic or design development estimates.
Schematic Design Estimate
As project designs evolve from their conceptual stage, they find their way to the next stage in their life cycle: schematic design. Here, design teams show more elements of the project including further developed site plans, floor plans, and façade concepts. Schematic designs may not include material selections, but they will show enough elements to address assumptions made in the conceptual phase.
As a result, schematic design estimates reflect a closer measure of probable costs when compared to the conceptual estimate. This allows you to focus your team’s efforts on finding value engineering opportunities and changing design elements to reduce costs.
Design Development Estimate
The goal of the design development stage is to create a detailed plan for your project while considering materials and finish selections. Design development documents may include a full set of architectural plans, project manual/specifications, and at times, structural, mechanical, electrical, and plumbing (MEP) drawings.
During design development, further improvements to the schematic design begin shaping core elements that closely resemble the final design. Although most disciplines are addressed at this stage, estimating teams must consider that the full design is not complete and remains a work in progress.
Nonetheless, this design update will supply interior and exterior finish selections, further define interior layouts and details, and ideally, present coordinated architectural, structural and MEP systems. Design development estimates offer more clarity on how construction costs will be distributed between major trades and narrow down the list of provisions and allowances carried in the schematic design estimate. In effect, the design development estimate will increase your level of confidence in the budgeted construction costs.
Construction Documents / Bid Estimate
After design development, developers and owners will have a solid idea of what their final project will look like and all that goes into building it. The next step requires less input from the owner but still requires extensive work on part of the design team. This phase generates a document set that holds the most information in the cycle known as the “construction documents”; it is the most critical stage of a project’s design life cycle as it intends to be specific, detailed, and thoroughly coordinated. In a perfect world, construction documents include all elements and provide clear direction with project-specific requirements and construction details to guide on-site builders and contractors.
Using a set of well-developed construction documents, estimating teams (and contractors) generate detailed estimates and proposals which consider all labor, material, and equipment costs needed to build the project. A best practice approach for owners and developers is to request bids from interested contractors while having their cost estimating team also develop their last version of the construction budget. This will grant you more confidence in a construction estimate and will mitigate the risk of scope gaps in contractor bids.
Closing Thoughts
Construction estimates are an essential aspect of the design life cycle. They help stakeholders budget resources and offer a close measure of expected costs at completion. Setting up estimate milestones during preconstruction will help developers and design teams collaborate to get the most out of planning efforts in the design life cycle.
At Build Analysis, we specialize in construction estimates to help you spot risks throughout preconstruction. Our team of construction experts and cost managers have several years of experience in multi-family, hospitality, and mixed-use sectors and we are excited to learn more about your projects.
Contact us today to gain insight into the possible challenges that may arise during preconstruction and how to gain the most out of the design life cycle.
