Conceptual Estimating,           Design-Build          and           the Steel Fabricator                                 ...
Conceptual estimating is the skill of      sibility estimate as a range of probablecosting a project from the view of the ...
formance requirement and design                  Each estimate should contain al-          termine an approximate tonnage ...
tors should not provide a conceptual         System or ETABS, the design file can          s Design criteria—loads and app...
ago, identify two or three parameters         you have to rush your first opportu-and then work through a conceptual      ...
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Conceptual estimating, design-build_and_the_steel_fabricator

  1. 1. Conceptual Estimating, Design-Build and the Steel Fabricator William Liddy and John Cross, P.E.By mastering the concept of conceptual estimating,steel fabricators can form relationships with ownersand developers in the earliest stages of a project.Y ou are at lunch with a local with ideas. And then she asks the big ule, save the developer money, and put developer and several question, “How much will it cost?” The a smile on her face. members of her staff. She table falls silent. All eyes turn to you, But you need to put together a num- spends 10 minutes excit- the steel fabricator. And you say… ber for the steel now. Before detailed edly talking about a new What would you say? Would you structural plans are completed. Andfour-story office building that she tell her that mill cost of a ton of steel is you’ll need to live with it as a maxi-wants to build on a parcel of land she only $430? That fabricated steel for an mum guaranteed price. Welcome to theowns. She turns to her director of de- office building today is around $1600 a world of conceptual estimating!velopment and he madly sketches his ton? Or that a four-story office buildingvision of the project on the back of a usually has about nine pounds of steel WHAT IS IT?napkin. Members of her staff chime in per square foot of floor space? Guess Jeff Beard, President of the Design- what…she wouldn’t care! Build Institute of America, defines con- Would you tell her you only work ceptual estimating as “the skill ofEverything takes time with steel, and that she’d have to talk forecasting accurate costs without sig- to an architect and a general contractor nificant graphic design informationEach progressive level of concep- to get a price? You’d miss getting in on (sometime no graphic design informa-tual estimation requires more time the ground floor and influencing the tion) about a project.” For the steel fab-and effort to complete. The struc- project! ricator, conceptual estimating is thetural steel fabricator can easily Do you let it end there? Hopefully skill to look at the performance specifi-over-invest staff hours in preparing not! This is your chance to look her in cations and footprint of a structure andconceptual estimates. The basic the eye and let her know that you’ve develop a budget for all of the activitiesrule of thumb should be that the worked as a team with local architects, relating to steel in the structure: detail-amount of effort to prepare the es- general contractors and structural engi- ing, fabricating, painting, transportingtimate should be proportional to neers, and you’d like to bring them in and erecting.the level of information and per- to meet her and discuss the project. Conceptual estimating is not justformance specifications available You’ll help her define the scope of the making a good guess at the cost of the project; the team will give her an esti- steel in a project. It is listening to theto the fabricator. Typically the mate that is representative of its actual owner and understanding the project’samount of time proportionally in- cost. goals. It is understanding structuralvested for each type of conceptual You know that this is an opportu- systems, assemblies and their costs. Itestimate is: nity to get your foot in the door. You is comprehending the price of steel, nots feasibility estimate 1 hour can influence the project design to when it leaves the fabricating shop, but match the efficiencies of your shop. when it is in place on the structure. It iss performance estimate 4 hours You’ll be able to avoid change orders the search for a more efficient and pro-s conceptual design est. 10 hours and negotiate your price. You’ll be part ductive way to manage the steels detailed estimate 40 hours of a design-build team, and together process. And it means clearly defining you’ll construct an office building that the scope of your work for the amount will accelerate the construction sched- you are proposing to charge.Modern Steel Construction • October 2002
  2. 2. Conceptual estimating is the skill of sibility estimate as a range of probablecosting a project from the view of the values although the client will typically Feeling overwhelmed?whole project looking down, rather only remember the low end of thethan from the details looking up. range. Developing your methodology, col- lecting historical data and produc-IS A CONCEPTUAL ESTIMATE STAGE 2—PERFORMANCE ing conceptual estimates takesETCHED IN STONE? CRITERIA ESTIMATE time and hard work. But concep- There are many stages of the con- The second stage is developing a tual estimating opens the door toceptual estimating process: feasibility performance criteria estimate. The design-build.estimates, performance criteria esti- client has moved from sketching themates, conceptual design estimates, de- project on the back of a napkin to a for- Involvement in design-build proj-tailed estimates and life cycle-cost mal statement of the performance re- ects as a steel fabricator will:estimates. At each progressive stage the quirements of the project. This includes s Allow you to negotiate your feesestimate should be better refined and a site plan and suggested structural s Increase your profitabilitycontain fewer contingencies. That does footprint. The conceptual estimatornot mean that every successive esti- will begin to visualize the structure in s Lower your riskmate will go down in cost. The scope of order to generate the performace crite- s Utilize the efficiencies of yourthe project may change or be better de- ria estimate. The estimator needs to shopfined, resulting in an increased esti- evaluate the effect of certain occupan- s Integrate your expertise into themate for the fabricated steel. In such cies on the loads imposed on the struc- final project designcases it is critical that a change in scope ture; the impact of HVAC equipment s Create an effective working rela-be highlighted as the reason for the in- on structural components; the impact tionship between you and thecrease in cost. It is an old rule of thumb of architectural concepts on connection structural engineerthat “no estimate is ever forgotten!” design; and the impact of use classifi- s Encourage the use of new timeand that is particularly true if subse- cation on fire protection regulations. saving tools like EDIquent estimates increase in cost. Each The estimator might base estimates on s Develop a long-term relationshipestimate needs to be fully documented the square footage of the structure,and retained. The challenge for the fab- comparative parameters to other recent with the project ownerricator is to track past project costs and projects, industry costing tools or price s Accelerate the project and yourorganize them in a way that allows the indices. Multiple approaches are ap- shop timecreation of an accurate conceptual esti- plied to create a range of costs frommate in a minimal amount of time. which the estimate is generated. It is also important to discuss poten- From this preliminary structuralSTAGE 1—FEASIBILITY tial contingencies with the entire proj- model, take-offs can be generated toESTIMATES ect team. Contingencies for unknown produce a typical material list, which The first stage of a conceptual esti- conditions and scope changes should can in turn be priced.mate is a feasibility estimate. It is de- be carried in the overall project esti- This estimate often is the basis of theveloped from very preliminary mate, not in the estimates of individual fabricator’s negotiated fee and design-information, often the proverbial back specialty contractors. Fabricators builder’s fee for the project. The as-of a napkin. The goal is to determine if should define the scope of the concep- sumptions and scope of the intendeda project’s cost is justified by the bene- tual estimate. They also should indicate work must be well defined in received from the completed struc- allowances for work performed by oth- It is critical that the design-builder whoture. No design effort has yet begun, ers or undefined work that will be re- submits the final proposal to the clientand if costs come back too high, there quired on the project. is aware of allowances included in thewill be no project. fabricator’s estimate, or possible mis- A feasibility estimate gives the fabri- STAGE 3—CONCEPTUAL communication errors could result.cator a chance to address potential DESIGN ESTIMATES For example, a fabricator might priceproject solutions, such as the savings The third stage is the conceptual de- all structural steel but not the miscella-possible with steel as compared to con- sign estimate. 10% design drawings, neous metal, while the design-buildercrete framing systems. A project might general arrangement drawings, and assumes that the fabricator will pro-not be feasible using a particular build- layout and architectural drawings pro- vide all type, but could become feasible as vide a base from which a representa- As the owner modifies the projectalternative materials and design ap- tive structural design can be requirements and the design-buildproaches are evaluated. A single proj- developed. Design loads, special struc- team changes the approach to the proj-ect might have multiple feasibility tural considerations and architectural ect, multiple conceptual design esti-estimates as the scope and perform- requirements must also be taken into mates might be necessary. Theance requirements of the project account. These loads and considera- design-build team should log thesechange. At this level of estimating there tions might not be assigned to their ac- changes and track the incremental costare no contingencies and no allowances tual location in the structure, but will of modifications to the overall projectbecause the entire project is still un- be considered in the general sizing of cost. The fabricator should maintain aknown. Often it is best to provide a fea- structural members and connections. similar log of the cost impact that per-Modern Steel Construction • October 2002
  3. 3. formance requirement and design Each estimate should contain al- termine an approximate tonnage ofchanges have on the structure. lowances to address 1)areas of risk to steel and associated cost. While many the fabricator and 2)items required by experienced fabricators can do this bySTAGE 4—DETAILED code or practice that are not yet de- memory, it is still advantageous toESTIMATE fined. maintain a database of these parame- Estimation does not end once the ters. The database can be a list of proj-project fee is negotiated. When design HOW DO I DEVELOP ONE? ects; their size, location, and number ofwork reaches the 50 percent level, a tra- The quality of a fabricator’s concep- stories; the number of tons of steelditional detailed estimate should be tual estimate depends on the quality of shown on the plans; the fabricator’sperformed. The purpose of this esti- information provided to the fabricator. bid; the winning bid for the project;mate, which is performed in the same The more uncertain the provided infor- and the final cost of the project. The listway as a hard-bid estimate, is to au- mation, the greater the variability in does not need to be computerized, but-thorize full funding for the project, to the estimate and the more allowances creating it on a computerized spread-identify problems with the conceptual will be added to the cost of the project’s sheet allows for easy sorting andestimate, and to provide a cost-control steel. As project information is re- categorizing of data.budget for the fabricating and Additional parameters toconstruction process. If there is a better define the project can bedisparity between the detailed Typical items to be included added to a database. These pa-estimate and the negotiated fee, in parametric spreadsheet rameters might include grossa fabricator can either propose Project name Floor-to-floor Height floor area, footprint, roof area,alternative cost-saving sugges- Customer Typical Bay Size exterior wall area, floor-to-tions to the design-build team or Project location Diaphragm floor height, HVAC systems,utilize the contingencies that the Project Architect Expansion Joint? intended structure usage, spe-team built into the negotiated Engineer of Record Bracing Type cial structure requirements,fee. Construction Start Tons of Steel structural engineer, and gov- Construction Finish Steel/square foot erning building code. If theSTAGE 5—LIFE-CYCLE Structure Type Tons of Joists project has been previously bidCOST ESTIMATE Intended Structure Usage Joists/square foot or negotiated, and a hard take- The final estimate is used on Controlling Code Number of Pieces off has been performed fromdesign-build projects is the life- Fire Rating Type of Connections the plans, it is valuable to entercycle cost estimate. Unlike the Type of Fire Protection Connection: Shop as many details about the take-other estimates, the life-cycle cost Special Requirements Connection: Field off as possible. This includesestimate does not focus only on Footprint Lateral System the number of pieces, connec-the cost to design and construct Number of Stories Number of Shear Studs tions, shear studs, bay sizes,the project. It includes the original Total Square Footage Delivery Method and any additional informationdesign and construction costs, fi- Roof Area If bid…our bid thatof value.nancing costs (taking into account Roof Slope Winning bidder The larger the number ofaccelerated cash flows from early Roof Deck Winning bid items that can be deduced fromoccupancy, and maintenance and Interior Drains Value of Steel Packag the client or design builder’supkeep costs over the life of the Stairs? Site Access information, the more accuratestructure), renovation costs (par- Penthouse Area Erect Deck? the projects’ initial parametricticularly if different loadings Exterior Wall Type Erect Steel & Joists? estimate will be. As projectsmight be anticipated), and the Exterior Wall Area Value of Erection Package age, an escalating cost factorresidual value or demolition costs can be applied to earlier esti-at the end of the structure’s useful mates to make them relevantlife. These costs are discounted over vealed, a fabricator should define key for current projects. Data in a spread-time to determine the true value in cur- parameters. These parameters can sheet can be sorted and viewed in dif-rent dollars of the project. then be referenced against a database ferent orders. Different ways of Life-cycle estimating involves pre- of similar parameters that the fabrica- looking at the project produces differ-dictive assumptions about the perform- tor has maintained on previous proj- ent cost ranges, which can then be com-ance of the selected structural system ects. This process is referred to as pared to determine a target value for athat might generate uncertainty in the parametric estimating. new project. A conceptual estimatorfinal cost estimate. However, this pro- recognizes the difference between thecedure is beneficial to weigh the rela- TYPE 1—PARAMETRIC value of a bid and the true cost of a pro-tive benefits of comparative systems. ESTIMATES ject’s steel and adjusts the bid amountsWhen comparing competing systems, The three most common parameters accordingly.the use of consistent assumptions can for a first estimate are 1)the type of When a conceptual estimate forminimize uncertainty. It provides a structure, 2)the number of floors in the steel is provided to the developer orvaluable comparison between a low structure, and 3)the total square design-builder, it should only includecost, high maintenance structure and a footage. These data points help the fab- the value of the work for which the fab-high cost, low maintenance structure. ricator reference similar projects to de- ricator is taking responsibility. Fabrica-Modern Steel Construction • October 2002
  4. 4. tors should not provide a conceptual System or ETABS, the design file can s Design criteria—loads and applica-estimate for the whole structure unless be read by a detailing program with ble codesthey are responsible for it. Instead they CIS/2 capability (SDS2 or Xsteel) and s Allowable vibration and drift as-should indicate that steel typically rep- displayed in 3-D. Connections can be sumptionsresents about 10% of the project cost designed and detailed take-offs per- s Framing assumptionsand invite a design-builder to address formed. Shop control packages (such as s Market conditions and timing thatthe overall cost. FABTROL) can also importing the impacts market costs Another way to obtain a feasibility CIS/2 file and provide quantity andor early conceptual estimate is to use cost estimates. DEVELOPING CONFIDENCEan estimating program, such as CONE- It is important to note that the fabri- The feeling of risk associated withDIA or D4COST. Both provide concep- cator does not design the structure! The providing a fee for steel on a projecttual estimating values based on a fabricator only creates a model to ad- without completed drawings is intimi-database of costs adjusted for time and dress structural issues and determine dating - but a lack of confidence in thelocation factors. CONEDIA works from an approximate list of materials from estimate could raise project contingen-a design-component methodology and which an estimate can be generated. cies. So how does a steel fabricator de-builds a virtual project. CONEDIA The fabricator’s prototype will have lit- velop the ability and confidence topresents a series of “what-if” scenarios tle correspondence to the structural en- provide conceptual estimates?so the estimator can test various designalternatives. Once the model is created,the estimator can override average unit gineer’s design. But it is a good estimate of the materials required. In- volving the structural engineer of 1. Hire or assign an individual in your firm with the responsibility of conceptual estimating. For manycosts with values that are more repre- record at this prototype level will inte- design-builders and specialty contrac-sentative of local conditions. D4COST grate preliminary ideas about the ac- tors this might not be the same staffapproaches the project differently. It tual structure and reduce the member that is experienced at hard-bidlooks at projects similar to the pro- uncertainty in the estimate. estimating. The mentality of the hard-posed project in the database and inter- bid estimator is one of looking at thepolates between them. The estimator TYPE 3—DETAILED ESTIMATE details and working up, rather thancan create a library of proprietary proj- Finally a detailed estimate is per- looking at the scope of the project andects in addition to the projects already formed once the design documents are working down.included and specify certain unit-costmodules for use in the analysis. Al-though no commercial program will developed at least to a 50-percent level. The purpose of this estimate is not to re-negotiate the project, but to provide 2. Allow your conceptual estimator access to historic project files and to the firm’s senior management. Theever replace the need for a company’s budgetary control to the fabricating conceptual estimator needs to knowcost experience, these programs are a process and to identify areas where historic costs and “rules of thumbs”good starting point. They provide a re- contingency funds might need to be that have served the firm well. Theminder of what items should be in- applied. If a significant difference exists firm’s management must have confi-cluded in the estimate, a schedule between the negotiated fee and the de- dence in the estimates produced, whichoverview in the case of CONEDIA, and tailed estimate, the plans can be re- only results from confidence in the esti-a way to check a fabricator’s concep- viewed, and cost-saving measures can mator. Communication and trust is es-tual estimate. be applied to the structural system, de- sential between a firm’s estimator and tailing or erection. its management.TYPE 2—SCHEMATICESTIMATES As the project is refined, the fabri- DEFINING THE SCOPE The definition of the scope of the 3. Develop a spreadsheet with his- toric bid costs and project parame- ters. Find old drawings, take-offs andcator can create a schematic or elemen- services provided by the fabricator is a bid sheets. Conceptual estimating is besttal estimate. This estimate is based on a critical element of the conceptual esti- done with a usable history to drawfabricator’s trial model of the structure. mate. The following items should be from.Once a model is created, a processequivalent to the take-off process ofhard-bid estimating follows. The more considered in defining the scope of the project: s Identification of the documents 4. Allow the conceptual estimator time to experiment on past proj- ects. Take a job that was bid two yearsthe prototype conforms to performance (title and date) that the conceptualspecifications, the closer the quantities estimate is based upontaken from it will correspond to the ac- s Items included in the conceptual es- How good are they?tual project. Models can be created eas- timate (for example: columns,ily with in structural design packages. beams, joist, deck, bracing, pour Conceptual estimates typicallyThese packages also generate a sum- stops, painting, erecting …) have the following accuracymary take-off of the components of the s Items excluded in this conceptual ranges:structure that can then be “priced.” estimate (for example, the structural If the fabricator wants to perform a design. Typically the design-builder s feasibility estimate +/- 20%more detailed take-off and if the soft- will be expecting all items in section s performance estimate +/- 7%ware supports a CIS/2 file transfer ca- 5 of MasterSpec to be included.) s conceptual design est. +/- 6%pability (such as RAM Structural s detailed estimate +/- 4%Modern Steel Construction • October 2002
  5. 5. ago, identify two or three parameters you have to rush your first opportu-and then work through a conceptual nity, pass it by.estimate for the project using historicdata from previous projects. Measure 9. Always include a statement of scope with any conceptual estimate.the conceptual estimate against the ac-tual as-built cost for the project, not thebid price, and refine the process on 10. Confirm any conceptual esti- mate with the most powerful tools you have…your common sensemultiple projects. and experience. Ask “does this esti-5. Invest in technology that enhances the conceptual estimating activity.Acquire a commercially available esti- mate make sense?” 11. Look at every design-build project as an opportunity tomating package or consider utilizing provide the owner with a better projectone on a per-project basis on the web. at a lower cost, on a more rapid sched-Invest in a design package that can ex- ule. Use your experience and yourport design files using CIS/2 to a de- shop’s efficiencies to their advantage.tailing or shop management package. Conceptual estimating is a skill thatUse it on historical projects to develop every design-build team member mustconfidence in the information that it have. It is a skill that every fabricatorprovides and the amount of contingen- can and must develop—so next timecies that need to be in place for varying you’re at lunch, your clients can benefitdesign conditions. by an estimate that brings their ideas6. Develop relationships with local structural engineers that may joinyour firm’s design-build teams. Un- off of the back of a napkin and into the realm of possible projects.derstand their design approaches, William (Bill) Liddy is Senior Advisorwork with them in developing proto- in AISC’s Steel Solutions Center intype models and discuss the efficien- Chicago. John Cross, P.E., is National Pro-cies of your particular fabricating ject Director, Design-Build, with AISCoperation. Marketing, LLC, in Chicago.7. Pursue design-build work in a fa- miliar market niche with otherfirms you have trust. You will havemore confidence in providing a con-ceptual estimate in a market you un-derstand. Trustworthy team membersprovide honest feedback on estimates.8. Give yourself time to prepare your first few conceptual estimates—ifModern Steel Construction • October 2002