Conceptual Budget Analysis
In its most-basic form, an estimate is a list of costs associated with the construction of a project. There are few different types of construction cost estimates with each providing different types of information and serving different purposes.
The most common error in estimating is omission. A good estimate should anticipate all of the potential costs and may even highlight items that aren't included. A thorough estimate should also be accompanied with a set of specifications that detail the scope and quality that's included.
Note: Do not select a builder based on a conceptual or preliminary estimate. It's very likely that the total cost will change substantially before construction is ready to begin.
Conceptual - A conceptual estimate is often needed for the purpose of planning a project. Accurate cost information is necessary to determine whether a project is viable. Cost-per-square-foot is the most common technique but can be misleading and inaccurate. Unit cost comparisons from historical records are the best format. A conceptual estimate should include adequate detail so the everything that is included (or not) is understood.
Preliminary - A preliminary estimate can be performed once the design of a home has started. From preliminary plans, the estimator can begin to measure areas and count quantities to establish a better level of accuracy. At this point many assumptions are still made to arrive at the total budget number. Several preliminary estimates may be provided during the design phase of the home.
Detailed - Construction working drawings and specifications are necessary to complete a detailed estimate. Accurate information needs to be provided to trade contractors and suppliers so that they may submit viable bids for their specific scope of work. The estimator assembles bids along with his own calculations to produce an accurate cost to build. This estimate is often used to establish a contract price between the builder and owner.
Quantity Takeoff - Quantity takeoffs are the highest level of detail estimate performed. In this case the estimate is used for the purpose of ordering materials for use in the project. Accurate estimates reduce delivery trips to the project and prevent waste on the job site, with both saving money. Skilled project managers use these estimates as tools to enhance productivity and strengthen relationships with trade contractors. This plays a big role in achieving preferred builder status.
Change Order - Changes always have potential for disrupting the relationship between the owner and builder. It's critical the pricing for changes is prompt and fair. Often work may be delayed when decisions about changes or extra work surface during the very stage of construction where they need to be implemented. Well-understood procedures and quick response are very important.
Dynamic Cost Control - While not really an estimating function, the estimate does play a big role in managing the actual costs on a project. A structured estimate with a recognized coding system is necessary to ensure that only the agreed amounts are paid to trades and suppliers. The estimator should provide detailed information to the project team so they can follow the numbers without any confusion.
Debrief - Analyzing a project upon completion is a powerful tool that many builders overlook. Lessons learned from each project provide valuable information for planning and managing future projects. Historical data arranged into a unit cost format allows the estimator to consistently provide accurate information to new customers and develop procedures to streamline the process. This task allows skilled estimators to produce accurate numbers and separates them from others that provide ballpark "guestimates".
Historical Unit Costs
A unit cost is the cost for a component of the home broken down into a measurable quantity. Some examples of costs that can be computed by a unit include:
We can provide a conceptual estimate for you comprising a unit cost comparison of ten homes we've built previously; each selected to represent the size, style and quality levels similar to your future home. The comparison utilizes the unit costs of well over 100 cost categories. It's actually not that difficult to produce since we've been fine-tuning our process for several years now. Please don't hesitate to ask for your complimentary conceptual cost estimate with no further obligation required.
Construction Cost Types
Another explanation of construction costs might be further help for understanding why there is such a broad range of pricing in the market. We think it's important to realize that cost-per-square-foot quotes may be misleading. Without sufficient detail, there's no way to know what is included in a ballpark price.
Another way of dissecting construction costs may be achieved by understanding the different types. At the risk of over-simplifying, costs might be divided into four types:
Commodity Materials and Labor - Lumber, concrete and drywall, plus many other products are basically commodities. Their costs are driven by market demand. There aren't any special places where one builder can purchase these items for less than another. We conduct business professionally and expect the best pricing on these items from our suppliers. Likewise, the labor cost to install many standard components is also market-driven. While we do have minimum standards, we seek to manage our projects as efficiently as possible and shop for the best price from preferred trade contractors. If a builder leads you to believe that they can provide these items at a cheaper rate, be cautious.
Mechanical Systems and Building Envelope - This is the area where many home buyers get into trouble. Air-conditioning, insulation, roofing and windows are some of the cost categories included. Many of these components are installed as systems and technical knowledge is necessary to Comparing the cost and benefit of numerous mechanical and envelope components is often above the ability of all but the most studious home buyer. Few buyers when given the option opt for the cheapest roof
Customer Selections and Personal Choices -
Amenities, Options and Upgrades -
Note: Most of the forms and information on our site are available to view if you provide us with an email address. We'd like to send you our monthly newsletter with information and resources about new homes and residential construction. Thanks for your interest in Groninger Custom Homes.