Conceptual Estimating, Design-Build and the Steel Fabricator

8/12/2019 Conceptual Estimating, Design-Build and the Steel Fabricator

1/5Modern Steel Construction October 2002

You are at lunch with a localdeveloper and severalmembers of her staff. Shespends 10 minutes excit-edly talking about a new

four-story office building that shewants to build on a parcel of land sheowns. She turns to her director of de-velopment and he madly sketches hisvision of the project on the back of anapkin. Members of her staff chime in

with ideas. And then she asks the bigquestion, How much will it cost? Thetable falls silent. All eyes turn to you,the steel fabricator. And you say

What would you say? Would youtell her that mill cost of a ton of steel isonly $430? That fabricated steel for anoffice building today is around $1600 aton? Or that a four-story office buildingusually has about nine pounds of steelper square foot of floor space? Guess

whatshe wouldnt care!Would you tell her you only work

with steel, and that shed have to talkto an architect and a general contractorto get a price? Youd miss getting in onthe ground floor and influencing theproject!

Do you let it end there? Hopefullynot! This is your chance to look her inthe eye and let her know that youveworked as a team with local architects,general contractors and structural engi-neers, and youd like to bring them in

to meet her and discuss the project.Youll help her define the scope of theproject; the team will give her an esti-mate that is representative of its actualcost.

You know that this is an opportu-nity to get your foot in the door. Youcan influence the project design tomatch the efficiencies of your shop.Youll be able to avoid change ordersand negotiate your price. Youll be partof a design-build team, and togetheryoull construct an office building that

will accelerate the construction sched-

ule, save the developer money, and puta smile on her face.

But you need to put together a num-ber for the steel now. Before detailedstructural plans are completed. Andyoull need to live with it as a maxi-mum guaranteed price. Welcome to theworld of conceptual estimating!

WHAT IS IT?

Jeff Beard, President of the Design-

Build Institute of America, defines con-ceptual estimating as the skill offorecasting accurate costs without sig-nificant graphic design information(sometime no graphic design informa-tion) about a project. For the steel fab-ricator, conceptual estimating is theskill to look at the performance specifi-cations and footprint of a structure anddevelop a budget for all of the activitiesrelating to steel in the structure: detail-ing, fabricating, painting, transportingand erecting.

Conceptual estimating is not justmaking a good guess at the cost of thesteel in a project. It is listening to theowner and understanding the projectsgoals. It is understanding structuralsystems, assemblies and their costs. Itis comprehending the price of steel, notwhen it leaves the fabricating shop, butwhen it is in place on the structure. It isthe search for a more efficient and pro-ductive way to manage the steelprocess. And it means clearly definingthe scope of your work for the amount

you are proposing to charge.

William Liddy and John Cross, P.E.

Conceptual Estimating,

Design-Build

Steel Fabricatorandthe

By mastering the concept of conceptual estimating,

steel fabricators can form relationships with owners

and developers in the earliest stages of a project.

Everything takes time

Each progressive level of concep-tual estimation requires more timeand effort to complete. The struc-tural steel fabricator can easilyover-invest staff hours in preparingconceptual estimates. The basicrule of thumb should be that theamount of effort to prepare the es-timate should be proportional to

the level of information and per-formance specifications availableto the fabricator. Typically theamount of time proportionally in-vested for each type of conceptualestimate is:

feasibility estimate 1 hour performance estimate 4 hours conceptual design est. 10 hours detailed estimate 40 hours


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formance requirement and designchanges have on the structure.

STAGE 4DETAILED

ESTIMATE

Estimation does not end once theproject fee is negotiated. When design

work reaches the 50 percent level, a tra-ditional detailed estimate should beperformed. The purpose of this esti-mate, which is performed in the sameway as a hard-bid estimate, is to au-thorize full funding for the project, toidentify problems with the conceptualestimate, and to provide a cost-controlbudget for the fabricating andconstruction process. If there is adisparity between the detailedestimate and the negotiated fee,a fabricator can either proposealternative cost-saving sugges-tions to the design-build team orutilize the contingencies that theteam built into the negotiatedfee.

STAGE 5LIFE-CYCLE

COST ESTIMATE

The final estimate is used ondesign-build projects is the life-cycle cost estimate. Unlike theother estimates, the life-cycle costestimate does not focus only onthe cost to design and construct

the project. It includes the originaldesign and construction costs, fi-nancing costs (taking into accountaccelerated cash flows from earlyoccupancy, and maintenance andupkeep costs over the life of thestructure), renovation costs (par-ticularly if different loadingsmight be anticipated), and theresidual value or demolition costsat the end of the structures usefullife. These costs are discounted overtime to determine the true value in cur-

rent dollars of the project.Life-cycle estimating involves pre-

dictive assumptions about the perform-ance of the selected structural systemthat might generate uncertainty in thefinal cost estimate. However, this pro-cedure is beneficial to weigh the rela-tive benefits of comparative systems.When comparing competing systems,the use of consistent assumptions canminimize uncertainty. It provides avaluable comparison between a lowcost, high maintenance structure and a

high cost, low maintenance structure.

Each estimate should contain al-lowances to address 1)areas of risk tothe fabricator and 2)items required bycode or practice that are not yet de-fined.

HOW DO I DEVELOP ONE?

The quality of a fabricators concep-tual estimate depends on the quality ofinformation provided to the fabricator.The more uncertain the provided infor-mation, the greater the variability inthe estimate and the more allowanceswill be added to the cost of the projectssteel. As project information is re-

vealed, a fabricator should define keyparameters. These parameters can

then be referenced against a databaseof similar parameters that the fabrica-tor has maintained on previous proj-ects. This process is referred to asparametric estimating.

TYPE 1PARAMETRIC

ESTIMATES

The three most common parametersfor a first estimate are 1)the type ofstructure, 2)the number of floors in thestructure, and 3)the total squarefootage. These data points help the fab-

ricator reference similar projects to de-

termine an approximate tonnage ofsteel and associated cost. While manyexperienced fabricators can do this bymemory, it is still advantageous tomaintain a database of these parame-ters. The database can be a list of proj-ects; their size, location, and number of

stories; the number of tons of steelshown on the plans; the fabricatorsbid; the winning bid for the project;and the final cost of the project. The listdoes not need to be computerized, but-creating it on a computerized spread-sheet allows for easy sorting andcategorizing of data.

Additional parameters tobetter define the project can beadded to a database. These pa-rameters might include grossfloor area, footprint, roof area,exterior wall area, floor-to-floor height, HVAC systems,intended structure usage, spe-cial structure requirements,structural engineer, and gov-erning building code. If theproject has been previously bidor negotiated, and a hard take-off has been performed fromthe plans, it is valuable to enteras many details about the take-off as possible. This includesthe number of pieces, connec-tions, shear studs, bay sizes,

and any additional informationthatof value.

The larger the number ofitems that can be deduced fromthe client or design buildersinformation, the more accuratethe projects initial parametricestimate will be. As projectsage, an escalating cost factorcan be applied to earlier esti-mates to make them relevant

for current projects. Data in a spread-sheet can be sorted and viewed in dif-

ferent orders. Different ways oflooking at the project produces differ-ent cost ranges, which can then be com-pared to determine a target value for anew project. A conceptual estimatorrecognizes the difference between thevalue of a bid and the true cost of a pro-jects steel and adjusts the bid amountsaccordingly.

When a conceptual estimate forsteel is provided to the developer ordesign-builder, it should only includethe value of the work for which the fab-

ricator is taking responsibility. Fabrica-

Project name

CustomerProject location

Project Architect

Engineer of Record

Construction Start

Construction Finish

Structure Type

Intended Structure Usage

Controlling Code

Fire Rating

Type of Fire Protection

Special Requirements

Footprint

Number of Stories

Total Square Footage

Roof Area

Roof Slope

Roof Deck

Interior Drains

Stairs?

Penthouse Area

Exterior Wall Type

Exterior Wall Area

Floor-to-floor Height

Typical Bay SizeDiaphragm

Expansion Joint?

Bracing Type

Tons of Steel

Steel/square foot

Tons of Joists

Joists/square foot

Number of Pieces

Type of Connections

Connection: Shop

Connection: Field

Lateral System

Number of Shear Studs

Delivery Method

If bidour bid

Winning bidder

Winning bid

Value of Steel Packag

Site Access

Erect Deck?

Erect Steel & Joists?

Value of Erection Package

Typical items to be includedin parametric spreadsheet

Modern Steel Construction October 2002


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tors should not provide a conceptualestimate for the whole structure unlessthey are responsible for it. Instead theyshould indicate that steel typically rep-resents about 10% of the project costand invite a design-builder to addressthe overall cost.

Another way to obtain a feasibilityor early conceptual estimate is to usean estimating program, such as CONE-DIA or D4COST. Both provide concep-tual estimating values based on adatabase of costs adjusted for time andlocation factors. CONEDIA works froma design-component methodology andbuilds a virtual project. CONEDIApresents a series of what-if scenariosso the estimator can test various designalternatives. Once the model is created,the estimator can override average unitcosts with values that are more repre-sentative of local conditions. D4COSTapproaches the project differently. Itlooks at projects similar to the pro-posed project in the database and inter-polates between them. The estimatorcan create a library of proprietary proj-ects in addition to the projects alreadyincluded and specify certain unit-costmodules for use in the analysis. Al-though no commercial program willever replace the need for a companyscost experience, these programs are agood starting point. They provide a re-

minder of what items should be in-cluded in the estimate, a scheduleoverview in the case of CONEDIA, anda way to check a fabricators concep-tual estimate.

TYPE 2SCHEMATIC

ESTIMATES

As the project is refined, the fabri-cator can create a schematic or elemen-tal estimate. This estimate is based on afabricators trial model of the structure.Once a model is created, a process

equivalent to the take-off process ofhard-bid estimating follows. The morethe prototype conforms to performancespecifications, the closer the quantitiestaken from it will correspond to the ac-tual project. Models can be created eas-ily with in structural design packages.These packages also generate a sum-mary take-off of the components of thestructure that can then be priced.

If the fabricator wants to perform amore detailed take-off and if the soft-ware supports a CIS/2 file transfer ca-

pability (such as RAM Structural

System or ETABS, the design file canbe read by a detailing program withCIS/2 capability (SDS2 or Xsteel) anddisplayed in 3-D. Connections can bedesigned and detailed take-offs per-formed. Shop control packages (such asFABTROL) can also importing the

CIS/2 file and provide quantity andcost estimates.It is important to note that the fabri-

cator does not design the structure! Thefabricator only creates a model to ad-dress structural issues and determinean approximate list of materials fromwhich an estimate can be generated.The fabricators prototype will have lit-tle correspondence to the structural en-gineers design. But it is a goodestimate of the materials required. In-volving the structural engineer ofrecord at this prototype level will inte-grate preliminary ideas about the ac-tual structure and reduce theuncertainty in the estimate.

TYPE 3DETAILED ESTIMATE

Finally a detailed estimate is per-formed once the design documents aredeveloped at least to a 50-percent level.The purpose of this estimate is not tore-negotiate the project, but to providebudgetary control to the fabricatingprocess and to identify areas wherecontingency funds might need to be

applied. If a significant difference existsbetween the negotiated fee and the de-tailed estimate, the plans can be re-viewed, and cost-saving measures canbe applied to the structural system, de-tailing or erection.

DEFINING THE SCOPE

The definition of the scope of theservices provided by the fabricator is acritical element of the conceptual esti-mate. The following items should beconsidered in defining the scope of the

project: Identification of the documents

(title and date) that the conceptualestimate is based upon

Items included in the conceptual es-timate (for example: columns,beams, joist, deck, bracing, pourstops, painting, erecting )

Items excluded in this conceptualestimate (for example, the structuraldesign. Typically the design-builderwill be expecting all items in section5 of MasterSpec to be included.)

Design criterialoads and applica-ble codes

Allowable vibration and drift as-sumptions

Framing assumptions Market conditions and timing that

impacts market costs

DEVELOPING CONFIDENCE

The feeling of risk associated withproviding a fee for steel on a projectwithout completed drawings is intimi-dating - but a lack of confidence in theestimate could raise project contingen-cies. So how does a steel fabricator de-velop the ability and confidence toprovide conceptual estimates?

1.Hire or assign an individual inyour firm with the responsibility

of conceptual estimating. For manydesign-builders and specialty contrac-tors this might not be the same staffmember that is experienced at hard-bidestimating. The mentality of the hard-bid estimator is one of looking at thedetails and working up, rather thanlooking at the scope of the project andworking down.

2.Allow your conceptual estimatoraccess to historic project files and

to the firms senior management. Theconceptual estimator needs to knowhistoric costs and rules of thumbsthat have served the firm well. The

firms management must have confi-dence in the estimates produced, whichonly results from confidence in the esti-mator. Communication and trust is es-sential between a firms estimator andits management.

3.Develop a spreadsheet with his-toric bid costs and project parame-

ters. Find old drawings, take-offs andbid sheets. Conceptual estimating is bestdone with a usable history to drawfrom.

4.

Allow the conceptual estimator

time to experiment on past proj-ects. Take a job that was bid two years

How good are they?

Conceptual estimates typicallyhave the following accuracyranges:

feasibility estimate +/- 20% performance estimate +/- 7% conceptual design est. +/- 6%

detailed estimate +/- 4%



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ago, identify two or three parametersand then work through a conceptualestimate for the project using historicdata from previous projects. Measurethe conceptual estimate against the ac-tual as-built cost for the project, not thebid price, and refine the process on

multiple projects.

5.Invest in technology that enhancesthe conceptual estimating activity.

Acquire a commercially available esti-mating package or consider utilizingone on a per-project basis on the web.Invest in a design package that can ex-port design files using CIS/2 to a de-tailing or shop management package.Use it on historical projects to developconfidence in the information that itprovides and the amount of contingen-cies that need to be in place for varyingdesign conditions.

6.Develop relationships with localstructural engineers that may join

your firms design-build teams. Un-derstand their design approaches,work with them in developing proto-type models and discuss the efficien-cies of your particular fabricatingoperation.

7.Pursue design-build work in a fa-miliar market niche with other

firms 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 yourfirst few conceptual estimatesif

you have to rush your first opportu-nity, pass it by.

9.Always include a statement ofscope with any conceptual estimate.

10.Confirm any conceptual esti-mate with the most powerful

tools you haveyour common sense

and experience. Ask does this esti-mate make sense?

11.Look at every design-buildproject as an opportunity to

provide the owner with a better projectat a lower cost, on a more rapid sched-ule. Use your experience and yourshops efficiencies to their advantage.

Conceptual estimating is a skill thatevery design-build team member musthave. It is a skill that every fabricatorcan and must developso next timeyoure at lunch, your clients can benefitby an estimate that brings their ideasoff of the back of a napkin and into therealm of possible projects.

William (Bill) Liddy is Senior Advisorin AISCs Steel Solutions Center inChicago. John Cross, P.E., is National Pro-

ject Director, Design-Build, with AISCMarketing, LLC, in Chicago.


Documents

Conceptual Estimating, Design-Build and the Steel Fabricator