Inside the Mind of a General Contractor: From Estimating Construction Costs to Groundbreaking
Construction Estimation is one of the most essential phases in the construction process. How a general contractor analyzes a construction build plays a major role in the groundbreaking of new project. Understanding what goes into the conceptual budget of a project is vastly important in fiding the right general contractor for your latest project.
Recently, five of South Bay Construction’s key leaders, JB Cahoon, John Machi, Derick Hostetter, Alex Groswird, and Ric Propersi sat down to answer important questions in the realm of cost estimation.
What are the main components to a project estimate?
John Machi: Estimating construction costs consists of knowing what the Customer’s budget is, when they would like to start the project, and when they would like to have it completed. By doing so we can account for the proper general conditions in our estimate, understand what the most important features are, and make sure that we’ve carefully listened to and made note of all pertinent info.
It is also important note that we have carefully thought-out the project and various scopes of work to ensure we’ve covered all of the sub-trades and associated pricing within the project.
What are the options and strategies for approaching an estimate for a new project?
Derick Hofstetter: It all depends on the details of the plans at the time of the estimate. If the plans are very rough, one strategy is to look at similar projects and use that data as a rough estimate. If the plans have enough information to quantify take off, the strategy would be to use historical unit price data, as well as similar builds to come to a more accurate price. The best option would be to have a detailed pricing plan go out to the subcontractor community.
What is SBC’s opinion regarding Lump Sum Contract or Cost Plus Fee with an “Open Book” policy—and how it can affect a job estimate and roll-out?
Derick Hofstetter: Lump Sum provides more cost certainty to the client, while the contractor will take on a bit more risk. The Cost Plus Fee, in theory, will be less costly, but the risk for cost overruns is much greater. I prefer the Lump Sum approach since I believe that as the contractor we are best suited to manage the risk.
How does the use of technology support or hinder a job estimate? Tell us more about SBC’s opinion around BIM Modeling, PlanGrid and other tools.
Alex Groswird: In my experience BIM modeling has been a huge help on complicated structures. I’ve used it on both a complicated suspension bridge project and a hospital project. Both cases BIM modeling provided many examples of potential conflicts before they became costly fixes.
JB Cahoon: We use Bluebeam, which is great for 85 percent of the takeoff, however you will need good old fashion drawings to help complete the estimate.
How do you use experience to create accurate bids?
John Machi: After a while of doing estimates, it becomes second nature for an Estimator to know what needs to be included in the estimate, how long it should take to build, and approximately how much the total project cost should come out to.
For me it’s a combination of using my gut for some things, calling one of my go-to subs for help with the pricing and digging into my archives of pricing notes and or previous estimates that I’ve recently done.
Can you explain clearly the differences between Conceptual Budgeting and Pre-Construction phases, and what has to be completed before going on to subsequent phases?
John Machi: First you start with a budget, or sometimes a few budgets, until the customer feels comfortable with the design and cost. Then you get a set of Final Drawings and send them out for hard pricing from the subcontractors in order to provide the Customer with a final/hard price and if approved, go to a Lump Sum Project.
Once the pricing has been approved, you provide the customer with a construction schedule and enter into the Submittals phase. At the same time, you enter into the Permit phase, as well as get a jump on the start of construction and try to time it just right.
What are the key factors for balancing a project’s scope, construction schedule, and cost?
Alex Groswird: I find the key to balancing the overall project’s path to success, and thus cost success is a well prepared and managed schedule. The key to that is getting and keeping superintendents and subcontractor buy off and updating and pushing the schedule through the project.
Ric Propersi: By bringing a realistic approach to the table in the beginning and allowing time to incorporate the needs of the client is the most important factor in balancing a project’s scope with the construction schedule. It is important to enlist the efforts of the client, architects and engineers early, including milestone dates for completion of each phase.
How important is conceptualizing uncertainty within a construction project?
Alex Groswird: Recognizing uncertainty is key and finding it early is obviously best. Some of the best tools for that is good subcontractor, contract scopes and a detailed schedule. Early shop drawing deliveries is also key in helping to alleviate any level of uncertainty.
How do you ensure that all those involved, from clients, architects, and SBC employees understand the estimate?
John Machi: I provide details and descriptions of each scope of work, provide clearly defined inclusions, exclusions, allowances, and alternates.
My approach to every estimate I do is to make it so self-explanatory and thorough that they have hardly any questions to come back at me with… or if let’s say my proposal was lost and picked up by some random person, they can read it and understand what that estimate is about.
Accurate Cost Estimation
Because of the complexity of cost estimation, it is essential to have the most experienced individuals working on your project. One great tool to simplify the process from the start is South Bay Construction’s Cost Reference Guide. The guide is widely used by owners/developers, brokers, architects, project managers and other real estate development professionals in the Bay Area and around the world. It’s efficient, up-to-date and most importantly built on South Bay Construction’s experience for accurate estimation.
Download the guide today by clicking on the button below!