Cost Modeling: Informed Decision Making Prior to Design

Chad Chapman
Often the greatest challenge for an owner at the start of a major construction project is answering the question, “How much will the project cost?”

The savvy building owner will be engaged in the cost modeling process, making cost critical decisions and, later, communicating the ‘design-to-budget’ culture to all project stakeholders. Cost modeling is the development of anticipated costs with very little project-specific information.

This shortage of information is typical at the onset of most projects; however, with a few key parameters defined, an experienced cost consultant can provide the detailed information typically only seen in later stages.

The process starts with a basic understanding of the owner’s needs, relating to purpose, capacity, and sustainability goals. Put simply, what is the vision for the facility? Next, strategic use of historical project data produces benchmarking information that allows development of accurate quantities and cost for the project.

The benchmarking data is based on specific projects, containing the most similar systematic components to the envisioned scheme. This enables realistic cost models to be provided, allowing particular elements to be estimated more accurately. Ideally these should be recent comparables at an advanced level of design, complete or under construction, to maximize the level of detail available. Using our unique project cost database, CATO, we are able to access cost data by building classification, sector, location, etc.

A specific example might include calculating the exterior enclosure total surface area of the most similar projects in aggregate. This provides a logical conclusion to the expected ratio of skin-to-floor of the building. In turn, this would provide approximate quantification for the yet-to-be designed facility. Similar calculations are used from various data, based on the team’s assessment of where the greatest perceived similarities exist. This process is used for the majority of building systems, leaving only the site as a stand-alone differentiator.

By distributing known parameters into the different major building systems (foundation, superstructure, partition density, etc.) using the known distributions from sample projects, a cost model is developed. Assessment of various options like site and facility configuration can be evaluated early, through holding the other aspects of the cost model as constants and assessing cost implications. This cost model then becomes a tool used by the project team in establishing target budgets for each building system element.

The early engagement of a cost consultant in projects facilitates a smoother transition into the design process. Having a cost model in hand, the team is allowed more focus on specifics and details rather than re-working their thoughts to achieve budget.

It is also vital to know the most economical solutions to project delivery. Our breadth and diversity of experience equips us with the knowledge to provide the strategic advice our clients seek.

Faithful+Gould recently worked with several Fortune 100 companies to establish cost models in the commercial, industrial, energy and hospitality sectors; allowing clients to evaluate options and establish program level budgets. This approach has proven invaluable in the design and construction of major projects that align with the owner’s vision while maintaining a target budget.

Using cost modeling techniques, we are providing assistance in early budgeting, alleviating costly re-design commissions, and equipping owners with a tool for making informed decisions much earlier in the process.