Construction Estimate vs. Project Budget

By: Mark N. Ottemiller, PE, LEED AP BD+C | Retired President, NuTec Design Associates, Inc.

Preparing a project budget is not a simple task, and is more than just getting an estimate for the construction cost of a building shell and basic mechanical and electrical systems. 

It is difficult to price what has not been designed, detailed, or described. Project budgets include many unknowns at the conceptual stage and not accounting for them will underfund the budget. From our experience, beyond the building shell and basic utilities, project budgets should include the following:

SITE CONCERNS:

  • Land acquisition
  • Geotechnical investigation
  • Stormwater management
  • Road improvements
  • Reforestation

ENVIRONMENTAL ISSUES:

  • Asbestos, PCB’s, lead, etc.
  • Air quality permits

MATERIAL HANDLING & STORAGE:

  • Cranes
  • Racking

UTILITY UPGRADES:

  • Electrical, gas, & water service
  • Emergency power
  • Compressed air
  • Boiler – steam or hot water
  • Chilled water/process piping
  • Industrial exhaust
  • Sewer/waste water treatment
  • Communications/data/security

INDIRECT COSTS:

  • Temporary staging for office and production
  • Architectural & engineering fees
  • Permit review fees - Municipal sureties/bonds
  • Contractors bond
  • Legal fees
  • Financing costs
  • Insurance – builder’s risk, etc.
  • Workforce training

TECHNOLOGY:

  • Certification programs (e.g. LEED)
  • Automation & space and utility impacts
  • Integration
  • Controls
  • EU vs. USA standards
  • Upgrade of IT systems
  • System commissioning

A contingency should also be added to account for unknown variables. We typically recommend 10%-15% at the conceptual stage of the project. Also, escalation should be addressed if the project is more than a year from the start of construction.

While the above list is not all inclusive, it is the basis of a well thought project budget.