Cost Estimating in Construction – Counting the Pennies

By Daniel A. Traina, EIT

Pre-construction planning is the process of creating a ‘road map’ of a construction project before onsite work actually begins. A comprehensive pre-construction plan includes many aspects such as cost estimating, market research, scheduling, risk analysis, and site logistics. Time spent pre-planning before mobilizing pays dividends later. A project with a well thought out plan is more likely to be executed well, while a lack of planning can lead to chaos, creating a jobsite that is disorganized and even dangerous. Today I will focus on the cost estimating component of pre-construction and take a look at how important accurate budgeting is to a successful project.

I will begin by recreating a painful situation that most in the construction industry have experienced. A project team (including owner, end user, architect, engineer, and in some cases contractor) have worked for months or even years to get a project to the construction document stage. The project is released for bid and on bid day the team is left disappointed with bids that have come in substantially over budget. Sometimes this causes a project to be canceled altogether. Other times the project needs to go through a lengthy cost reduction or rebid process, in either case likely impacting the planned schedule. Bid documents may need to be revised, meaning staff are redoing previously completed work, which is generally bad for morale.

A good cost estimating process involves verification of quantities and budget numbers from multiple sources. Any differences in quantities, pricing, or approach between the multiple sources should be reconciled between stakeholders. This process helps to identify any errors in the estimate and project risks, as well as engage all project stakeholders. Following this process helps to avoid the undesirable situation described above by identifying budget challenged projects early on. The active budgeting process should begin much earlier than the bidding phase. When possible a construction manager or general contractor should be engaged on a project at or even prior to design development (schematic design is even better if upfront schedule allows time). When budget constraints are identified early on, the impact to the project schedule and the need for document rework are far less. It is a much easier and faster process to reduce costs in early stages than during the construction document phase. Additionally, the process of cost estimating at early design phases (concept or schematic design) can verify the feasibility of a project. If a project is shown to not be feasible early on, the owner can save a good deal of effort, time, and money by pulling the plug on the project right away, as opposed to progressing a project to construction documents which will not end up being built.

At Welliver we provide market specific, real time estimates and price the work via multiple sources. This means we quantify the entire project and apply historical pricing for the market. At the same time, we utilize the subcontractor community to provide real time budgets for their scopes of work. Our internal pricing is then compared to and considered against subcontractor budgets to build confidence in the overall estimate. This process helps to identify potential cost exposures/risk in the cost estimate. Subcontractors are carefully selected from those who are best suited for the specific project (based on project location, size, type of work, etc.). In the case that cost estimates are above the owner’s budget, we work together to identify potential scope changes and value engineering to bring the project back on track.

Feel free to reach out to myself or any of your existing Welliver contacts for assistance with pre-construction cost estimating on your next project. Engagement early on has the biggest potential for positive impact on your project.

Dan brings more than 10 years of construction experience, an extensive cost database, and current bid market trends to every pre-construction estimate and competitive project bid. He has an impressive background in engineering and design, which he draws from when performing cost analyses, unit pricing, value engineering, and constructability reviews. Experienced working with numerous state-of-the-art technical software programs, Dan provides accurate and realistic project estimation, a proven value to his client’s decision making process. As Lead Estimator for Welliver, Dan leads the execution and delivery of estimating services for a substantial number of highly complex and significant projects for clients representing a broad range of market sectors including higher education, industrial, healthcare, and commercial/residential. Dan can be reached at [email protected].

Energy Performance Contracts – Strategic Tool When Planning School Facility Upgrades

By Michael Ginalski

School districts in New York State are required to continually plan for the maintenance of their facilities through the utilization of the Building Condition Survey (BCS) every five years. In spite of this however, most districts have so many needs that the vast majority of needs far exceeds a district’s ability to address all of them. In addition to this, many districts have aging buildings which suffer from poor air quality, lighting, climate control, and ventilation all of which have a direct impact on student learning.

A strategy districts can use to begin to tackle environmental needs is an Energy Performance Contract (EPC) as a means of funding building improvements with no net cost impact to the school district. EPC’s are self-funded using the savings from energy efficiencies and state aid to implement energy retrofits which result in guaranteed annual savings on energy costs. The savings pay for these upgrades and provide an on-going annual savings to school district utility costs.

Major Advantages

An EPC results in upgraded state-of-the-art equipment, improves the building environment, meets all NYSED requirements, and pays for itself through guaranteed savings. There are major advantages with no downside for districts in utilizing an EPC. Those include:

  • Eligibility for building aid
  • Qualifies for energy incentives
  • Coordinates well with existing capital projects
  • Guaranteed savings and performance
  • Part of a referendum qualifies for an additional 10% in state building aid

For districts, this can mean upgrades to various environmental systems – from controls to windows, lighting to climate control, and boilers to solar panels – all of which can provide a quantum leap in district planning in terms of future projects as well as contribute to improving the overall climate and environment. We are fortunate in New York State that this opportunity is available which demonstrates a true commitment from the State to moving districts towards a more energy efficient environment.

A key component of an EPC is the energy audit conducted by an Energy Service Company (ESCO). ESCOs work with districts to identify systems which can be upgraded to accomplish savings. The ESCO guarantees these savings which in turn pay for the actual capital improvements (the difference between pre-installation and post-installation use). If the projected savings do not occur, the ESCO must compensate districts directly for the shortfall.

Benefits of Energy Performance Contracts

In this COVID-19 era the school environment has been under the microscope. Beyond improving the learning environment and providing a safer environment for students, there are many ways that EPCs benefit school districts and communities including:

  • Reduces the burden on taxpayers – EPCs allow districts to not only save money annually but NYS law states that EPCs must be self-funded and tax neutral.
  • Opportunities for student engagement – most ESCOs offer educational opportunities for students based on projects underway.
  • Improves the learning environment – Too hot or too cold? Poor air flow because windows won’t open? Cold air coming through window units because of age and condition? Bad HVAC? No climate control? Boilers on their last legs? The negative impacts of all of these conditions is not imaginary.
  • Demonstrates solid, visionary, and responsible leadership – When a community hires district leaders they expect that they are hiring individuals who will move a district forward to ensure the children of the community have the best opportunity to be successful. They also expect district leadership to be fiscally responsible and understand that reducing energy costs is good for taxpayers.

Energy Performance Contracts provide a great opportunity for districts to become more energy efficient while not negatively impacting taxpayers, their workforce, learning, or programs. In fact, EPCs allow districts to save money which in turn can be reinvested in the workforce or programs. At Welliver, we are working with various districts all of which are at different points in the EPC process from project development to actual implementation. As your Construction Manager, we are poised and ready to assist districts in this great opportunity to move school districts towards a more energy efficient environment.

Mike joins Welliver as our K12 Communication Liaison after 33 years working in the K12 education sector. He brings a comprehensive understanding and direct exposure to all of the issues facing public education today, including  improving building energy efficiency and reducing operating costs. In his 13 years as the Superintendent in Corning-Painted Post (CPP) Area School District, Mike led the district through four successful referendums which led to $260M in new construction from 2010-2020. Mike bridges the gap between Welliver’s construction management teams and K12 school district superintendents, school boards, and facility directors. He provides expertise and guidance, as well as helps districts carry out capital improvement initiatives involving pre-referendum voting, budget management, community outreach, and buildings and grounds personnel. Mike can be reached at [email protected].