The Conceptual Estimate, Methods, and how to Improve Estimating Accuracy

Published July 6, 2022, 8:59 p.m. by sdanquah@gmail.com

Conceptual estimates are critical to the success of capital improvement programs, resource allocation, and general construction projects. This is because the estimate occurs very early in the planning stages of a project and may form the basis of a budget for the program or project. According to AACE International recommended Practice No. 56R-08, conceptual estimates are used for schematic design or concept study. They are also used to assess early program cost for go or no-go decision programs or are used for funding requests. The expected accuracy range for conceptual estimate is -10% to -20% on the optimistic side, and +20% to +30% on the pessimistic side. The estimates are normally based on conceptual design. Conceptual designs are mostly at 30% design maturity level.

Analogous Estimating: relies on the cost data from similar projects and all available information on the current project
Assembly Unit Cost: based on limited design, basis of design documentation, and any other information available at the time of the estimate.

Use estimators with experience in the type of project or building to be constructed.
While design may not be complete, the estimator must provide a complete estimate as if design is complete. Conceptual estimates must be forward looking, incorporating all the costs of labor, material, equipment, and the necessary allowances and contingencies to complete the project.
The more information available to the estimator, the better the estimating accuracy. Therefore, design firms must provide all available information to the estimating team. Providing a concept design, and the Basis of Design (BOD) documents greatly improves the accuracy of the concept estimate.
The estimator must provide basis of estimate documentation, listing assumptions, special inclusions, allowances, and exclusions
Estimator must include appropriate contingencies to cover the design progression. Design contingencies are established in relation to the given scope of work to cover cost increases from design progressions, predictable conditions, and details within the defined project scope. It is not for scope increases or changes. Contingency ranges between 15% to 35% at the concept level, depending on type of project, location, size, complexity, and available information.

Review of the estimate is critical to improving the accuracy of the estimate. Design firms and management must review the estimate for completeness and ensure that estimators’ assumptions are consistent with the project expectations.