1. Conceptual Estimating,
Design-Build
and
the Steel Fabricator
William Liddy and John Cross, P.E.
By mastering the concept of conceptual estimating,
steel fabricators can form relationships with owners
and developers in the earliest stages of a project.
Y
ou are at lunch with a local with ideas. And then she asks the big ule, save the developer money, and put
developer and several question, “How much will it cost?” The a smile on her face.
members of her staff. She table falls silent. All eyes turn to you, But you need to put together a num-
spends 10 minutes excit- the steel fabricator. And you say… ber for the steel now. Before detailed
edly talking about a new What would you say? Would you structural plans are completed. And
four-story office building that she tell her that mill cost of a ton of steel is you’ll need to live with it as a maxi-
wants to build on a parcel of land she only $430? That fabricated steel for an mum guaranteed price. Welcome to the
owns. She turns to her director of de- office building today is around $1600 a world of conceptual estimating!
velopment and he madly sketches his ton? Or that a four-story office building
vision of the project on the back of a usually has about nine pounds of steel WHAT IS IT?
napkin. Members of her staff chime in per square foot of floor space? Guess Jeff Beard, President of the Design-
what…she wouldn’t care! Build Institute of America, defines con-
Would you tell her you only work ceptual estimating as “the skill of
Everything takes time with steel, and that she’d have to talk forecasting accurate costs without sig-
to an architect and a general contractor nificant graphic design information
Each progressive level of concep-
to get a price? You’d miss getting in on (sometime no graphic design informa-
tual estimation requires more time
the ground floor and influencing the tion) about a project.” For the steel fab-
and effort to complete. The struc- project! ricator, conceptual estimating is the
tural steel fabricator can easily Do you let it end there? Hopefully skill to look at the performance specifi-
over-invest staff hours in preparing not! This is your chance to look her in cations and footprint of a structure and
conceptual estimates. The basic the eye and let her know that you’ve develop a budget for all of the activities
rule of thumb should be that the worked as a team with local architects, relating to steel in the structure: detail-
amount of effort to prepare the es- general contractors and structural engi- ing, fabricating, painting, transporting
timate should be proportional to neers, and you’d like to bring them in and erecting.
the level of information and per- to meet her and discuss the project. Conceptual estimating is not just
formance specifications available You’ll help her define the scope of the making a good guess at the cost of the
project; the team will give her an esti- steel in a project. It is listening to the
to the fabricator. Typically the
mate that is representative of its actual owner and understanding the project’s
amount of time proportionally in-
cost. goals. It is understanding structural
vested for each type of conceptual You know that this is an opportu- systems, assemblies and their costs. It
estimate is: nity to get your foot in the door. You is comprehending the price of steel, not
s feasibility estimate 1 hour can influence the project design to when it leaves the fabricating shop, but
match the efficiencies of your shop. when it is in place on the structure. It is
s performance estimate 4 hours
You’ll be able to avoid change orders the search for a more efficient and pro-
s conceptual design est. 10 hours
and negotiate your price. You’ll be part ductive way to manage the steel
s detailed estimate 40 hours of a design-build team, and together process. And it means clearly defining
you’ll construct an office building that the scope of your work for the amount
will accelerate the construction sched- you are proposing to charge.
Modern Steel Construction • October 2002

2. Conceptual estimating is the skill of sibility estimate as a range of probable
costing a project from the view of the values although the client will typically Feeling overwhelmed?
whole project looking down, rather only remember the low end of the
than from the details looking up. range.
Developing your methodology, col-
lecting historical data and produc-
IS A CONCEPTUAL ESTIMATE STAGE 2—PERFORMANCE ing conceptual estimates takes
ETCHED IN STONE? CRITERIA ESTIMATE time and hard work. But concep-
There are many stages of the con- The second stage is developing a tual estimating opens the door to
ceptual estimating process: feasibility performance criteria estimate. The design-build.
estimates, performance criteria esti- client has moved from sketching the
mates, conceptual design estimates, de- project on the back of a napkin to a for- Involvement in design-build proj-
tailed estimates and life cycle-cost mal statement of the performance re- ects as a steel fabricator will:
estimates. At each progressive stage the quirements of the project. This includes s Allow you to negotiate your fees
estimate should be better refined and a site plan and suggested structural
s Increase your profitability
contain fewer contingencies. That does footprint. The conceptual estimator
not mean that every successive esti- will begin to visualize the structure in
s Lower your risk
mate will go down in cost. The scope of order to generate the performace crite- s Utilize the efficiencies of your
the project may change or be better de- ria estimate. The estimator needs to shop
fined, resulting in an increased esti- evaluate the effect of certain occupan- s Integrate your expertise into the
mate for the fabricated steel. In such cies on the loads imposed on the struc- final project design
cases it is critical that a change in scope ture; the impact of HVAC equipment s Create an effective working rela-
be highlighted as the reason for the in- on structural components; the impact tionship between you and the
crease in cost. It is an old rule of thumb of architectural concepts on connection structural engineer
that “no estimate is ever forgotten!” design; and the impact of use classifi- s Encourage the use of new time
and that is particularly true if subse- cation on fire protection regulations. saving tools like EDI
quent estimates increase in cost. Each The estimator might base estimates on
s Develop a long-term relationship
estimate needs to be fully documented the square footage of the structure,
and retained. The challenge for the fab- comparative parameters to other recent
with the project owner
ricator is to track past project costs and projects, industry costing tools or price s Accelerate the project and your
organize them in a way that allows the indices. Multiple approaches are ap- shop time
creation of an accurate conceptual esti- plied to create a range of costs from
mate in a minimal amount of time. which the estimate is generated.
It is also important to discuss poten- From this preliminary structural
STAGE 1—FEASIBILITY tial contingencies with the entire proj- model, take-offs can be generated to
ESTIMATES ect team. Contingencies for unknown produce a typical material list, which
The first stage of a conceptual esti- conditions and scope changes should can in turn be priced.
mate is a feasibility estimate. It is de- be carried in the overall project esti- This estimate often is the basis of the
veloped from very preliminary mate, not in the estimates of individual fabricator’s negotiated fee and design-
information, often the proverbial back specialty contractors. Fabricators builder’s fee for the project. The as-
of a napkin. The goal is to determine if should define the scope of the concep- sumptions and scope of the intended
a project’s cost is justified by the bene- tual estimate. They also should indicate work must be well defined in writing.
fit received from the completed struc- allowances for work performed by oth- It is critical that the design-builder who
ture. No design effort has yet begun, ers or undefined work that will be re- submits the final proposal to the client
and if costs come back too high, there quired on the project. is aware of allowances included in the
will be no project. fabricator’s estimate, or possible mis-
A feasibility estimate gives the fabri- STAGE 3—CONCEPTUAL communication errors could result.
cator a chance to address potential DESIGN ESTIMATES For example, a fabricator might price
project solutions, such as the savings The third stage is the conceptual de- all structural steel but not the miscella-
possible with steel as compared to con- sign estimate. 10% design drawings, neous metal, while the design-builder
crete framing systems. A project might general arrangement drawings, and assumes that the fabricator will pro-
not be feasible using a particular build- layout and architectural drawings pro- vide all steel.
ing type, but could become feasible as vide a base from which a representa- As the owner modifies the project
alternative materials and design ap- tive structural design can be requirements and the design-build
proaches are evaluated. A single proj- developed. Design loads, special struc- team changes the approach to the proj-
ect might have multiple feasibility tural considerations and architectural ect, multiple conceptual design esti-
estimates as the scope and perform- requirements must also be taken into mates might be necessary. The
ance requirements of the project account. These loads and considera- design-build team should log these
change. At this level of estimating there tions might not be assigned to their ac- changes and track the incremental cost
are no contingencies and no allowances tual location in the structure, but will of modifications to the overall project
because the entire project is still un- be considered in the general sizing of cost. The fabricator should maintain a
known. Often it is best to provide a fea- structural members and connections. similar log of the cost impact that per-
Modern Steel Construction • October 2002

3. formance requirement and design Each estimate should contain al- termine an approximate tonnage of
changes have on the structure. lowances to address 1)areas of risk to steel and associated cost. While many
the fabricator and 2)items required by experienced fabricators can do this by
STAGE 4—DETAILED code or practice that are not yet de- memory, it is still advantageous to
ESTIMATE fined. maintain a database of these parame-
Estimation does not end once the ters. The database can be a list of proj-
project fee is negotiated. When design HOW DO I DEVELOP ONE? ects; their size, location, and number of
work reaches the 50 percent level, a tra- The quality of a fabricator’s concep- stories; the number of tons of steel
ditional detailed estimate should be tual estimate depends on the quality of shown on the plans; the fabricator’s
performed. The purpose of this esti- information provided to the fabricator. bid; the winning bid for the project;
mate, which is performed in the same The more uncertain the provided infor- and the final cost of the project. The list
way as a hard-bid estimate, is to au- mation, the greater the variability in does not need to be computerized, but-
thorize full funding for the project, to the estimate and the more allowances creating it on a computerized spread-
identify problems with the conceptual will be added to the cost of the project’s sheet allows for easy sorting and
estimate, and to provide a cost-control steel. As project information is re- categorizing of data.
budget for the fabricating and Additional parameters to
construction process. If there is a better define the project can be
disparity between the detailed Typical items to be included added to a database. These pa-
estimate and the negotiated fee, in parametric spreadsheet rameters might include gross
a fabricator can either propose Project name Floor-to-floor Height
floor area, footprint, roof area,
alternative cost-saving sugges- Customer Typical Bay Size
exterior wall area, floor-to-
tions to the design-build team or Project location Diaphragm
floor height, HVAC systems,
utilize the contingencies that the Project Architect Expansion Joint?
intended structure usage, spe-
team built into the negotiated Engineer of Record Bracing Type
cial structure requirements,
fee. Construction Start Tons of Steel
structural engineer, and gov-
Construction Finish Steel/square foot
erning building code. If the
STAGE 5—LIFE-CYCLE Structure Type Tons of Joists
project has been previously bid
COST ESTIMATE Intended Structure Usage Joists/square foot
or negotiated, and a hard take-
The final estimate is used on Controlling Code Number of Pieces
off has been performed from
design-build projects is the life- Fire Rating Type of Connections
the plans, it is valuable to enter
cycle cost estimate. Unlike the Type of Fire Protection Connection: Shop
as many details about the take-
other estimates, the life-cycle cost Special Requirements Connection: Field
off as possible. This includes
estimate does not focus only on Footprint Lateral System
the number of pieces, connec-
the cost to design and construct Number of Stories Number of Shear Studs
tions, shear studs, bay sizes,
the project. It includes the original Total Square Footage Delivery Method
and any additional information
design and construction costs, fi- Roof Area If bid…our bid
thatof value.
nancing costs (taking into account Roof Slope Winning bidder
The larger the number of
accelerated cash flows from early Roof Deck Winning bid
items that can be deduced from
occupancy, and maintenance and Interior Drains Value of Steel Packag
the client or design builder’s
upkeep costs over the life of the Stairs? Site Access
information, the more accurate
structure), renovation costs (par- Penthouse Area Erect Deck?
the projects’ initial parametric
ticularly if different loadings Exterior Wall Type Erect Steel & Joists?
estimate will be. As projects
might be anticipated), and the Exterior Wall Area Value of Erection Package
age, an escalating cost factor
residual value or demolition costs can be applied to earlier esti-
at the end of the structure’s useful mates to make them relevant
life. These costs are discounted over vealed, a fabricator should define key for current projects. Data in a spread-
time to determine the true value in cur- parameters. These parameters can sheet can be sorted and viewed in dif-
rent dollars of the project. then be referenced against a database ferent orders. Different ways of
Life-cycle estimating involves pre- of similar parameters that the fabrica- looking at the project produces differ-
dictive assumptions about the perform- tor has maintained on previous proj- ent cost ranges, which can then be com-
ance of the selected structural system ects. This process is referred to as pared to determine a target value for a
that might generate uncertainty in the parametric estimating. new project. A conceptual estimator
final cost estimate. However, this pro- recognizes the difference between the
cedure is beneficial to weigh the rela- TYPE 1—PARAMETRIC value of a bid and the true cost of a pro-
tive benefits of comparative systems. ESTIMATES ject’s steel and adjusts the bid amounts
When comparing competing systems, The three most common parameters accordingly.
the use of consistent assumptions can for a first estimate are 1)the type of When a conceptual estimate for
minimize uncertainty. It provides a structure, 2)the number of floors in the steel is provided to the developer or
valuable comparison between a low structure, and 3)the total square design-builder, it should only include
cost, high maintenance structure and a footage. These data points help the fab- the value of the work for which the fab-
high cost, low maintenance structure. ricator reference similar projects to de- ricator is taking responsibility. Fabrica-
Modern Steel Construction • October 2002

4. tors should not provide a conceptual System or ETABS, the design file can s Design criteria—loads and applica-
estimate for the whole structure unless be read by a detailing program with ble codes
they are responsible for it. Instead they CIS/2 capability (SDS2 or Xsteel) and s Allowable vibration and drift as-
should indicate that steel typically rep- displayed in 3-D. Connections can be sumptions
resents about 10% of the project cost designed and detailed take-offs per- s Framing assumptions
and invite a design-builder to address formed. Shop control packages (such as s Market conditions and timing that
the overall cost. FABTROL) can also importing the impacts market costs
Another way to obtain a feasibility CIS/2 file and provide quantity and
or early conceptual estimate is to use cost estimates. DEVELOPING CONFIDENCE
an estimating program, such as CONE- It is important to note that the fabri- The feeling of risk associated with
DIA or D4COST. Both provide concep- cator does not design the structure! The providing a fee for steel on a project
tual estimating values based on a fabricator only creates a model to ad- without completed drawings is intimi-
database of costs adjusted for time and dress structural issues and determine dating - but a lack of confidence in the
location factors. CONEDIA works from an approximate list of materials from estimate could raise project contingen-
a design-component methodology and which an estimate can be generated. cies. So how does a steel fabricator de-
builds a virtual project. CONEDIA The fabricator’s prototype will have lit- velop the ability and confidence to
presents a series of “what-if” scenarios tle correspondence to the structural en- provide conceptual estimates?
so the estimator can test various design
alternatives. Once the model is created,
the estimator can override average unit
gineer’s design. But it is a good
estimate of the materials required. In-
volving the structural engineer of
1. Hire or assign an individual in
your firm with the responsibility
of conceptual estimating. For many
costs with values that are more repre- record at this prototype level will inte- design-builders and specialty contrac-
sentative of local conditions. D4COST grate preliminary ideas about the ac- tors this might not be the same staff
approaches the project differently. It tual structure and reduce the member that is experienced at hard-bid
looks at projects similar to the pro- uncertainty in the estimate. estimating. The mentality of the hard-
posed project in the database and inter- bid estimator is one of looking at the
polates between them. The estimator TYPE 3—DETAILED ESTIMATE details and working up, rather than
can create a library of proprietary proj- Finally a detailed estimate is per- looking at the scope of the project and
ects in addition to the projects already formed once the design documents are working down.
included and specify certain unit-cost
modules for use in the analysis. Al-
though no commercial program will
developed at least to a 50-percent level.
The purpose of this estimate is not to
re-negotiate the project, but to provide
2. Allow your conceptual estimator
access to historic project files and
to the firm’s senior management. The
ever replace the need for a company’s budgetary control to the fabricating conceptual estimator needs to know
cost experience, these programs are a process and to identify areas where historic costs and “rules of thumbs”
good starting point. They provide a re- contingency funds might need to be that have served the firm well. The
minder of what items should be in- applied. If a significant difference exists firm’s management must have confi-
cluded in the estimate, a schedule between the negotiated fee and the de- dence in the estimates produced, which
overview in the case of CONEDIA, and tailed estimate, the plans can be re- only results from confidence in the esti-
a way to check a fabricator’s concep- viewed, and cost-saving measures can mator. Communication and trust is es-
tual estimate. be applied to the structural system, de- sential between a firm’s estimator and
tailing or erection. its management.
TYPE 2—SCHEMATIC
ESTIMATES
As the project is refined, the fabri-
DEFINING THE SCOPE
The definition of the scope of the
3. Develop a spreadsheet with his-
toric bid costs and project parame-
ters. Find old drawings, take-offs and
cator can create a schematic or elemen- services provided by the fabricator is a bid sheets. Conceptual estimating is best
tal estimate. This estimate is based on a critical element of the conceptual esti- done with a usable history to draw
fabricator’s trial model of the structure. mate. The following items should be from.
Once a model is created, a process
equivalent to the take-off process of
hard-bid estimating follows. The more
considered in defining the scope of the
project:
s Identification of the documents
4. Allow the conceptual estimator
time to experiment on past proj-
ects. Take a job that was bid two years
the prototype conforms to performance (title and date) that the conceptual
specifications, the closer the quantities estimate is based upon
taken from it will correspond to the ac- s Items included in the conceptual es- How good are they?
tual project. Models can be created eas- timate (for example: columns,
ily with in structural design packages. beams, joist, deck, bracing, pour Conceptual estimates typically
These packages also generate a sum- stops, painting, erecting …) have the following accuracy
mary take-off of the components of the s Items excluded in this conceptual ranges:
structure that can then be “priced.” estimate (for example, the structural
If the fabricator wants to perform a design. Typically the design-builder s feasibility estimate +/- 20%
more detailed take-off and if the soft- will be expecting all items in section s performance estimate +/- 7%
ware supports a CIS/2 file transfer ca- 5 of MasterSpec to be included.) s conceptual design est. +/- 6%
pability (such as RAM Structural s detailed estimate +/- 4%
Modern Steel Construction • October 2002

5. ago, identify two or three parameters you have to rush your first opportu-
and then work through a conceptual nity, pass it by.
estimate for the project using historic
data from previous projects. Measure 9. Always include a statement of
scope with any conceptual estimate.
the conceptual estimate against the ac-
tual as-built cost for the project, not the
bid price, and refine the process on
10. Confirm any conceptual esti-
mate with the most powerful
tools you have…your common sense
multiple projects. and experience. Ask “does this esti-
5. Invest in technology that enhances
the conceptual estimating activity.
Acquire a commercially available esti-
mate make sense?”
11. Look at every design-build
project as an opportunity to
mating package or consider utilizing provide the owner with a better project
one on a per-project basis on the web. at a lower cost, on a more rapid sched-
Invest in a design package that can ex- ule. Use your experience and your
port design files using CIS/2 to a de- shop’s efficiencies to their advantage.
tailing or shop management package. Conceptual estimating is a skill that
Use it on historical projects to develop every design-build team member must
confidence in the information that it have. It is a skill that every fabricator
provides and the amount of contingen- can and must develop—so next time
cies that need to be in place for varying you’re at lunch, your clients can benefit
design conditions. by an estimate that brings their ideas
6. Develop relationships with local
structural engineers that may join
your firm’s design-build teams. Un-
off of the back of a napkin and into the
realm of possible projects.
derstand their design approaches, William (Bill) Liddy is Senior Advisor
work with them in developing proto- in AISC’s Steel Solutions Center in
type models and discuss the efficien- Chicago. John Cross, P.E., is National Pro-
cies of your particular fabricating ject Director, Design-Build, with AISC
operation. Marketing, LLC, in Chicago.
7. Pursue design-build work in a fa-
miliar market niche with other
firms you have trust. You will have
more confidence in providing a con-
ceptual estimate in a market you un-
derstand. Trustworthy team members
provide honest feedback on estimates.
8. Give yourself time to prepare your
first few conceptual estimates—if
Modern Steel Construction • October 2002