Blog Posts

The Importance of Understanding Construction Costs Early in the Process

Authored by Eric Greene, VP, Residential Group Manager

In the initial stages of a project’s development, we partner with our clients to prepare construction cost estimates that help them better understand their building options and associated costs. This work often occurs prior to our clients purchasing land or their involvement with local municipalities. Our seasoned estimators and executives analyze the conceptual design ideas and compare a potential project against Erland’s recent historic cost data for similar projects and current market information. We also provide schedule information and make recommendations regarding materials, unit sizes and mixes, parking options, and other design elements that impact a project’s cost. At the end of this exercise, Erland delivers to our clients an experience-backed breakdown of construction costs and overall project duration; a significant piece of their pro forma puzzle.

When starting with a blank slate, our clients have countless options and decisions to make. By understanding their goals and analyzing different scenarios, we’re able to provide our clients with valuable and timely information to help them maximize their investment. For example, how will parking requirements be addressed i.e. does parking need to be below-grade or is on grade parking possible and acceptable? A lot can be done to control construction costs early in the design process but once big items like structural systems, mechanical systems, and facade materials are selected, it is difficult to make changes to them. We have seen several of our clients receive approval for their building’s height and facade from planning and zoning boards, prior to bringing us on board, without knowing what the project will truly cost to construct. They’re then pigeonholed into these parameters. By bringing Erland in early on, we’re able to provide accurate cost information before anything is approved and eliminate the need for redesign or the need to seek additional approvals. This ultimately saves our clients both time and money.

Estimating is a team effort that includes our Estimators, Project Executives, Group Managers, Project Managers, and at times our Project Superintendents. Bringing these perspectives together ensures things like the schedule and site logistics are considered when building our comprehensive and well thought out estimate. For example, how materials will be hoisted often impacts both the schedule and subcontractor costs. Our team also performs complete in-house quantity takeoffs and detailed estimates. We then obtain subcontractor input as appropriate for the level of estimate being performed and compare that to our figures. This allows us to better understand the details of the project and review subcontractor proposals to make sure they have captured the entire intended scope of work.

Another major part of determining a project’s cost is understanding the industry’s trends and being aware of potential material shortages and/or potential escalation costs. Our team spends time analyzing market data and staying up-to-date on all aspects of the market.  We are always reading, talking with subcontractors and trade associations, and learning what is important to our clients and then applying that to our preconstruction efforts. Our team is always upfront with what we are seeing in the marketplace and focuses on finding the best path to build the project that our clients want within their budgets. 

Erland offers a collaborative and open-book estimating process. Our team is always available to answer any questions a client may have. We encourage conversations where new ideas are presented and discussed. Since so much of our work starts very early in the design process, Erland is accustomed to proposing alternatives as part of the team and then evaluating the options for costs, pros/cons, life cycle costs, schedule impact, etc. We help to bring structure and accountability to what can be a complicated process with many stakeholders.

As we go through the early development process together—due diligence, financing, design, and entitlements—we help to solidify the critical information that our clients need. Our approach builds trust with clients because we put ourselves in their shoes and always act in their best interest. With so many stakeholders involved in the preconstruction and construction processes, we work hard at setting their project up for success and are honored to be our client’s trusted advisor. 

For any questions regarding this topic, please contact Eric Greene at egreene@erland.com.