L2 - Preliminary Budgets

Question 1

Budget Beginnings

Answer 1

Project Inception:
-Unlimited funds.
-Owners are looking for + ROI.
All projects participants review and approve the preliminary cost investigation..
Success requires buy-in.

Question 2

Conceptual Budgeting - Four cost parameters

Answer 2

Type of project.
Size.
Location.
Schedule.

Question 3

Conceptual Budgeting - Conceptual estimates

Answer 3

Analogous estimating (top down).
Parametric modeling.
Bottom-up estimating.
Computerized estimating.

Question 4

Conceptual Budgeting - Interpreting Conceptual Budgets

Answer 4

Based on conceptual estimates.

Degree of accuracy/reliability?

Question 5

Conceptual Budgeting - Integrating the owner’s Conceptual Budget

Answer 5

How much will it cost?

Can the owner afford the project?

Question 6

Initial project and construction budget development - Total project Cost

Answer 6

Cost of construction.
Land.
A/E, CM, and other consultants.
Financing.
Owner management.
Contingency.

Question 7

The CM and Owner objectives

Answer 7

Clearly identify the owner's projects objectives.
Determine what the owner really expects.
Draw out as much detail as possible:
-Interior finishing quality.
-Energy utilization and efficiency.
-Lifecycle costs.
-Architectural aesthetics.
-ROI.
-Expansion capabilities.

Question 8

Project constraints

Answer 8

External.

Resources, productivity and local conditions.

Question 9

Procurement strategies

Answer 9

Often driven by legal and/or financial requirements.
-D-B-B
-CM at Risk
-Owner furnished, contractor installed.
-Firm fixed price / LS
-Cost reimbursement contracts.
Unit price.

Question 10

Additional conditions impacting initial budgets

Answer 10

• Allowances for known but undefined requirements.
• Contingencies for unknowns.
• Cost escalation factors.
• Field and general conditions costs.
• Foreign currency fluctuations.
• Market conditions for materials and equipment.

Question 11

Organizing the budget

Answer 11

Build a standard format.
Create WBS.
Review budgets.
List exclusions and assumptions.

Question 12

Contingency in the Pre-Design phase

Answer 12

Soft costs are difficult to quantify.
National standards vs concrete values.
Risk analysis: Expected monetary value of risk=probability of risk event X value of risk event.
Do not overstate the likely cost of probability of risk events.

Question 13

Preliminary budgets

Answer 13

Failures often result from inadequate initial project budgeting.
Challenging Task.

Question 14

A realistic budget contains:

Answer 14

Consideration of the owner’s goals and objectives.
Reasonable procurement strategy.
Identified project constraints.