Connecting Project Teams.
Creating Reliable Project Budgets:
Creating
Reliable Project Budgets, Continued
CASE STUDY
ONE: City Maintenance Facility
Ten
years prior to the Commission's final funding approval, city staff had
identified the need for a new maintenance facility. A site had been agreed
on and purchased by the city. The scope of work had been discussed for
several years and a consensus had been obtained at the highest levels,
including two city professional engineers. A model of the new facility
was built by public works. All of this was accomplished before the $6
million budget request was submitted to the Commission.
After the money was appropriated, a Request for Qualifications was advertised for design-build firms and a team was selected. Within a month, the design-build firm completed schematic drawings based on the city's programming documents and developed a complete cost estimate using actual quantities, subcontractor quotes, and the firm's multi-billion dollar data base. The design-builder's estimate, guaranteed to be within +/-7%, was $14 million, a 233% bust! Because the responsible staff members didn't want the project to be cancelled, they cut the size of the project in half and deleted many basic features (like parking lot pavement) to get the project into the approved $6 million budget.
So why did this budget bust happen? There were, of course, many contributing factors. In the first place, the city relied on a city maintenance engineer to prepare the budget. This man's primary experience was in scheduling manpower and equipment for road and park maintenance. Before that he was a U.S. Army Infantry Officer. Although he had certain building systems well defined and quantified, like the electrical and lighting systems, his electrical cost estimate was based only on the cost of the bare materials plus direct labor. He left out the insurance and taxes associated with that labor, and forgot to include small tools, helpers, subcontractor's overhead, supervision, non-productive time, and the subcontractor's profit. This is an understandable mistake because most people don't think about these "hidden" costs and they certainly don't know how to estimate them.
In addition to the above, general conditions were also completely omitted from the budget, including trash removal, telephones, final cleaning, warranties, testing, permits, layout, special insurance, and bonds. These items are typically 8% of any construction budget. Finally, there were numerous items required by the city's own building and zoning codes that were overlooked. These included special landscaping, irrigation, screen walls, sidewalks, drainage, and fuel storage tank environmental protection systems.
©2000 John A. Jones, PE, CBO
