Connecting Project Teams.
Creating Reliable Project Budgets:
Creating
Reliable Project Budgets, Continued
CASE STUDY
TWO: Industrial Facility
This year, another Florida city approved a budget of $500,000 for an industrial
facility. The public works director, a professional engineer, had discovered
an existing private facility close by that would meet the city's needs
perfectly. He determined that a clone should be built on city-owned property
on the outskirts of town, so he asked the owner of the existing facility
how much the building had cost to construct. The public works director
figured that if he added 20% to the $400,000 cost of the existing building,
he'd have a safe budget to take to the Mayor. Unfortunately, the final
budget estimate for the "clone" was actually $1,000,000, causing the public
works director to eventually lose his job.
Before this project, the engineer's experience had been limited to roads and sewers and he had never been responsible for an industrial building or any other structure. Ironically, the single biggest mistake he made in preparing the budget was underestimating the site development. The city's site was a raw and rural piece of property, miles from town and very low lying next to a lake. The existing building he used as his prototype was built in a preplanned industrial park in a neighboring city. The prototype site, purchased for $350,000, was already at grade with all utilities, drainage, and permits in place. The city's site, purchased for only $30,000, needed five feet of fill, utilities extended from a quarter mile away, and drainage engineered and approved by the state.
The city also wanted 80,000 square feet of heavy-duty pavement; the prototype had only 25,000 square feet of standard pavement. And finally, the prototype's quoted construction cost of $400,000 did not include design fees, estimated to be $83,000. When the two projects' total development costs, including land and design, were compared, they were very nearly equal. If only the public works director had been more diligent, he could have used the prototype to develop an excellent budget and maintain his position with the city.
©2000 John A. Jones, PE, CBO
