For many years, architects assisted their clients with estimates of what the project could or would cost. In the last decade or so, the word “estimate” has virtually disappeared, and we now prepare an “opinion of probable cost”. So what's the difference? The cynical answer would be that an estimate seems like a sort of “price tag” whereas an opinion is more likely to change depending on who you talk to. While there is a certain amount of truth to that, especially given the wild ride we have been on since the pandemic and supply chain shortages, the real difference is that an opinion of probable cost is a more honest, modest statement of what the project “could” cost.
The fact of the matter is: whether you call it an estimate or an opinion this should not be confused with a bid or a quote. An opinion of probable cost is a tool to be used to establish a scope, build a budget, and develop a project. Whereas a bid or a quote is an actual price. The estimate/opinion is a whole matrix of information that should include: basic budget information, options for reducing or increasing the scope depending on the actual economic environment, and perhaps most importantly a contingency amount to deal with any unforeseen conditions that may be encountered.
At Teitsch-Kent-Fay Architects, P.C. we worked for many years on an estimating process that can accommodate the vagaries of the market, and provide the client with a fleshed out budget that they can use to move forward. This process begins with the development of the above mentioned basic budget information. We use a systematic approach to this process, where the different parts of the building are broken down into their constituent systems and evaluated accordingly. This process differs from a system where one would count each and every nail, screw, and all other elements, which suffers from a “forest for the trees” problem in that one can get so bogged down in miniscule details so as to miss significant elements of the project. This systematic approach also works extremely well with our team of consultants who provide pricing information on their specific trade that can simply be plugged into the overall picture.
This core part of this process is what was once referred to as the “estimate,” however it is only part of the picture. In addition to the raw numbers of building elements and labor costs, the matrix of costs should also include an understanding of what the duration of the project will be, assigning an appropriate escalation cost based on what economic pressures may come to bear at the time the project is to be constructed. The opinion of probable cost also should include what we refer to as alternates or unit prices which can be used by the client to reduce or increase the costs of the project to ensure it remains within budget. A recent example of an alternate was the new soccer field at Sharon Springs where the base bid was to seed and mulch the field, but we were able to accept the alternate to install sod instead, resulting in a field that will be ready for play much sooner. All of these mechanisms give the client flexibility, and the ability to respond to economic pressures.
Incidental costs are all the expenses a client will incur that are not directly attributed to the contractor working on the job. These include: insurance costs, permitting costs, professional design services, testing and verification costs, as well as furniture and equipment costs. Without the incidental costs included in the overall budget, a real understanding of what the project will cost cannot be adequately established.
The final piece of this overall project matrix is the contingency budget. No matter how much planning goes into any construction endeavor, there is always the potential for unforeseen conditions to result in costs. In our office we have a (very cynical) quote: “old buildings are designed to make architects and engineers look stupid”. While there is some truth in this, a more mature approach is that each project must be developed with a contingency in mind to ensure that any unforeseen issues can be dealt with appropriately.
So, returning to the original question: What is the difference between an estimate and an opinion of probable cost? The estimate is one part of the larger information matrix that is encompassed in an opinion of probable cost. Just the estimate alone is only a part of the whole picture that is needed to fully understand the financial implications of something as complex as a construction project.