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Construction Stages of Design, Estimates & Contingencies

A successful project should identify the budget at each significant milestone through the design process. This will ensure that the project stays within the budget throughout the entire duration of the project if the proper contingency amounts are used at each stage. Please see the phases below with each of the recommended contingency amounts. This is just a guideline, but should be used to approach this topic as a project progresses during pre-construction and into construction.


1. Conceptual Estimate- It is the first serious effort made to predict the cost of the project, often a tool for the owner presenting useful information in contemplating the project feasibility and further development for potential tenant leasing. Typically, the MEP design has not been determined, and this is based on an architectural "space" plan for the intent of the project. Typical project contingencies should be at least 15% for Design and 10% for Construction depending on level of detail of information.

2. Schematic Estimate- Transitioning from simply an idea to a workable and realistic design concept is the central goal purpose of the schematic design process. Contingencies for Design should remain around 10-20% depending on level of detail and construction contingency should be a minimum of 10%. At this stage if an actual project is likely a going to happen, it is highly recommended that a due diligence survey be completed as well as zoning report unless it is 100% known how the property is zoned. Included in this process is investigation into the prior permits on the property and verification of existing systems- fire protection, fire alarm, mechanical equipment & distribution as well as existing electrical systems and capacity for the project.

3. Design Development (Estimate)- The primary goal is to create a detailed design that includes the types of materials that will be used on the project, what the interior and exterior of the space will look like, and what kind of equipment, systems, and furnishings will be used in the building. At this stage there are some unknowns, which may include specifications for finishes, construction specific details, structural, etc. that will affect the overall budget. The CAD backgrounds for the DD Architectural set can be shared with the MEP engineers to start permit documents. Design Contingency for the budget should stay at a minimum of 10% and Construction Contingency at 10%.

4. Permit Documents (Estimate)- A full set of permit documents are completed including Architectural, Structural, Mechanical, Electrical, Civil, Landscaping and Plumbing. From the CAD Backgrounds the Fire Alarm and Fire Sprinkler permit documents are created and submitted separately in a deferred submittal. At this stage the drawings are submitted to the governing agencies including health departments, city planning, city permitting departments and fire departments. Once reviewed by these agencies, the notes and comments are to be incorporated into a final set of construction documents. Depending on the city agency, Structural Design & calculations may be deferred, or it may be submitted with Architectural. Items that must be included in this set include Title 24 Documentation, code signage, occupancy calculations, handicap parking information, emergency Egress and Path of Travel documents for the site. Site plan including Cal Green requirements such as EV charging, bike storage, etc. The handicap parking layout and signage needs to be included. Design Contingencies for budgets will be around 0-5% and Construction Contingency around 5-10% depending on the size and complexity of the project. At this stage all materials and equipment are typically defined, including engineering systems for MEP title 24 design compliance.

5. Construction Documents (Estimate)- After the city and over governing agencies review the project, they will either issue permit comments or the completed permit. At this point the architect & engineers will produce final documents with these changes that will be used for actual construction. If a contract has been issued for the project based on the DD or Permit Documents, then the changes associated with the construction documents will be captured a change order. At this point for the project budget, the design contingency reduces to 0% and the Construction Contingency remains at 3-10% depending on the size of the project. Design Contingency typically will lower to 0% at this point, and Construction Contingency will vary from 2-5% depending on size of project and level of design.

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