As pressure increases to understand capital cost prior to the first spade touching dirt, more and more healthcare owners are turning to a Parallel Estimating process to improve understanding
Case Study #1
On a low lying flood plain, this project would accommodate numerous sports fields and recreational areas. Given the nature of its elevation, it would require large earth berms to allow bridges to connect the fields to the surrounding high level campus. These berms would require large, complex geotechnical solutions and a series
Risk Elimination in the GMP
As the CM is taking on the risk, from a business perspective, they will always understandably protect themselves when producing a GMP estimate. This is not a fault of the CM taking on the risk, but a reality of the nature of the contractual model chosen by the owner. Naturally, the incentive is not always aligned with the owner's desire to have the lowest cost project possible. A parallel estimating process allows the owner’s cost estimator to help manage the “risk” or “fluff” in the number. The approach should not be so definitive that the team is too aggressive with the GMP, but through accurate quantification, seeking market rates and validating assumptions and the nature of cross checking the approach, the triangulation should breed confidence with the CM to be more finite with their number.
Case Study #2
This particular project had close to a million square feet of office space. The majority of closed offices existed as standalone “pods” dotted around the space with glass walls and individual ceiling caps to make them cube-like. The ceilings were specified with a product called Baswaphon, a highly technical, sound absorbing panel with a trowel applied finish. At the reconciliation, the CM had the co
It Works Both Ways
The above case study demonstrates how the parallel estimating process reduces the GMP. The triangulation process can also eliminate risk in the other direction and often ensures the GMP is the “right” number in the sense of moving it higher.
Case Study #3
On this 80,000 square foot building project, the owner employed two separate independent estimating teams to triangulate with the CM; one estimator representing the Owner and one estimator representing the Architect. Although this was an unusual
Reconciliation in the Healthcare Field
Conclusion
A solid reconciliation process will instill confidence in the project team, owners and stakeholders as they move through preconstruction and aim to manage financial constraints and establish a realistic GMP.
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of exposure and ensure a successful preconstruction phase and subsequent bid and award. When procuring a project with a Construction Manager (CM) under a Guaranteed Maximum Price (GMP) contract, (also referred to as a CM at Risk), there are definitive advantages to employing an owner’s representative cost estimator to triangulate estimating in the preconstruction process and produce a parallel estimate. Since a GMP contract transfers project risk to the CM, Parallel Estimating or triangulation is an effective way to validate the GMP developed by the CM and understand just how much risk has been built into the number.
of gravel pyramidal “lifts” to stop subsiding. The healthcare team employed a parallel estimating approach. At the Schematic reconciliation, both the CM and the Estimator came to the table with different approaches and different costs for assembling the berms. Since there was significant cost involved in the two approaches, the process allowed for the owner and design team to assess the cost and risk involved with both and highlighted the necessity to solve the geotechnical solution before the next round of estimating. By merely highlighting the risk, the process escalated the need for a geotechnical direction, solidifying the approach and the cost exposure early in the project.
st represented by an allowance on a cost per square foot basis. Given that the owner’s cost estimator was unfamiliar with the product, research on the product was conducted and the local supplier was identified and thus produced the quote that had been provided. The cost was $5 per square foot less than the allowance by the CM. This allowed the CM, a degree of confidence to reduce his GMP by $570,000. This is a classic example of how the parallel effort helps reduce the contingency held within the numbers. The estimating window is often very short as projects move fast, having two separate independent numbers often allows for a more collaborative process once around the reconciliation table.
approach, three numbers certainly helped mitigate the risk and get a consensus on the right number. The local CM, experienced in the local market, was particularly inexperienced in the triangulation process and some of the misses in the preconstruction process were exposed through the diligence of the two parallel estimates. In one instance, it was identified that the CM had missed an entire elevation of the curtain wall. This was easy to do on such a complex, multi-elevation building, as the one in question. The omission was captured and therefore, all three estimates helped the team work towards the “right” number. 
There has been much success using the reconciliation process in the healthcare sector. Due to the nature of the work, the capital costs in healthcare are often significant and, given the complexity of these projects, lend themselves to this process.
