When embarking on an ICI (Industrial, Commercial, and Institutional) construction project that involves a Design-Builder, Construction Manager, or Architect, understanding the levels of construction budgets used in the construction industry is essential. Knowing the accuracy depicted in with each budget level empowers customers to make informed decisions and effectively manage their cost expectations. In this article, I will provide an overview of the five levels of budgets commonly used by general contractors: E, D, C, B, and A.
E-Level Construction Budget: The Starting Point
The E-Level budget serves as the initial stage of budgeting, where limited information is provided to the estimator but a client requires numbers to begin working into their business plans. At this early stage, the estimator relies on basic project information and preliminary data to provide a rough estimate based on historical square foot data and a preliminary scope of work. E-Level budgets have an accuracy range of ±40%. These budgets are useful for initiating discussions, gauging project feasibility, and obtaining rough cost projections.
Key Takeaway:
The E-Level budget is little more than a square foot ballpark estimate with an accuracy range of ±40%. Information required includes geographical location, structure type, expected use, and approximate size.
D-Level Construction Budget: Enhanced Accuracy
As the project progresses, the D-Level budget provides a higher level of accuracy compared to the E-Level budget. At this stage, the estimator has access to more detailed information, including defined site location and project scope as well as conceptual drawings and information on other major material selections. D-Level budgets typically have an accuracy range of ±30%. This enhanced accuracy enables customers to further evaluate project feasibility, make more informed decisions, and align their expectations with the budget. This level of construction budget is typically detailed and accurate enough to initiate financing negotiations with the bank.
Key Takeaway:
The D-Level budget offers enhanced accuracy within the range of ±30% and can be completed once the location and schematic design has been established. These budgets are typically sufficiently accurate to help establish the feasibility of a project.
C-Level Construction Budget: Refining the Cost Estimate
Moving forward, the C-Level budget further refines the cost estimation process. With advancing architectural drawings, preliminary engineering designs, and initial communication with the local municipality, the estimator can provide a more comprehensive assessment of the project's cost. C-Level budgets typically have an accuracy range of ±20% and involve collaboration with the high-cost sub-trades, usually the mechanical and electrical trades. This level of accuracy allows customers to gain a better understanding of potential expenses, evaluate different options, and make informed choices that align with their budgetary constraints.
Key Takeaway:
The C-Level budget refines the cost estimate with an accuracy range of ±20%. At least 30% of the design should be developed at this budget stage.
B-Level Construction Budget: Honing the Details
A B-Level budget is prepared during the detailed design stage. At this point, the project has the finishes selected, and the drawings and specifications for all construction divisions are complete to 70%. B-Level budgets provide a highly accurate cost projection. The estimator is able to use detailed material takeoffs and initial sub-trade quotations. B-Level budgets generally have an accuracy range of ±10% and are developed before the complete tendering to all subtrades has taken place.
Key Takeaway:
The B-Level budget provides a high level of accuracy with an accuracy range of ±10%. It is a pre-tender budget that allows for some unforeseen costs. It is expected that at least 70% of the project has been developed.
A-Level Construction Budget: The Actual Cost
The A-Level budget signifies the final and most accurate cost estimation for the project. It reflects a budget that has 90% of the project costs locked in place. It is based on complete issued for construction drawings, complete project specifications, finalized material selections, supplier cost estimations, and sub-trade quotations. The accuracy of an A-Level budget is expected to be as tight as ±5%. This level of accuracy allows customers to have a realistic reference point against which actual expenditures can be compared during the construction process, ensuring better cost control and financial management.
Key Takeaway:
The A-Level budget is understood to be the most accurate budget available with a ±5% margin. In order to obtain this level of budget, 100% of project design needs to be developed including complete IFC documents and with a full tendering of the project.
Understanding the different levels of budgets used in construction projects empowers customers to make informed decisions and effectively manage their construction budget. Starting from the E-Level budget as a ballpark estimate and progressing through the D, C, B, and A-Level budgets, customers witness the refinement and increased accuracy of the costs as the designs are finalized.
*Note, this blog is intended to provide general information on various construction related topics. Contact your local construction professional for advice related to your own projects. Should you have any questions or concerns, feel free to contact us at info@baribeauconstruction.com.