Treanor Talks: Architecture, Planning & Design
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Treanor Talks: Architecture, Planning & Design
Controlling Cost in an Uncontrollable World
In the construction industry, the cost of a building is more complex than simply adding up the sum of its parts. From labor rates to equipment prices and indirect costs, there are many factors affecting construction budgets. While your cost estimation might appear accurate at first, it’s crucial to understand cost control options so that you can respond to the unexpected and stay on budget.
To learn more, we caught up with Joe Stramberg, a principal in TreanorHL’s Student Life studio, and Blair Tennant, associate principal for Vermeulens cost consulting. Joe and Blair have worked together on various higher education facilities on campuses across the United States, and have presented on this topic at several national conferences, including Tradeline, ACUHO-I and more. On this episode, they talk about cost drivers, case studies and tools you can use to keep your facility on budget—without sacrificing design integrity or programming.
For a deeper dive into cost control, visit them at the Tradeline University Facilities conference this May, at the ACUHO-I conference this June.
Can't make it? Review some basic tips to implement cost control and share with your colleagues.
TreanorHL is a national architecture, planning, and design firm located in the United States. The company holds a firm belief in sharing resources and insights with professionals, clients, and building users to shape the space we use to live and grow as people. For more information, visit treanorhl.com.
Welcome to TreanorHL Talks, a podcast about architecture planning and design trends, as well as current events and noteworthy topics in the field. I am your host, Megan Brock, introducing today's topic: controlling cost and an uncontrollable world. In the construction industry, the cost of a building is more complex than simply adding up the sum of its parts. From labor rates to equipment prices and indirect costs, there are many factors affecting construction budgets. While your cost estimation might appear accurate at first, it's crucial to understand cost control options so that you can respond to the unexpected and stay on budget. To learn more, I'm catching up with Joe Stramberg, a principal in the TreanorHL Student Life studio, as well as Blair Tennant, a principal for Vermeulens. Joe and Blair have worked together on various higher education facilities on campuses across the United States, including the University of Kansas, the University of Texas at San Antonio, and the University of Utah. Today, they will talk specifically about cost control for higher education residence halls. Joe and Blair, thank you for joining me today. Please tell us a bit about yourself and how you developed an interest in cost control.
Joe Stramberg:This is Joe Stramberg, principal with the Student Life group and I've dedicated my career to the student life experience on university campuses. It's what I've been really focused on the last 20 plus years and the focus on cost control became in to focus within the last five years or so. The rising costs in higher education has really put a strain on student's ability to afford a university and access to a university. So the clients and industry have really been demanding that we begin to think about affordability for students and how that plays into the overall higher education expenses and experience.
Blair Tennant:Thank you, Megan. I'm Blair Tennant, I am a principal with Vermeulens. I have been cost estimating my entire career. You might hear some A's or some oofs or outs or something in my voice but I'm originally from Canada, studied mechanical engineering and finance. I'm a numbers guy, I started with Vermeulens right out of school, been there ever since, it was 15 years ago. So I live numbers.
Megan Brock:Fantastic. Well, let's talk numbers. So I know both of you have talked in depth about this topic at several conferences so far, but let's start a bit more broad. What are some of the main cost drivers in higher ed residence halls?
Joe Stramberg:This is Joe. Some of the key cost drivers to consider early in the programming and conceptual phase of the work is a couple things. One, the structural system choices that are out there, as well as the mechanical, electrical plumbing systems, those just between those two disciplines of work, make upwards of around 60% of any project of any residence hall type project. So there and within each of those, there's many choices that is available to the design team and to the client. And then it's about understanding the market that you're working in, and the availability of those specific trades. And ultimately, what the client's end goal is for their building product, whether it's a kind of a light commercial type facility, all the way up to a heavy commercial, heavy institutional type facility. So paying attention to the various types of structural system choices, and it can range from concrete and wood concrete podium with wood structure, all the way up to prefabricated light gauge metal studs. And in the market, it's kind of in its infancy in the market is mass timber, which is what we're beginning to see. It's very early in its market, and that we believe it's at the high end of the cost currently. And over time, those costs we believe will come down and making it more affordable.
Blair Tennant:There are some trade-offs in the mass timber where you can save on finishes by leaving wood exposed, which actually is, you know, pretty attractive to most people. It does save on schedule for for most projects as well. So there are some savings with mastic.
Megan Brock:Have you worked on any recent mass timber structures?
Blair Tennant:We have we have we have two that are under construction now and so they are coming into premium, but the architecture is fantastic. I mean, well your Science and Tech group is actually working on one in Toronto, with our team out there right now, mass timber and bubble deck as well. I think you know, like Joe mentioned, there are so many system choices. Yet so many budgets are set by cost per square foot. So to know what the cost per square foot is before you know which systems you're shooting for is really, it's really impractical. You can't you can't make a decision until you know those parameters and systems. It's across the board right? So Joe mentioned, you know, structural systems and mechanically you have VRF and DAV, right, which is variable refrigerant volume and variable air volume. So all those systems, you've got the same thing for your finishes, your skin, your site working utilities are something you always need to look at individually, right? I mean, Joe, we had those two projects where, essentially, if you took the same utility costs, and put a different building on it, it would double per square foot and correct, because you just basically have to look at your site independent, double size, your building, and the cost per square foot drops in half.
Joe Stramberg:It is truly the wildcard when you're doing the early estimating with a lot of unknowns. And each site is unique and different. And that drives the cost. And it can range anywhere from 7-8% all the way to 15-18%. There's such a wide swing in the cost of the site work.
Blair Tennant:You if you want to get your cost per square foot down, just build a bigger building. That's right.
Megan Brock:So when thinking more about what's occupying that square footage, how can a building program then also influence cost?
Joe Stramberg:Definitely, in some of the program influencers is really about in particular, on residence halls, it's that mix of the different types of units, balanced with the amenities that are being offered. So you can think of spaces that are shared with more students affords the project more amenity type space. So that mix of different types of unit, whether they're traditional, single and double residence hall units, to more semi-suite, where you've got a little bit more independence, all the way up to suites and apartments. Those suites and apartments, typically all that amenity space exists within the unit itself. So there's a balance of that unit mix and what the amenities that are offered. And just thinking of it in terms of square foot, beyond just the square footage, when you have units that have are heavy in plumbing, those costs definitely impact the cost model because it's more piping, more fixtures. Whereas if that can be shared more across the students.
Blair Tennant:The most cost-effective facility I've worked on was a corridor housing right, so Texas A&M, their army corps is literally a rectangle with you know, rooms on both sides and essential washroom right in the middle, you know, showers and washrooms right in the corner, right so that, like Joe was saying that's a highly efficient, but not really what we build anymore. It's kind of old, old school way of doing things, but how you lay that mix out has a huge impact on what you're paying.
Megan Brock:That's a great point, Blair. And I think even considering Joe's comments about what we're providing the students, if the goal of this facility is to create community, for example, that could rise the cost depending on where we're going to locate those MEP systems or how we want traffic to flow through that building so that we can meet that goal of creating community or or whatever that our clients are trying to achieve with this facility. So, since we know these goals at the start of the project, thinking early about cost could help us do what we want to do without going over budget. What are some other ways a building's layout might influence cost?
Joe Stramberg:And an example of some of our the way we approach the early conceptual phases, is taking the program and looking at laying the building out in a number of different configurations. At the University of Texas at San Antonio, we had like 15 different schemes that we kind of vetted down to about five and it was really about looking at the program and how the architectural massing of how the building was organized in different shapes, which has a direct impact on the amount of exterior building materials. Which is probably one of the most expensive parts of a project. The brick masonry, the glass walls, the windows. So the ability to study that in terms of meeting the program. And creating as efficient building as you can on a given site is a strategy in a way to impact the cost as it relates to site layout.
Megan Brock:Great. So beyond the program and massing, and the layout and all of those elements. What are some other tactics that either of you have used to help reduce cost?
Joe Stramberg:I believe that starts with the design of the individual student unit in terms of making it the most efficient possible way, but yet providing the amount of area that's required, as well as the amount of area that provides the most flexibility for the students to move their furniture around. It provides great flexibility and creativity for the students. But it minimizes that ratio between the width of the unit to the length of the unit, which then again, translates back into that conversation around site and exterior building materials. So it absolutely starts with the design of the unit, because the units typically make up around 70%, of a residence hall prod project, in terms of its area. And by doing simple things like reducing the width of a unit by a foot, you can save about a percent an area, in the skin, and the exterior building material costs upwards of 3% savings. But you're still providing the same amount of area for that unit.
Blair Tennant:So those are those are all great metrics on getting the most program for each square foot you have right but when you're talking about cost, you also need to talk about current costs and future costs. So a lot of these system choices, if you put in a VRF system, it will not last as long as a VAV system, right? So we've covered those. There's even other options, right? So basically, everyone has been in a motel room before. You know, there's little units on the wall underneath the window, you can do that too. And they're very low cost. But you'll be in 20 years, you'll be replacing that
Joe Stramberg:A number of times.
Blair Tennant:Right. So from an institutional standpoint, a lot of these institutions where Joe and I work, they want buildings that are going to last 100 years. So you may pay more today. But if you look at it over 100 year cycle, you know, some of those decisions you make to get things down early, will translate into more cost over time.
Megan Brock:Well, this is the question that everyone dreads. But what are some truly uncontrollable costs? And how could we plan for those?
Blair Tennant:So yeah, so the, the one piece that is essentially impossible to control, but possible to predict is how the market is going to bid. Right? So escalation and inflation aren't just a factor of how much your materials and the hourly wages cost. It's more of an output factor. So I just had a phone call before we started where a contractor said oh we lost the job because another contractor came in and price super low and just bought himself a job. So is that deflation in the market? No, it's a contractor who really wants work. So they bid it low. And this is what happens as the economy starts to slow: bids go down, because they're going to basically room for lower overhead and profit. Conversely, when you're in a really busy market, people will be like, I'll take that job. But I want 10% fee on, you know, we're fees are normally 3-5%. But we'll do it for 10. And everyone starts doing it for 10. And the next year, the market just blows up, for example, you know, Joe and I have a project where the contractors is getting a 9% fee on their work, which is great for them. And all of their competition was the same rate as well. But it's kind of unheard of. For us, we're used to seeing things in the 3-5%. But that's where the market went, the market was busy. And you know, it's not that they're they're gouging or unfair, the competition was in the same boat. And so those are the things that you can't really control. But what we do at Vermeulens is we are generally tracking the construction volume in every market we're working in. So as we see spikes in the market activity, we'll do two things: will carry escalation contingency, and what we call a bidding contingency. So uncontrolled, but you can you can use contingency to help offset some of the market conditions. Honestly, those again, like kind of back to inflation and adjustments, you know, a lot of that tariff inflation, that was just market fear. If you look at steel pricing, it never really moved. There was a short spike, and steel right now is lower in cost than it was 10 years ago. Right. So was a tariff really that big a deal?
Joe Stramberg:No, but that's something that's somewhat uncontrollable, right?
Blair Tennant:Definitely, definitely there are regulations that are put in place, tariffs, taxes, even some, you know, cities or municipalities where we have this conversation yesterday with a nonprofit that's kind of affiliated with the city. So they have to use payment performance bonds, whereas when they do private work, they don't have to use payment performance bonds. So that adds you know, two and a half percent 3% to the cost of the project. So again, those are variables but if you're paying attention and planning well, you should, should know which realm you're in.
Megan Brock:Speaking of planning well, Joe, I know you have a tool you use to help clients with planning out building components and costs. Would you tell us a bit about that?
Joe Stramberg:Sure. So at the beginning of the project, even at the programming phase, what we like to do is even before any pencil hits the paper, is really do a deep dive into all the various components that make up the budget for a construction project. And then we take that information and we look at it from what would be the low end of the range in terms of its quality, the middle range, and then the high range. So if you want to think about it in terms of like residential kind of grade, at the low end, the medium, the middle, would be kind of commercial, like commercial, and at the high end being an institutional 100-year building, as Blair was mentioned. And it's a great tool to be able to set your target budget, and then working together with the client and the design team, and if there's a construction manager on board, going through each one of those system components, and having a conversation about the quality associated with that, and then setting a range of what we would anticipate and expect that product to come in at. And so when you look at it, you're not going to have a building that is all in the low range, it's typically a mix of the low, middle, high, at the end of the day as your target.
Blair Tennant:A lesson learned on that, too, is making sure that the right people were in the room to make those decisions. I don't know how many times we've said, okay, we're gonna go with all wireless access for the facility. Next thing you know, no, no, no, we can't do that. We're hardwiring every room, you know, we're going to use offline card readers. And then security comes in and says no, online. So those things constantly happen, making sure that the the decision makers are sitting at the table when the choice is made.
Joe Stramberg:And it's a tool to help you provide more detail at the beginning of a project. So it kind of sets the stage, as you move, as the design process evolves, and more of the project is being documented. It's a great tool to reference back to on the early decisions that the collective team has made together.
Blair Tennant:Rather than it's$200 a square foot building.
Joe Stramberg:Right.
Megan Brock:Well, I know I like cheat sheets. And that sounds like a great tool and process. So thinking more broadly in terms of market influencers? How has the market changed? And how has that affected cost?
Blair Tennant:One of the evolving trends I mean, it's been around for most of my career, I guess now, but is the shift to construction manager at risk, right. And then also, there's a P3 developer model that perhaps Joe can touch on. But CM at risk is generally a construction manager at risk. They come on board early in the project, they're working with their network of subcontractors, and essentially, it's a negotiated price. So it's not a bid, which you know, previously historically it was, what do you call design, bid build, right? Now we've gotten to the negotiated price, what happens is, in theory, you're supposed to be transferring risk, that the contractor is supposed to be taking the big risk away from him. But really what's happening is they essentially, not inflate, but cover off all the possible all the possible things that could arise in a project and cover it within the numbers, which is great. Ultimately, I'm not saying this brings you quality. But generally you're paying an inflated price. Even further to that we're getting these institutions that are so scared of bidding a project that they do a GMP at, at in the design development stage of document. And at that stage, you know, every single person who's guaranteeing that price has to fill in the blanks on the drawings, and make sure they're covered. So ultimately, you may be, you know, you may be paying the appropriate price, but you're likely paying too high. So, our recommendation is if you want to go the GMP route, then you essentially wait until the documents are complete. So 100% documents, you send them out, either essentially bidding the job to their subs. And then you use that information and you allow them to have some type of contingency just to guarantee at that point, but it's minimal risk for them. It does bring new risk back to the owner that ultimately brings you a lower cost.
Megan Brock:So essentially, your delivery method even becomes a cost influencer.
Blair Tennant:Yes, that's a good way to put it.
Megan Brock:So what about value engineering? Should we be wary of that?
Joe Stramberg:I don't know if we should be wary of it as much as you should be wary of it if you're having to take large reductions to get the project in budget. I think some of the lessons learned over the past few years is we as designers, we need to be asking more questions during the value engineering process. And in particular, when alternative systems are being proposed, and making sure that we're digging deeper and understanding the kind of bigger picture impacts to the building project. But I think all in all, value engineering is a good tool, as you move from phase to phase, at an appropriate scale of what you're trying to reduce the costs and provide the best value.
Blair Tennant:Yeah, I think all all too often, value engineering becomes something midway near the end of a project, because we're over budget, right. And fortunately, at that point, a lot of the structural systems are set mechanical systems are set. So you just started attacking architecture, right? And, and no one's happy. And, you know, building ends up being something a little different than it was envisioned to be. So our goal, like what Joe and I, why we do this, why we talk about this is we want to get the budget and the scope aligned in the beginning, and we're never looking back. We aren't, we aren't going back into value engineering at the forefront. Obviously, we want to look at each system and make sure we're spending the money appropriately. But we're not trying to cut things out of the project down the road, that's really, the goal of what I do is to eliminate that.
Joe Stramberg:And working with and working with the in particular on the construction management, delivery methods. And when they're part of the team, working with them and the client to make sure that everybody's on the same page, as it relates to, we don't want to be value engineering stuff during the design process. And at the end of the day, the contractor giving back millions of dollars of work that could have been included in the project to begin with, that doesn't do anybody any good. So it's really a team effort to make sure that we're balancing it as as closely as we possibly can through each phase of the project.
Megan Brock:So what are a few points you would like our audience to take away or keep top of mind about cost control?
Joe Stramberg:As it relates to benchmarking: that every project is unique. And that's one tool to make sure you're beginning to think about the project and getting it within the ballpark as it relates to the budget, that 60% of the project is going to, as it relates to residence hall design work, is going to be in your structural and your mechanical systems. So those two decisions right there is going to impact more than half of half of your budget. And that there's as it relates to the program itself, that there's choices as it relates to the unit mix and the amenities that are offered. And it's a balancing act.
Blair Tennant:Yeah. And I think it kind of goes without saying, you know, what we're talking about here is early detailed cost model, right. So digging into the detail early, is the fundamental key. And to deal with the market. Just keep an eye on on basically the jobs market, and how you during the projects.
Megan Brock:Well, I appreciate your time. Thank you for joining me today, Joe and Blair.
Joe Stramberg:Thanks, Megan.
Megan Brock:So Joe and Blair will be presenting on this topic at the SWACUHO conference in February, and ACUHO-I in June. So catch up with them there for deeper dive into cost control. See episode notes, or visit treanorhl.com to learn more about how we've helped our clients with space solutions that fit their unique needs and budgets. By working as a tea,m planning far in advance, and considering alternative paths, you can ensure your budget will stay on track while designing space that supports your building users' endeavors. In higher education, it's all about the students. Thinking about their needs ahead of time will not only keep your costs in check, it also supports our future leaders and critical problem solvers. This is Megan Brock with TreanorHL, thanking you for joining us on this episode of TreanorHL Talks. TreanorHL is a national architecture planning and design firm located in the United States. The company holds a firm belief in sharing resources and insights with professionals clients and building users to shape the space we use to live and grow as people. For more information visit treanorhl.com That's t-r-e-a-n-o-r-h-l.com.