Construction Cost Estimating
The GNWT uses a four level construction cost estimating system that has been the standard in numerous jurisdictions for many years. This system is based on the fact that only very rough estimates can be forecast at the early stages of a project, and that the cost estimates need to be refined as planning proceeds to become as accurate as possible. The best information available is used at each stage in a project.
Class 'D' (also known as Level 1) Estimates are generated at the very beginning of a potential project and are simply to provide a rough “order of magnitude” cost.
Class 'C' (Level 2) Estimates are prepared on the basis of the conceptual schematic design, which includes the overall amount of space and general type of space required. This estimate is usually used for obtaining preliminary project approval. While this estimate is not 100% accurate, the cost of detailed planning required to generate a more precise figure is not warranted unless there is clear intent to proceed to construction.
Class 'B' (Level 3) Estimates are generated as the scope and design of the project are finalizedand final materials are selected. Class ‘B’ estimates are the sum of all of the individual cost factors for the planned project and are therefore more accurate than Class ‘C’ figures.
Class 'A' (Level 4) Estimates are the most refined, being based on the completed drawings and specifications for the project. They are used to confirm funding allocations, verify the anticipated construction cost, and to identify any design/cost changes caused by modifications made during the completion of the construction documents.
Preparing the Capital Budget
The Capital budget is referred to as the “Capital Main Estimates” and covers a five year period. Any capital initiative under consideration needs to have the first five years of funding included in the Capital Main Estimates and approved by the Legislative Assembly in order to become an approved Capital Project.
The caveat to this is Public Private Partnership projects. Since the government does not usually make any payments until construction is completed, the funding would not be allocated until the first year occupied.
Updating Cost Estimates
Once a project is approved (as part of the Capital Plan), the next phase of work is called “Design Development.” It is during this phase that the scope of work is clearly defined. This includes the selection of major equipment like air handling systems, as well as materials and finishes such as flooring and fixtures. At the conclusion of Design Development, Class ‘B’ Estimates are generated for the total cost as well as annual expenditures. These figures are then used to update the Capital Main Estimates.
In each following year, including the last year of construction, the most recent plans and associated costs are submitted to update the Capital Main Estimates.
Cost Containment
The fact that Capital Project costs can be updated, usually as increases, does not mean that plans are changed without rigorous assessment and serious deliberation.
Rather, the process recognizes that major construction projects take several years to complete and situations change. In the case of a hospital for example, the potential exists for new medical research results or new technologies to change best practices at any point. If this happens, an assessment very similar to the overall Capital Planning process is conducted rapidly. The results of this assessment, along with the cost implications, must be reviewed and approved by all of the same Committees and ultimately by the Legislative Assembly before being acted upon.
