Whitepaper: 06.15.2019

Target Budget Design: Providing Value with Cost Certainty

Group of people in a meeting

by Jim Mynott, McCarthy Vice President Design Management

The growing market response to design-build delivery requires a different level of integration for the project delivery team. In a recent article prepared by RS Means the growing market penetration of design-build ranges from 17 percent to 71 percent of all projects in the United States, with the military utilizing design-build on 81 percent of all projects. As owners and governmental agencies continue to look for ways to improve their procurement approaches to their projects, a clear transition is underway in all major market and geographic sectors to consider design-build delivery.

What has become apparent during these transitions to design-build has been that the project team needs to establish an early commitment to cost to ensure team alignment and consistency in executing design to construction and through operations. As we have seen in the California market, the advent of “performance-based” design-build RFPs requires the teams to propose a project solution within a Maximum Allowable Contract (MAC); thus, Target Budget Design becomes a critical component of the overall project pursuit approach.

What is the Target Budget Approach?
Simply stated the Target Budget Approach establishes the costs of the project before the design documents are produced not as a function of design document production, reversing the roles of the budget from reactionary report to a proactive, integrated team alignment tool. As a byproduct, the “target budget” approach continuously integrates budget into the project scope and project requirements discussions and decisions. In essence, this approach focuses on team alignment and integration at the earliest point in the project to affect the best results for the project and owner.

Target Budget Design Transcends Delivery Methods
Grounded in design-build and Lean processes, the Target Budget Approach functions as a continual barometer to the project. This approach requires different skill sets for all team members in order to collaborate toward the best solutions. Team members are now required to be able to synthesize the creative aspects of the design process, schedule/progress of the design, the owner’s requirements, contractual obligations and budgeting. A few of the new critical skill sets include:

  • Conceptual Estimating
  • Understanding the “language of design”
  • Developing flexible approaches to managing design process
  • Communicating across multiple disciplines
  • Working with less information than in the past
  • Application of Lean processes to eliminate waste, foster pre-fabrication, and support expedited decision making

Continual Balance of Three Overlapping Circles
In order for Target Budget Design to be successful, the project team needs to achieve a confluence of design, estimating and the owner’s requirements centered on the Target Budget Approach. When achieved, the entire team receives real-time feedback, and the design team authors content one time, thus avoiding re-authoring design content.

Cost Models and Target Budget Level of Detail Progression
Managing real-time cost models of current scope in design with that of the target budgets allow the team to aggregate the available information in the most suitable way for the project. By having both the target budget and on-going detailed cost models, the team is able to focus their efforts toward gaining the best understanding of design solutions to meet the owner’s wants and needs as early as possible in the project life cycle.

For example, by identifying and understanding the larger constraints of the project, such as location, orientation and massing, allows the team to set target budgets based on the available parameters and detailed cost histories from the design-builder’s past projects. A good way to think about Target Budget Design is that it is a combination of both parametric estimating and quantity surveys to capture the project cost and scope requirements, where in the beginning the team relies heavily on the parametric estimating side, and later in the design, relies heavily on the quantity surveys – all while focused on the target budgets.

As it is an iterative process to go from parametric-focused to quantity survey focused, the team needs to continually evaluate scope, costs and execution with regard to the target budget and the level of detail contained in the documents:

Managing and Monitoring Content
Design updates and tracking require the team to maintain a disciplined approach to update documents on a regular basis. The design-builder must have a defined process of both Building Information Modeling (BIM) and PDF management and output to give the team the opportunity to challenge current developments and resolve issues on a regular basis. A collaborative platform such as Bluebeam Studio allows the design manager to establish a platform for everyone to work in and comment to.

Another key aspect to this phase includes an individual(s) who is aligned with and responsible to know the owner’s RFP and all of the project requirements in order to facilitate a “no surprises” approach to ensure the design and design requirements are adhered to.

The Role of the Contractor’s Design Integrator
The contractor’s design integrator bridges the various design functions and project priorities to facilitate the target budget process. This individual organizes the approach and solicits support from the estimating and operations staff to facilitate information exchange and, most importantly, to break down any silos between the participants. One of the most important roles of the design integrator in Target Budget Design is the understanding of cost trending as a result of the iterative design progress. The design integrator needs to understand how the project cost drivers affect the target budget:

While typically thought of as quantity survey and reconciliation, the real cost drivers to any project include areas such as:

  • Building codes and local agency requirements
  • The owner’s RFP and related scope of work narratives
  • The changing nature of workplaces and workplace efficiency
  • Equipment (medical or otherwise) in terms of infrastructure needs, serviceability and access
  • Marketplace factors (e.g., bidding environment, escalation, capability of the subcontractor marketplace)

Engaging BIM and Other Technology Platforms for Decision Management
BIM has added a new tool in the ability to manage Target Budget Design. The use of models in the early concept phase offers a unique way to engage the estimating staff to understand the intended design approach for the project. A well delivered target budget project will include developing a BIM Execution Plan at the very start of the team formation in order to familiarize the team with workflows, file attributes, and authoring aspects of utilizing BIM for the project.

A simple example of this management is for model-based estimating, where quantities are acquired directly from the model, so as the model detail progresses, more certainty is gained on actual quantities. The figure below highlights this quantity take-off, which requires alignment of scope with model details and estimating process and platform.

A powerful aspect of BIM is also the ability for the team to visualize and coordinate the design content during the development of the documents. This leads to virtual clash avoidance and production of the 2-D plan set from 3-D coordinated models.

Delivering Value Through the Process
The true value of Target Budget Design lies in the alignment of the team in delivering the client the best result in terms of project value, design acumen and schedule. When the project team focuses on developing the scope in alignment with the budget, as opposed to redesigning due to budget overruns, creative solutions and flexibility in design approaches emerge.

Recognizing this industry trend toward needing certainty earlier in the design phase, McCarthy has developed tools (including model based estimating, integrated design delivery and design issue management) and training to deliver this certainty for clients. An exceptional client experience begins with early alignment of budget, schedule and quality during the design phase. Engaging clients, consultants, permitting agencies, and all the extended team members in facets of this process allow for the true value of the project team to be recognized in supporting your goals for the best project delivery possible.

About the Author
Jim Mynott, DBIA, LEED AP BD+C, is Vice President of Design Management at McCarthy Building Companies, Inc. With more than 20 years of experience in the construction industry, Jim currently oversees design management responsibilities and implementation of BIM for McCarthy in Southern California. In this role, he coordinates the early team integration on projects with a design-build or a design assist approach. He holds a bachelor of science in Construction Management from California Polytechnic State University, San Luis Obispo, and a MBA from California State University, Long Beach. Jim can be reached at jmynott@mccarthy.com.

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