Skip to content
Michael Z. Stern A field manual of difficult urban development
Subject index

The Economics of Buildings With Few Precedents

How a price is built for a building nobody has built before, and why the answer is always a band rather than a number.
Michael Stern in a dark jacket and light blue shirt, photographed indoors at night

The economics of building things with few precedents is one of the five subjects Michael Stern works in, and this index explains how a cost is assembled when there is no comparable project to copy from. Every figure in these entries describes the wider industry, its indices, its estimate classes and its research findings; none describes his own work, and the pillar entry keeps the stance that no number about his buildings appears on this site.

An estimate for an unusual building begins by admitting what is unknown. Neumann Monson Architects describes the design contingency falling as knowledge grows, from about 20 percent of construction cost before design begins to 15 percent in schematic design, 10 in design development and 5 at construction documents, with escalation of roughly 4 percent a year priced separately to the midpoint of construction, a bidding contingency of about 5 percent held against bid day surprises, and a construction contingency of 5 percent that rises to 7 or 8 on a renovation.2 When the bids still come in high, the discipline that answers is value engineering, and Cooperative LA traces it to Lawrence Miles at General Electric during the Second World War: define what each element is for, then find the least costly way to deliver that function without losing it, which is a different act from stripping a project for parts and calling the result savings.3

Method can also move the number. Engineering News Record reported on a 58 story tower in Austin designed by performance based wind analysis instead of prescriptive code values, which trimmed the reinforced concrete structure’s cost by 5 percent and its embodied carbon by 6 against a conventional design run in parallel, took six inches off the core walls and removed a tenth of the reinforcing steel, with the engineers involved predicting the approach would be standard for tall buildings within ten to fifteen years.1 The entry on what independent review buys weighs that kind of gain against the price of a second opinion.

The nine entries move from the estimate outward. Underwriting a Building With No Comparable is the pillar. Cost Estimating Without Comparables explains assemblies and ranges. Contingency and the Risk Register and Value Engineering and What It Costs cover the two tools above. Construction Cost Indices explains what the published series track and miss. Bid Dispersion on Unfamiliar Work and Schedule Float and the Cost of Sequence cover the market and the calendar. What Independent Review Buys covers the second opinion, and The Economics of Skyscrapers and the Height Premium turns to the research on why cities build tall at all.

  1. Engineering News Record, Paradigm Shift in Tall Building Wind Design Cuts Material, Cost and Carbon
  2. Neumann Monson Architects, 3 Types of Building Project Contingencies
  3. Cooperative LA, What Is Value Engineering in Construction?

Contents

  1. A multi span cable stayed viaduct crossing a wide valley seen from a hillside, a Wikimedia Commons photograph in Michael Stern's encyclopedia Underwriting a Building With No Comparable

    Pricing the parts of a building that has no twin, and learning the dangerous answers before the cheap ones.

  2. Cost Estimating Without Comparables

    When the whole has no precedent, the estimate is assembled from parts that do.

  3. Contingency and the Risk Register

    Money carried for what the drawings have not shown yet, and the ledger that says why.

  4. Value Engineering and What It Costs

    Lawrence Miles's wartime substitution method, its job plan, and the gap between a saving and a deletion.

  5. Construction Cost Indices

    Twenty cities, a basket of steel, cement and lumber, and the building no index has priced.

  6. Bid Dispersion on Unfamiliar Work

    Five bidders, five readings of the same risk, and the tools that make them read it alike.

  7. Schedule Float and the Cost of Sequence

    Slack on the program, the crew's floor cycle, and the error that bills twice.

  8. What Independent Review Buys

    One more engineer, a tested wall, and what an error nobody caught would have cost.

  9. A dense downtown skyline of towers at sunset seen from above, a Wikimedia Commons photograph in Michael Stern's encyclopedia The Economics of Skyscrapers and the Height Premium

    Why a tower stops growing at the floor that no longer pays, and five reasons the cost curve bends.