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OCR for page 31
Appendix C
The Construction Budget Preparation
Process at IBM Corporation
Prepared by Edward Marshal
Based on business needs, operating units within
the corporation working with the Real Estate and
Construction Division (RECD) prepare a Statement
of Requirements (S/R) to establish the need to house
people and/or equipment in new facilities. The S/R
includes absolute requirements for these facilities
and also, in some cases," wish lists" of additional
elements which the Operating units would like to
incorporate, if feasible.
The Statement of Requirements is quantitative
and covers approximate size, intended population,
location, and inter-relationships. It also lists the
need for such special spaces as cafeterias, auditori-
ums, computer spaces, classrooms, etc.
Once the requirements have been determined
the Consulting Services Group, comprising archi-
tects and engineers, takes the S/R and develops a
Design Criteria (D/C) or building program which is
qualitative in nature. Depending on the type of
proposed building, certain Corporate Facilities Prac-
tices (CFPs) are observed. These documents define
the minimum standards which must be maintained
in the design of the facility.
Next, the D/C is translated by Consulting Serv-
ices into a set of Estimating Assumptions (E/A) for
all trades. The assumptions form the basis from
which the Statement of Requirements could be built,
to IBM's standards. At this time the building is
purely hypothetical in nature, as all this preparatory
*Edward Marsch is We Director of Planning/Analysis of
IBM's Real Estate and Construction Staff.
31
work takes place before retaining an Architect. IBM
has developed a standardized computerized format
for these Assumptions which allows the group to
work logically through the proposed project. It
includes the elements and systems most commonly
found in typical IBM facilities.
RECD has developed a standard Construction
Library. This document is a detailed listing of all
construction elements found on IBM projects. The
library is coded specifically for IBM's use and it
bridges the Masterformat/CSI trade numbering stan-
dard format to IBM's Construction numbering for-
mat. It is designed to be adapted for use on each
IBM project, and ties in with the Standard Estimat-
ing Assumptions. RECD's estimating department
prepares a budget estimate from the S/R, D/C, and
E/A. As nearly as possible many of the elements of
the proposed building are incorporated into the es-
timate, and the pricing reflects RECD's experience
of constructing buildings in many parts of the coun-
try. In the civil, structural, and architectural trades,
Unit Pricing is usually performed. For the me-
chanical and electrical trades, the estimator gener-
ally breaks down his estimate into labor, material,
and equipment costs.
To the construction cost, the estimator adds line
items including architects' fees, IBM costs, and
any other special considerations to reach between
the budget and a recently completed project. This
provides a sanity check to his estimate.
The budget estimate, the bridge and a prelimi-
nary schedule are then presented to IBM's senior
management for funding approval.
OCR for page 32
32
Assuming approval of the project, an architect is
retained to begin design. RECD provides him with
copies of the SIR, D/C, CFPs, and Construction
Library. He is also given a construction budget
within which he must design the facility. IBM
specifically avoids giving him copies of the Esti-
mating Assumptions and the Budget Estimate since
these could well limit his creativity in reaching a
successful design solution.
The architect prepares a design solution for IBM's
review, together with his own budget estimate which
is presented in the Construction library format to
enable IBM to compare the costs against the ongi-
nal budget. After the scheme has been approved,
the A-E prepares preliminary drawings which are
submitted to RECD for review and comment. IBM
examines the plans and specifications and verifies
that the estimate is reasonable for the scope de-
scribed. At this early stage the estimator ensures
that the project remains within budget while the
Consulting Services Group monitors overall de-
sign. As a team, the two groups manage the devel-
opment of the project.
If, at any time, the cost for the proposed project
exceeds the budget, RECD initiates a series of
meetings with the A-E and the design team, to
review the design with the intention of reducing the
overall cost without sacrificing the quality of the
job. Such `'Value Engineering" could affect any
part of the job, from substituting a structural sys-
tem (steel vs. concrete frame), a mechanical system
(ducted return vs. plenum), or an electrical system
(conduit and wire vs. BX cable).
APPENDIX C
As the project becomes better defined, each level
of detail is checked from preliminary and interme-
diate stages Trough final drawings. Each stage is
accompanied by estimates reflecting the increased
level of detail and are matched against the original
estimate.
The Construction Library, as mentioned above,
is used throughout the planning and budget stages
of the project and into the bidding cycle.
Contractors are required to submit their propos-
als when bidding the work, using the IBM/CSI
format in order to provide estimate companson.
Payment requisitions are submitted using the same
format, and IBM's accountants use the same docu-
ment to capitalize the project. The Library is a
major resource in the creation of an Historical Data
Base from which much valuable information can be
obtained for use in the preparation of budgets for
future projects.
Throughout the course of the project, IBM uses
the budget estimate as a basis for comparison be-
tween the original concept and the finished prod-
uct. During the buy out phase of the project and in
the negotiation of change order work the IBMICSI
format provides ready access to cost data, which
eliminates much of He guesswork otherwise en-
countered, primarily because the format allows the
cost of the work to be broken down into fairly
concise construction elements.
As can be seen from the above narrative, IBM
places great importance in developing detailed,
realistic budgets, and then manages the project to
it.
Representative terms from entire chapter:
construction library
