Welcome to All Things Estimating
I would like to introduce a new website that focuses on answering two questions –
Can it be built? How much is it going to cost?
My name is Scott Townsend – the founder of All Things Estimating,
I have recently relocated to Launceston for a new adventure for my family and have set up shop working remotely and offering building consultancy focusing on Estimating Services whilst developing this website into a resource bank and training & education to pass on knowledge for the young blood of the industry.
The basic premise is to explore processes within the design & building process capturing D&C trinity that exists with “Design Management, Tendering, and Procurement”. I have been in the industry for over thirty years. Firstly, as a designer then a builder, D&C estimator and most recently author/blogger .
The website gives me a platform to help empower others on a larger scale. I have high hopes for the site and it is also my hope to ring in some colleagues to give their specialist experiences as well. So please share it with your colleagues and I would be thankful for any blog ideas or industry insights.
All Things Estimating is open for Business.
Building Industry Tier System
How Does the Tier System Work?
A tier system exists within many industries and is a way to rate the size, quality, accreditation, etc.
The building industry deals with banks and developers who rate businesses, plus we have our own Building Tier System that is based on turnover. The challenge is both the Systems have a Tier 1, 2 & 3 and there are some similarities at the top levels, In a broad-brush description, the business tier deals with who is financing the project and the building Tier system deals with how much turn over the building company smashes out over a year turnover on an average. The turn over of a building company (Building Tier) has a direct reflection on the amount of staff and capabilities and size.
In Australia – from a building perspective, we often have dealings with banks and financial institutions plus we deal with recruiters and other building industry people. I think the confusion is created as two systems can get blurred sometimes depending on who you are talking to. It has always struck me as interesting as the definitions are similar but most people you talk to seem to merge the description of both systems.
But if you remember that banks and big developers use a “Business Systems” and recruiters and the general building industry use the “Building Tier System”.
THE BANKING TIER SYSTEM
The banking system rates business on capital and the business’ reliance on lending organizations, or under a corporate umbrella. This has changed a lot in recent years as most businesses have some type of dependency on banks.
The Tier 1 Business is a corporate giant that has little to no requirement for banks in the fact they use their own capital.
Tier 2 is a layer below, however, has some dependency on banks or an umbrella company, these Tier 2 businesses can often be owned by a Tier 1 company.
Then the Tier 3 companies are the smaller businesses that basically depend on financial institutions to trade. The line in the sand for Tier 3 Business is around a turnover less than $1 million dollars.
So when you look at the Building Tier System the biggest difference will be with Tier 2 & 3.
THE BUILDING TIER SYSTEM
The Building Tier System is similar but different, as it only looks at the capability of the building company and generally looks at turn over.
Tier 1 Builders
Tier 1 is building companies with a turn over greater than $500 million to the multi-billions.
In Australia’s landscape, these are the giants of the industry. Tier 1 companies basically generate the work for themselves including the full development – using their own money. – Major infrastructure and development.
In recent years there has been a lot of movement of who owns what, amalgamations, etc so it would be fair to say the landscape is changing. The companies that play in the tier 1 genre would include but not limited to: Theiss, Lend Lease, John Holland, Multiplex (Owned by Brookfield), Watpac, Hutchinson Builders, ProBuild, Hansen Yunken, etc.
These companies control most of the major commercial projects such as large infrastructure and institutions like roads, highways, railways, universities, shopping centres, high rises etc. These companies handle the full process from conception to completion and then they may sell the projects or hold as an asset portfolio.
Tier 2 Builders
Tier 2 is building companies with a turn over greater than $100 Million to Less than $500 Million.
Tier 2 is obviously one step down as a mid tier building company but still an exceptional big operator.
These companies tend more to the commercial rather than residential projects. These companies normally operate in education, retail, and industrial sectors.
The trouble in separating Tier 2 and 3 gets a little harder. Examples of Tier 2 & Large Tier 3 companies included but not limited to the following: Adco Constructions, AW Edwards, BMD Group, Buildcorp Australia, Built, Cockram, Downer Group , FDC Construction & Fit out; Grocon, Growth Build, ICON Construction Australia, Lipmans, McMahon, Paynter Dixon, Patterson Building Group, Pelicano, Renascent, Richard Crookes Constructions, Schapelle, Shape Australia, Taylor Construction Group, etc. (Sorry If I missed anyone).
Tier 3 Builders
Tier 3 – Is everything less than $100 million.
A Tier 3 builder is a traditional client/builder relationship which basically means every other builder in the industry regardless of commercial or residential nature of the business. These companies don’t like labels and tend to step up regularly. However, the majority of the Tier 3 builders are more exposed to economic fluctuations, government policy, and outside influence.
However, it should be said that there is an entire subsection in Tier 3 which include the following:
- Turn over <$5M;
- Turn over >$5m to $50M
- and Turn Over >$50M <$100M.
These companies are the little family business’ all over Australia that compete and punch often way above their weight class. Often The pipeline of work could be quite diverse and you could also work in different genres to keep the cash flow coming through the doors. Often the Tier 2 and 3 Building Company has a banking organisation partner that helps control the cash flow of day to day business, This is probably why the tier system on face value gets blurred as well.
If you wish to read more about
Tender Process – Click Here
GFA, NLA, CFA=UCA+FECA?
MEASURING AREAS?
There is a heap of abbreviations linked to the measurement of building volume, floor areas and the like that start at the feasibility & council level with approvals linked referring back to GFA. This measurement is also valid when a landlord wishes to either sell or lease a floor space. Internal and walls and the outside spaces are separated but the primary measurement is the Gross Floor Area. (For Builders – this measured is terrible for benchmarking and record keeping).
Then a tenant needs to know how many car spaces they have and how much useable space they are going to get. The volume of the space is also important as power must be used to light and ventilate the space.
Builders are interested in areas where their contracts say need to achieve an “NLA” (Net Lettable Area), but normally this is a secondary thought (but still checked extensively). Builders are more interested in the overall construction area and its associated cost per square metre of everything.
- Councils, PCAs, banks, developers all operate on a measurement called “GFA” (Gross Floor Area).
- The end user – Developers, Land Lords, and real estate agents and tenants are interested in “NLA” (Net Lettable Area).
- Finally – Builders are interested in a measurement loosely known as “CFA” ( Construction Floor Area) which generally covers all of a building. Now just to throw another couple of abbreviations in the mix we have also UCA and FECA that is widely used.
From a bench marking and cost planning point of view once you are in a company – Make sure you settle on a measurement rule and then never change it. All projects MUST be measured the same way or else your data will get corrupted.
MEASURement DEFINITIONS
GFA – Gross Floor Area
GFA & GBA (Gross Building Area) is often confused within the industry. GFA is used by councils to define the floor space that can be developed on a site based upon its Floor Space Ratio. It can be used for determining the development potential of sites. This number is often produced by an architect at DA stage. The calculation often misses the external thickness of the perimeter walls, Garages, balconies, terraces, external walls are left out of the equation.
The sum of the area of all floors of the building measured from the external faces of the exterior walls, or from the centre line of walls separating the building from any other building, excluding an area used solely for rooftop fixed mechanical plant and/or basement car parking”. In the circumstances listed below GFA will be calculated as detailed:
- stairwells and liftwells should be counted as contributing to GFA once only (these components are not considered to be floor area for subsequent levels).
- basement parking also incorporates parking for bicycles, where such areas are designed in accordance with the relevant Australian Standard, and can be excluded from the GFA calculation.
- Balconies, external stairs, External suspended structures as ramps, walkways and Terraces can be excluded from the GFA Calculation.
- voids within an atrium design can be excluded from the GFA provided the initial floor area of the atrium is included.
- mezzanines are considered to be a floor and should be included in the calculation.
NLA – Net Lettable Area
The area of a building that can be let to tenants. It is less than the gross building area as it excludes such things as walls, common areas, and lift wells. The inside area of a building to be leased. Sometimes called “carpet area”. The calculation of the NLA will depend on the particular formula used by will exclude common and service areas.
In the case of an existing tenant, the NLA is normally taken from the face of the shopfront and in a situation of a sublease the perimeter of the tenancy wall is often a shared wall and would be taken from the centre of the wall.
NLA is one of these calculations that need to be defined clearly in a contract as the big discrepancy is normally the extent of where the outside boundaries are taken. Check the fine print.
CFA – Construction Floor Area
Builders are interested in a measurement known as “CFA” ( Construction Floor Area) which generally covers all of a building. Builders have gone down a root where they break up the building cost in three components.
- Unenclosed Covered Area (UCA)
- Fully Enclosed Covered Area (FECA)
- External Works outside CFA
Elements outside the above (Like road works, Landscaping, etc) could be picked up as a separate number however for benchmarking of CFA is the number we need. The CFA can then be broken data useful for future projects.
So the CFA = UCA + FECA. These are the abbreviation that count to an estimator.
Fully Enclosed Covered Area (FECA)
The sum of all fully enclosed and covered building areas at all floor levels, including: basements (except unexcavated portions), garages, floored roof spaces and attics, penthouses, enclosed porches and attached enclosed covered ways, equipment rooms, lift shafts, vertical ducts, staircases and any other fully enclosed spaces and useable areas of the building. The FECA is computed by measuring from the face of exterior walls, ignoring any projections such as plinths, columns or piers. It excludes open courts, light wells, connecting or isolated covered ways, and net open areas of upper portions of rooms, lobbies, halls, and interstitial spaces etc which extend through the storey being computed.
Unenclosed Covered Area (UCA)
The sum of all unenclosed covered areas at all building floor levels, including roofed balconies, open verandahs, porches and porticos, attached open covered ways alongside the building(s), useable space under the building(s), unenclosed access galleries (including ground floor) and any other trafficable covered areas of the building which are not totally enclosed by full weight walls. The UCA is computed by measuring from the inside face of any enclosing walls, balustrades or supports, but excludes connecting or isolated covered ways, and eaves, overhangs, sun shading, or awnings unless they relate to clearly defined trafficable covered areas.
BENCHMARKING HISTORIC DATA
So the CFA = UCA + FECA.
Within the Tender schedules (Priced Criteria) – the categories of all the costs can be grouped into a few areas that can vary and also screw the data.
If you are interested in keeping good records I would suggest the following format.
- Noted GFA (m2)
- UCA Area (m2)
- FECA Area (m2)
- Design Cost
- Authority Fees
- Trade Costs UCA
- Trade Costs FECA
- External Works (outside Boundary)
- Preliminary Costs
- Program duration
- Overhead Recoverable
- Margin
- Competitors
- Win / Loss amount
If you wish to read more about
Estimator Records – Click Here
If you wish to read more about
Tender Process – Click Here