Based on square footage the construction cost will be $$280,000.$ Your management fees and architecture costs add another $$50,000,$ and the upgraded features add $$40,000$ more $$ so the total is still well under their $$400,000$ budget. Ralph and Marie finalize the bank loan and confirm the amount to borrow from their parents.

However, once you start hiring subcontractors and ordering materials you discover the cost of the metal roof, premium wood siding, and the concrete work requested by Ralph and Marie are way above what is typical in your area. You go back and develop a bottoms$-$up estimate as shown in Figure $2.$

There is no way Ralph and Marie can increase their budget, so they adjust their requirements to get back under the cap. This delays construction by four weeks to re$-$plan, to return and re$-$order replacement materials, and to reschedule the construction crews. This is an example of how parametric estimates can overlook details that are unique to a project, and a bottoms$-$up estimate based on specific requirements and project plan is more appropriate when higher confidence is required.

You now have a good bottom$-$up cost estimate for labor, materials, and other expenses. Ralph and Marie must work with their bank and parents to ensure funds are available when needed to cover the construction costs. The bank wants a schedule for the loan draws, and Ralph$$s parents need to know when to liquidate investments to free up the money. Construction has started, the initial funding is nearly gone, and your concrete contractor is demanding payment before they will do any more work. How do you proceed?

Estimate equal payments based on the total cost and six$-$month project duration. Ask the bank to release the next draw immediately to avoid delays with your concrete contractor.

Take a week to build a time$-$phased budget based on your project schedule.