How Should an Owner Build a Conceptual Estimate?

By Wyatt Cooper · Published October 22, 2026 · 7 min read

Key takeaways

A conceptual estimate is built from cost per square foot by building system, from benchmarks for similar buildings, because the design has little detail yet.
The cost per square foot people quote is usually only part of the cost: add design contingency, the contractor's general conditions and profit, escalation to the midpoint of construction and construction contingency.
GSA's estimating policy gives the order: direct cost, then design contingency and general conditions and profit, then escalation, then construction contingency.
In the worked example, $271.50 per square foot of direct cost becomes $386.15 per square foot of construction cost, and $432.15 with design fees and furniture.

To build a conceptual estimate, price the building by system (foundations, shell, interiors, mechanical and electrical, sitework) at a cost per square foot taken from similar buildings, for direct cost. Then add a design contingency for what the drawings do not show yet, the contractor's general conditions and profit, escalation to the midpoint of construction, and a construction contingency. Add design fees and furniture for the total project cost.

Why a single cost per square foot misleads

Ask what a building costs per square foot and you get one number with no method behind it: no location, no date, no statement of whether it includes the contractor's markups, sitework, contingency or design fees. A conceptual estimate is useful only if you know what is in it, so build it in layers and keep each one visible.

GSA's cost and schedule policy (P-120) is a public, written method for this. It defines the layers: the current estimated cost of construction is "Direct Cost + Design Contingency + General Conditions and Profit + Special Use Taxes", the estimate at award adds escalation, and the full estimated cost of construction adds construction contingency (GSA P-120). An owner who is not a federal agency can use the same order.

How much an early estimate can know

Estimate classes by project definition, ASTM E2516 as GSA P-120 presents them
Class	Project definition	Life-cycle stage	Typical purpose
Class 5	0% – 2%	Project initiation	Screening or feasibility
Class 4	1% – 15%	Feasibility studies	Concept study or feasibility
Class 3	10% – 40%	Concept design, design development	Budget authorization or control
Class 2	30% – 70%	Design development, construction documents	Control or bid/tender
Class 1	70% – 100%	Construction documents	Check estimate or bid/tender

A conceptual estimate is Class 4 or 3. P-120 notes that "an estimate’s accuracy is directly related to the level of scope definition", and that for concept design and schematic estimates "it is acceptable to use unit prices combining labor, materials, and equipment costs in a single figure". In practice that means a cost per square foot for each building system, measured from the concept drawings.

Steps to build it

Measure the gross floor area and the site area from the concept drawings.
Price direct cost by building system, the UniFormat way of grouping cost (substructure, shell, interiors, services, sitework), at a cost per square foot from similar buildings: your own past projects or a cost consultant's.
Adjust each benchmark for location and for the date it is from.
Add a design contingency for what the concept does not show. P-120's guideline for capital new construction at concept design is 7.5% to 10% of direct cost.
Add the contractor's general conditions and profit, as a percentage allowance or built up.
Escalate to the midpoint of construction. P-120 says the estimator "may assume that half of the work will occur before the midpoint of construction and half after".
Add a construction contingency for changes during construction. P-120's guideline for new capital construction is 7% of the escalated estimate.
Add design fees, construction management, furniture and equipment, and land for the total project cost.

1Direct costEach building system's area × its cost per square foot, plus sitework
2Current estimated costDirect cost + design contingency + general conditions and profit + special use taxes
3Estimated cost at awardThe current estimate + escalation to the midpoint of construction
4Estimated cost of constructionThe cost at award + construction contingency
5Total project costConstruction + design, management, furniture, equipment and land

The layers of a conceptual estimate, in the order GSA P-120 adds them

UniFormat is CSI's system-based classification; CSI says estimators and design teams benefit from it for "cost analysis and early project design documentation" (CSI). Sizing the two contingencies for your project's risk, beyond GSA's guidelines, is in how much contingency an owner should carry.

A worked example: a fictional 40,000-square-foot office

The building is fictional: a 40,000-square-foot, three-story office on a suburban site. Every cost per square foot and percentage below is invented for the example except GSA's 10% design contingency (the top of its concept range) and 7% construction contingency. Do not use these rates; use benchmarks for your market.

A conceptual estimate in layers (whole dollars)
Layer	How it is figured	Amount	Per square foot
Substructure	40,000 SF × $18	$720,000	$18.00
Shell	40,000 SF × $92	$3,680,000	$92.00
Interiors	40,000 SF × $48	$1,920,000	$48.00
Services (mechanical, plumbing, electrical, fire)	40,000 SF × $86	$3,440,000	$86.00
Sitework	From the site plan	$1,100,000	$27.50
Direct cost	Sum of the five systems	$10,860,000	$271.50
Design contingency	10% × $10,860,000	$1,086,000	$27.15
General conditions and profit	14% × $11,946,000	$1,672,440	$41.81
Current estimated cost of construction	$11,946,000 + $1,672,440	$13,618,440	$340.46
Escalation to the midpoint	4% a year × 1.5 years = 6% × $13,618,440	$817,106	$20.43
Estimated cost at award	$13,618,440 + $817,106	$14,435,546	$360.89
Construction contingency	7% × $14,435,546	$1,010,488	$25.26
Estimated cost of construction	$14,435,546 + $1,010,488	$15,446,034	$386.15
Design fees and furniture	$1,240,000 + $600,000	$1,840,000	$46.00
Total project cost	$15,446,034 + $1,840,000	$17,286,034	$432.15

Direct cost adds up as $720,000 + $3,680,000 + $1,920,000 + $3,440,000 + $1,100,000 = $10,860,000, and with design contingency $11,946,000. Escalation is 6% × $13,618,440 = $817,106.40 and contingency 7% × $14,435,546 = $1,010,488.22, each rounded to the dollar. The number a contractor might quote, $271.50 a square foot of direct cost, is 63% of the $432.15 the owner has to fund ($271.50 ÷ $432.15 = 0.628).

Mistakes that sink the budget later

Comparing a direct-cost benchmark with a contractor's all-in price, or the reverse.
Using a benchmark from another city or another year without adjusting it.
Leaving out sitework, which per square foot of building varies most from site to site.
Spending the design contingency on added scope while the design is still developing.
Escalating to the bid date instead of the midpoint of construction.
Forgetting what the owner buys outside the construction contract: design fees, furniture, IT and moving.

Once the estimate is set, choosing how to buy the work is in delivery methods compared and how to choose a general contractor; on a GMP contract the contractor's own estimate replaces yours as design develops. The rest of the owner's path is in the owner's guide and the project lifecycle.

The bottom line

A conceptual estimate is a cost per square foot by system with every layer added in a fixed order: design contingency, general conditions and profit, escalation to the midpoint, construction contingency, then soft costs.

Keep each layer visible. When someone quotes you a single cost per square foot, you will know which layers it leaves out.

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Sources

P-120, Public Buildings Service Cost and Schedule Management Policy Requirements (PBS 1000.6B, November 7, 2022) — U.S. General Services Administration (via WBDG). Read October 22, 2026.
Standards overview (MasterFormat and UniFormat) — Construction Specifications Institute. Read October 22, 2026.

Questions

What does commercial construction cost per square foot?

It depends on building type, location, date and what the figure includes, so no single number is reliable. Use benchmarks for buildings like yours in your market, and check which of the layers above each one includes.

How accurate is a conceptual estimate?

Less accurate than a later one: GSA's policy, following ASTM E2516, ties accuracy to how much of the project is defined, and a concept estimate has only 1% to 40% of it. Carry contingency to match.

What is the difference between design contingency and construction contingency?

Design contingency covers what the drawings do not show yet and shrinks to zero by final construction documents. Construction contingency covers changes during construction, such as unforeseen site conditions.

Why escalate to the midpoint of construction?

Contractors buy labor and material across the whole job. GSA's policy lets the estimator assume half the work happens before the midpoint and half after, so escalating to the midpoint approximates the price the bids will carry.