Actual Material Cost vs. Material Cost: what's the difference?

Marcio – Your definition for “Material Cost” above is correct. However, the reviewers’ comment appears to question your method of calculating the total “Actual Material Costs” entered into Tab A of the MR Calculator (basing it on the total from Tab B).

Indeed, if Tab B individually itemizes the actual cost of EVERY SINGLE PRODUCT used on your project, the spreadsheet must include hundreds, if not thousands, of entries. Topping the list would be a number of high-cost, high-ticket items that contribute significantly to MR Credits. Below them, pages and pages of lesser entries for minor components would show negligible credit impact or none at all. Compiling such a detailed tabulation would have demanded an epic effort from your project’s contractors and administrators—detail far beyond what is required under normal construction accounting practices.

When teams that I have worked with have attempted this approach, the paperwork quickly overwhelms them, costs for minor items fall through the cracks, and the “Total” of Actual Material Cost comes up short. The resulting omissions tend to skew MRc4 & MRc5 percentages upwards, undermining the credibility of the calculations.

The reviewers appear to be asking you to check that your figures are complete and to justify the reported total or revise the total to include any omissions. Since every major project includes procedures to document and manage payments to contractors, you may need to compare notes with your contractors & construction managers to confirm your reported costs. If you coordinated cost reporting with contractors & construction managers during construction, your work may already be complete.

Marcio - Sorry for my tardy reply. I was away from all communications while on vacation but I think Jon covered the bases (thanks Jon!).

Are you clear on the situation?

Marcio - Could the review team be saying that the total of the Sustainable Materials Costs on B. Inputs of the BDC Materials and Resources calculator is equal to the Actual Material Costs you entered on A. Instructions? If so, I can see where they are concerned as these costs should not be equal. You should have material costs that do not have sustainable attributes for MRc3-7. Hence Actual Material Costs for everything in Divisions 03-10 and the required sections in 31 and 32 should theoretically be much higher than the materials that you enter into B. Inputs worksheet that have sustainable materials attributes. There is no need to enter materials that do not have sustainable material attributes into B. Inputs worksheet. This adds more work for your team and more for the review team to wade through. Only materials with sustainable materials attributes should be entered into B. Inputs. Does this help?

Marcio—Michelle makes a good point that, because your total on Tab B matches the total on Tab A, the reviewers may have assumed that you have omitted non-contributing materials from your Total Material Cost.

Your idea is good. Look into the process used to compile the costs. Make sure to verify the following points:
1. That the cost tally includes all installed materials. (I have seen contractors omit materials that they could not find regional or recycled content data for.)
2. That the amounts reported for contributing materials correspond to the submitted regional or recycled content data. (I have seen contractors report a cost for a complex assembly, but provide data only for a single component.)
3. That the total includes all minor subcomponents and accessories of the installed assemblies. (I have seen contractors leave these out.)
4. That the values are the amounts actually invoiced (not early estimates or bids) and that they reflect complete, end-of –construction expenditures.

It actually surprises me that your list is ONLY 354 lines long. Many buildings have far more components. However, if your stadium is mostly open-air with few interior finishes, the number of materials seems more reasonable. The investigation described above should either confirm that your list of material costs is complete or help you to identify omissions and make the required corrections.

I got some clarification on this at Greenbuild this week. Michelle, I agree with you, but the confusion arises if you are using Actual material costs for the denominator (not the 45% estimate), how else do you prove that total value for the project, if not by using (and showing on the spreadsheet) the sum of all the materials on the project? However in that case the "Total sustainable materials cost" wont the sum of only the rows contributing the sustainable criteria, but rather the total material cost. The former is irrelevant for NC and CI projects and misleading, as it is neither the numerator nor denominator of any calculation for any credit. It's merely for the reviewers to gauge for completeness. They need to make a checkbox or something that indicates if a line item is contributing to the numerator, and have E19 sum up only those values.

I have to admit that I’ve never used the Actual Materials Cost method because I think it too time consuming. However, I’ve never been asked to prove the value shown for the Total Construction Cost (of which the 45% value is derived). I would think that the reviewer would be looking at the Total Estimate Project Budget you enter into PIf2 and seeing if the Total Construction Cost or Actual Materials Cost seems reasonable in relation to the entire budget. I would think you would keep a separate spreadsheet of the materials for your Actual Materials Costs for backup/proof. (I would only upload it if asked in a review comment.) I keep one to back up the Total Construction Cost but have never been asked to produce it. I don’t think that the BDC MR Calculator is not meant to be a repository for a breakdown of these overall costs. It is meant to document materials contributing to MRc3-7.

I don’t enter anything into the B. Inputs worksheet unless it contributes to MRc3-7. (I would suggest keeping this worksheet clean and straightforward.) That is what the Sustainable Materials Cost total represents. The Total Construction Cost is entered on A. Instructions and 45% is carried over to the B. Inputs worksheet for Total Materials Cost. (If you select Actual Materials Costs on A. Instructions, then the Actual Materials Cost is carried over to the B. Inputs worksheet for Total Materials Cost.)

FYI: I think Sustainable Criteria Value cell sums up the numerator for each credit as you suggest (Column L for recycled for example).

Marcio—It looks as though you may have it all sorted out.

Marcio/Geoffrey/Michelle—When I have used the “Actual Material Cost” method in the past, I have not required contractors to provide an item-by-item cost breakdown of every single material to substantiate the reported total. Instead, I required them to track invoices more generally at the CSI Division or Spec Section level, providing more detail only for major components relevant to MR Credits. This has avoided the nightmare of tracking costs for thousands of products individually.

Reviewers have not required me to prove the total value for the project by providing a complete list of all material costs on the Credit forms. They were satisfied only to see the contributing materials. However, time has passed. The forms have changed a bit and so may have GBCI review standards. (Marcio’s review comment suggests otherwise.)

I agree with Michelle's advice to keep Tab B clean and straightforward. On the other hand, in light of Geoffrey's comments, if I had to do it now using the current MR Calculator spreadsheet, I might include a few entries on Tab B with titles such as “Miscellaneous other Div. 04 materials” to cover the costs of the numerous non-contributing minor materials. This could show how we calculated the Total without the numbing detail of a 3-thousand-line spreadsheet. I would hope that the Review Team would find this acceptable.

Fair enough, but that begs the question, how to you get your "Total Installed Cost" to which you apply the 45%? I'd make an argument that it isn't the total contract value, because my interpretation of "Total Installed Cost" is only hard costs, i.e. delivery, labor and material. I'd argue that there are soft costs in subcontractor scope such as engineering, permitting, shop drawings, bonds, insurance, performance mock-ups/testing, etc that wouldn't be included in the "Total Installed Cost." For this I would use the Schedule of Values to extract only the delivery, labor and material values, and take my 45% from that. If the Schedule of Values is detailed enough to break down material costs (which it can be, if you direct them to in the beginning), then it's even easier. Any thoughts on that?

Geoff—You are right that you should base the “45% Default” only on hard costs (and only for the stipulated CSI Divisions), not on the Total Contract Sum. Ideally, the contractors’ Schedules of Value would itemize all those general & administrative cost as part of “Front End” (CSI Divs 00 & 01) costs, but somehow, many contractors insist on clumping soft costs into the later, technical Sections.

I agree too that, in a well integrated project team, the Owner, Architect, & Construction Manager should be able to craft the language in the “Measurement and Payment” provisions to require Schedules of Values, Pay Application, Change Orders, and other construction cost instruments to break out costs as required for LEED. This would eliminate many of the omissions, contradictions, and duplications of effort that result when LEED teams try to track costs on their own.

Unfortunately, many construction teams see LEED cost tracking as an extra burden outside their scopes, and many LEED APs are outside their “comfort zones” when discussing construction accounting, SoV’s, and the like.

I think one of the reasons the default value option is given is so that you don't have to pick apart the GC and subs' costs. My experience has been that the costs in the stipulated CSI Divisions and Sections for the MR credits (currently CSI MasterFormat™ Divisions 03–10, 31 (Section 31.60.00 Foundations) and 32 (Sections 32.10.00 Paving, 32.30.00 Site Improvements, and 32.90.00 Planting) are hard costs. Since I have been working on LEED projects for 14 years, I have always taken the entire cost of the rating system version stipulated CSI MasterFormat Divisions and Sections for the MR credits and then taken 45% of that cost to arrive at the default materials cost.

I have been unsuccessfully trying to get a discrepancy resolved in the Reference Guide since I first noticed it in November 2013. Please see my 11/14/13 post below- http://www.leeduser.com/credit/NC-2009/MRc4?all-comments=true#comment-45037 regarding subtle language difference that relates to this discussion.

Michelle—Is there really a discrepancy?
Your 2013 post notes that one page of the LEED-2009 Reference Guide calculates the 45% Default from “total construction cost (hard costs only)” and another page calculates the Default based on “total construction cost (including labor and equipment).” Both instances reference pulling cost only from CSI Divisions 03-10 and a few Spec Sections from Divisions 31 & 32.

As you just noted above, the referenced CSI Divisions 03-10 and those few Spec Sections from Divisions 31 & 32 ARE “Hard Costs.” “Hard Costs” are the costs (including labor and equipment) of the tangible, physical, permanent construction—the “architecture” of the project.

“Soft Costs” are for fees, insurance, mobilization, and various other intangibles such as Geoff lists in his post above. Most construction documents specify these “General & Administrative” requirements in CSI Divisions 00 & 01.

Therefore, the Reference Guide seems to be saying the same thing twice, just in different ways.

Incidentally, I have found an AIA resource with excellent graphics delineating construction cost terminology: http://www.aia.org/aiaucmp/groups/aia/documents/pdf/aiab097618.pdf.

My frustration has been that, when contractors & estimators compile their Schedules of Values and preliminary construction estimates, they often clump soft costs in with hard instead of itemizing them separately under CSI Divisions 00 & 01. This inflates the “Total Construction Cost” for Divisions 03-10 (etc.) and skews the 45% default results unfavorably.

Geoffrey suggested in his October 27 post that a project could require contractors to break out costs as needed for LEED on their Schedules of Values and Pay Applications. If contractors did so, teams could extract the “Total Construction Cost” or “Actual Material Cost” (on Tab A of the MR Calculator) directly from Pay documents with minimal effort. By eliminating the need for contractors to submit separate (and possibly contradictory) cost breakdowns for LEED, the timesavings could be substantial. (Tracking of individual costs for contributing products would still be necessary for input into Tab B.)

In practice, many projects require contractors to break out and track material &/or labor costs as a matter of course to demonstrate compliance with tax laws or fair labor practices. If this is the case, the “Actual Cost” approach would require little extra work.

These integrated methods DO require some advanced planning and coordination between LEED administrators and the rest of the project team.

Dear All,
I'm carrying out the Calculator MR section for the contractor. I'm using Total Construction Cost at tab A. Which cost should I fill in total constrcution cost? All contract cost (including MEP works, tax, operational overhead, profit) Or only direct cost (excluding MEP works, VAT, etc..)?
Also how to put in put in Material Cost tab B, is it cost by contract to subcontractor (including tax, and installation service)? However, the contract is only stated the lump sump condition and don't have the break down value (hard cost and soft cost).

Yodi - Per the asterisk on tab A. Instructions, insert the cost of CSI MasterFormat Divisions 03-10, 31.60.00, 32.10.00, 32.30.00, and 32.90.00 only. (I think this is what you are referring to as the direct cost.)

In order to pursue these MR credits, you have to get the cost of the contributing materials themselves to insert on tab B. Inputs. This is the cost to deliver the materials to the jobsite - including tax and delivery. You only need the cost of the materials that contribute to these MR credits - not the cost of every material on the job. For instance, if you are claiming recycled steel, then you need the cost of the delivered steel itself (in addition to the recycled content percentage) for tab B. Inputs. Hopefully your LEED project manager spelled out the need to break out the cost of materials via a Sustainable Design section in Division 1 and provided a form to help you gather these costs from subcontractors.

Note: If you were a LEEDuser member (and not a guest), you could access the Documentation Toolkit above, which would give you access to the Environmental Materials Reporting Form - if you don't have one already.

Marcio,

Did you submit your revised spreadsheet? What was the outcome?

I got this same comment and sent an inquiry to my review team their response below:

The Total Materials Cost includes all materials installed on the project (within the divisions covered by this credit). Typically, project teams only include the materials contributing to the MR credits in the calculator, so the Total Sustainable Materials Cost is typically substantially lower than the Total Materials Cost. When a reviewer sees those costs equal to one another, it's an indication that the Total Materials Cost may be misreported.

Please verify that the Total Materials Cost includes all relevant materials, including Divisions 31 and 32. If this does not change the value, please provide a narrative confirming that all materials were included in that cost.

Erika - I'm sorry we didn't hear back from Marcio on this.

I am hopeful you are able to get this issue resolved. Please keep us informed of the outcome.