Oversights in cost estimations create headaches through the entire lifespan of a project. It can also stop a project dead in its tracks – and that’s likely after investing serious time and money.
But where do construction cost estimating errors typically stem from? From our experience, some common culprits can be traced back to bad data, which can be from outdated cost books or simply a lack of information.
At PT&C, our team of experienced construction professionals are devoted to avoiding cost estimate mistakes. This includes up-to-the-minute cost data specific to geographic location, modern practices, and on-site research.
And they have some cost estimating tips that can help you avoid typical mistakes in construction cost estimating – no matter the size of the project or the budget flexibility.
Mistake 1: Not Visiting the Project Site
A good rule of thumb is to expect the unexpected. The best rule of thumb is to visit the project site so you know exactly what to expect.
One of the most common (and costly) oversights in cost estimations is failing to visit the project site. If that’s not an early aspect of the estimation, it can be far past the point of no return by the time you find out something is off.
Make sure to analyze the job site as early as possible. In certain situations, it’s even better to visit the site multiple times to check its status and ensure there’s no change. This is especially important if preparation for your job is performed in phases; for example, a building needs to be demolished and cleared before you can begin.
Visiting a job site that’s not what it is on paper isn’t necessarily a costly estimating error – unless you visit the job site after the estimation. Then it could be catastrophic, an outcome that’s incredibly easy to avoid.
Mistake 2: Overlooking Costs Details During Estimation
The only way you can fully trust your data is if you fully trust the source. While we ensure all PT&C CostBook data is updated constantly to reflect accurate material and labor costs specific to the location, we understand that we’re not the only option.
And an extremely common and equally costly oversight in cost estimations is trusting data you paid for.
We’ve all been there. It’s far easier to simply use what’s there rather than double and triple-checking every line item on your material takeoffs (MTOs).
Some of the reasons why a lot of cost estimation services don’t offer an accurate estimation include:
- Ignoring less-obvious costs that come with specific situations.
- Basing labor costs on national average and inflation rather than specific location.
- Not basing labor costs on modern technology, such as new machinery.
The more projects you complete, the more data you have. Don’t hesitate to use that data to inform your next cost estimation. One of the best cost estimating tips we can give you is trusting your experience – and flagging anything that doesn’t match that experience.
Mistake 3: Inaccurate Market Conditions
Current market conditions in construction are essential anytime, but it’s especially crucial in the wake of COVID-19. Demand is expected to skyrocket, particularly for residential properties and healthcare facilities.
Further, the demand for remote working will likely remain at an all-time high for the foreseeable future, and the expected bounceback of the economy will open up a wide range of new opportunities.
Ignoring current market conditions leads to cost estimate mistakes. The availability of certain material cost changes or laborers can affect the timeline. The changes in regulations, particularly for health precautions, will also be a major factor.
Our data at PT&C is focused on geography to narrow the current market conditions to reflect specific areas as well as the national trends. This helps diminish estimating errors while optimizing efficiency at every level.
Mistake 4: Not Assessing Risk and Contingencies
Of all the costly oversights in cost estimations, not assessing risk and contingencies can be the most devastating. This is a key aspect of cost estimation and can greatly affect the final number.
The beauty of investing in risk assessments and contingency plans is that when things go right, that usually means leftover money for reinvestment.
But more importantly, taking these factors into account avoids enormous costs later on that can go well beyond even the most conservative estimates.
Mistake 5: Relying Entirely on Software
However, you still must have an expert who knows what the project needs.
Relying on software to get the estimations right is an increasingly common mistake in construction due to the increasing quality of the available software. But while we believe our software is the best of the best, we still emphasize the fact that our clients still need an electrical engineer, civil engineer, mechanical engineer, and so on.
Great software is important. Expertise is essential. The perfect combination involves experts who perform better thanks to great software.
Mistake 6: Thinking You Can Avoid Cost Estimating Errors
You can minimize common cost estimating mistakes. You may even pull off a near-perfect estimation every now and again. But we don’t want these cost estimating tips to imply that perfection is possible.
You still need to expect the unexpected, even if you avoid every potentially costly oversight in your cost estimations.
During the cost estimation process itself, be willing to forgive yourself and your team for any mistakes. Until the estimation is finalized, it’s all part of the process, and catching something wrong is a success, not an indication of failure.
Bonus Tip: Optimization Can Make All the Difference
No matter what your workflow looks like, spreadsheets or software, make sure that you have a way to address collaboration and organization that benefits each individual worker as well as the team as a whole.
Some of the key factors for effective cost estimation optimization include:
- Status updates and progress tracking.
- Consistent formatting across all data presentations.
- Easy communication between teammates.
- Reliable, updated cost estimation data specific to your project’s location.
If you have the best process alongside the best data, you’ll have the best chance of avoiding costly oversights in your estimations.