Whether it’s a small house or a huge commercial building, every construction project starts with cost estimation. Accurate cost estimation serves as the foundation on which stakeholders can base their decisions. With strict schedules and financial constraints, cost estimation helps ensure that the project is delivered on time and within a reasonable budget.
Cost estimation involves looking at the construction project and identifying the tasks required to complete itt. Then, estimators will determine the amount of money, resources, and time needed for each task to prepare the timeline and the project’s total cost.
Cost estimation is one of the most critical aspects of a construction project. Overestimating or underestimating a project can have serious consequences for your construction business. So before you bid, here are some of the best practices for construction cost estimation that you need to know.
1. Factor in risks in the estimate
The primary goal of project management in construction is to deliver the project on time and within budget. In the duration of a project, a lot of things can go wrong even with proper planning. It is prudent that estimators identify potential risks that can affect the successful delivery of the project and impact its total cost. While it is always good to hope for the best, project managers should always be ready for the worst and include the risk in the cost estimation.
For example, if the project happens during a season forecasted to have bad weather, managers need to account for delay and even weather damage. The financial situation of stakeholders and market stability also add an uncertainty factor that needs to be considered. Finally, the availability and level of detail of a project design as well as the size and type of the project can influence the accuracy of cost estimation.
Failure to include risk in your cost estimation will jeopardize your ability to finish the job. So always watch out for surprises and have some margin for time and budget as a buffer in case things go south.
2. Break down tasks into smaller parts.
Huge and complex construction projects are always overwhelming to manage. It follows then that estimating the cost of such a project is a challenging feat. So instead of tackling big chunks
of the project, managers should break down big, elaborate tasks into smaller, more digestible ones.
For example, instead of estimating the cost of a bathroom renovation as a whole, you can break it down into its components—buying new tiles, paint, and bathroom fixtures, finding a painter, painting, installing new tiles and new fixtures, looking for faults, etc. This way, the cost estimation process will be easier.
Breaking down tasks allows you to have a top-down perspective of the project and identify the steps that lead it to completion. You can then detail the time and resources needed for each task. A more detailed task breakdown leads to a more precise and accurate estimate.
3. Leverage construction estimation software.
Cost estimation in construction is a time-consuming task and it grows even bigger with the scope of a project. If you are going through a bidding process, which you most likely are, then your cost estimation speed is a huge factor. Clients want to get estimates quickly. Especially for industrial and commercial construction projects, they are less likely to wait for weeks just to get your estimate.
So how do you get an edge over competitors? By using construction estimation software, you can improve the speed and accuracy of the cost estimation process. The traditional process pen and paper estimation, as well as spreadsheets, is accelerated by automation. In addition, cost estimation software reduces the instances of human error, making the final estimate closer to the true cost.
Cost estimation is stressful for any project manager. As it involves literal guesswork, one wrong estimate can be the difference between getting the project and not. But as long as you practice these techniques for cost estimation, you can be confident with your estimates and deliver the project successfully.
About the Author:
Patrick Hogan is the CEO of Handle.com, where they build software that helps contractors, subcontractors, and material suppliers secure their lien rights and get paid faster by automating the collection process for unpaid construction invoices.