There is therefore a need for the contractors and construction firms to work towards improving their project estimations to avoid cases where the budget and time allocated to a project are exceeded. Thus, underestimation of projects may result in a situation where one is left with no money, while over-estimation means loss of bid. Therefore, estimates play a critical role in any project as it aids in determining first-time estimates.
What is Project Estimation?
Project estimation is a technique that enables an organization to predict the time, cost, resources, and effort, which is necessary to carry out construction projects. These are nothing but the approximate costs of materials to be used, human resources that are required for the work, duration of the project, etc., all of which are calculated with the help of blueprints, scope of work, geographical location, legal requirements, and other such factors. The estimate used here is the overall cost of the project which is known as budget.
Types of Estimating
There are several ways to estimate construction projects:
- Analogous Estimating: Evaluating based on the cost of actuals of a similar project type carried out in the past.
- Parametric Estimating: Employing the characteristics of the project in the establishment of a mathematical model of estimation.
- Bottom-up Estimating: Converting the bid into a bottom-up approach where every material and each task are quoted before arriving at the total.
- Vendor bid analysis: Converting bids of subcontractors and vendors towards cost comprehension.
Electrical Takeoff Services and commercial estimation services are two of our competitive service offerings that focus on bottom-up estimating and vendor bid analysis.
Why Accuracy Matters
It is important to estimate accurately since budgets are made from these estimates and the whole project must follow this budget. Underestimation is therefore risky because it eliminates any allowances for such costs, which will see the project exceed the estimated cost. Overestimating is also adverse when it comes to the bid for the specific contract because it is not competitive enough.
Common Estimating Pitfalls
Many factors can lead to inaccurate estimates and cost overruns:
Unanticipated Conditions: Project plans do not necessarily reflect certain existing conditions.
- Fluctuating Material Costs: In this case, the increased material rate during the project is due to more volatility than stability in material prices.
- Incomplete Design Documents: The omission of details in plans makes quantities difficult to compute
- Poor Communication: poor interrelated and integration between teams and disciplines
- Scope Creep: Escalating the project scope without providing matching funds.
There are several approaches to consider when attempting to enhance the accuracy of an estimate:
Here are proven techniques our Residential Estimating Services team uses to create accurate project estimates:
1. Define the Scope
Avoid allowing projects to change as the estimating is being done by locking down the scope and plan of the project.
2. Check Historical Data
Compare the cost of similar previous projects to better estimate future expenses of the project.
3. Add Contingencies
Pad estimates with 10-20% more as some contingency to help in case of extra expenses are encountered.
4. Conduct Risk Analysis
Try and understand risks such as delays in permitting to introduction of contingencies where they are most required.
5. Regularly Update the Estimate
When adding more details to the design, ensure to update the estimate to encompass the new details.
Benefits of Good Estimates
Investing resources into proper Commercial Estimating Services leads to major benefits:
More Competitive Bids: Comprehensive estimates help contractors provide reasonable though profitable bidding prices.
- Well-Planned Budgets: Solid budgets that have been prepared from estimates provide the necessary financial framework for the execution of a team’s projects.
- On-Schedule Completion: Estimates with accurate time frames assist in managing projects by presenting achievable goals regarding realistic timelines.
- Improved Resource Management: When it comes to labor and material necessities, precise forecasting contributes to the enhancement of business processes organization.
- Increased Profitability: Good estimating always ensures that the contract price adequately provides for total costs and margins.
Conclusion
Criticisms of cost estimating studies have revealed that to achieve on-time and on-budget construction project completion, adequate front-end estimating is crucial. Failure to avoid common mistakes in estimation and rather opt for best practices is one of the biggest causes of extra unnecessary expenditures that lead to cost overruns. Appropriate estimation for each project assists contractors in enhancing the efficiency of the employees and the contractors, satisfaction of the clients, appropriate profit margin, and better position of contractors for future contracts. Consult with one of our experienced estimators today for your next project.
