Construction cost estimation estimates how much it will cost to construct a facility for owners, developers, or other potential buyers. Construction costs often change during construction because of various variables such as contractors’ bids, changes in design scope or client requirements; overruns; liquidated damages clauses; and overall market conditions such as commodity pricing. For construction purposes, cost estimates are not intended to represent the building’s total construction budget; rather, they are set forth to demonstrate the feasibility of a design and are used for various purposes, including funding the construction project.
8 Common Mistakes to Avoid in Construction Cost Estimation
1. Not Conducting a Site Visit
Inspecting the site and gathering data for construction cost estimation before construction begins is important. Workers should be employed, equipment acquired, and materials stockpiled before the contractor arrives. Even if a landowner or developer has an architect/engineer hired, it is still important to look at the site and gather information for construction cost estimation.
2. Failing to Assess Risks & Creating Contingencies
A construction estimate should be prepared from the perspective of contractor pricing and not from the landowner’s or developer’s perspective. Most clients want to get the best deal possible on all aspects of a project – including construction cost – and will ask their contractors for price reductions if bids come in higher than expected. Hence, it is essential to understand and appreciate the risks and contingencies involved in a construction cost estimate.
3. Applying Least Cost Analysis
It is important to check whether the construction cost estimate prepared by a contractor can be justified assuming that all subcontractors have bid at least cost and the construction supervisor has ensured that efficient teamwork has been established for each subcontractor. If it is impossible to meet this objective, an alternative work method is needed. An example would be to order all materials online from a strategic vendor rather than relying on various vendors in a local area for these materials.
4. Making Assumptions
Reviewers of construction cost estimates should check whether the engineer/architect has used conservative assumptions in the cost estimate. A more complex design than the others can also adversely affect the price of a project. The cost estimate should be realistic, and reviewers should consider if trimming down any of the items is possible.
5. Neglecting to Perform Feasibility Studies
Project designers need to assess briefly how the facility will be constructed to determine if equipment, materials, workforce, and time are available or easily accessible and assess how efficiently workers can be scheduled and supervised.
6. Not Reviewing the Contractor’s Estimate
The cost calculator should review the contractor’s and subcontractor’s estimates for accuracy, completeness, and organization of the work breakdown structure. The construction estimate should also be reviewed to ensure all required information is included. It will help the cost calculator know how to break down a project into its basic components and determine which items are more difficult or less likely to change compared to other parts of the project facility.
7. Not Using Appropriate Methods
The methods used in construction cost estimates differ for each facility type. They can be categorized into procedures related to facilities and equipment, those that are related to projects, and those that involve materials.
8. Not Considering Changes During Construction
It is important to check for changes during construction that could affect the cost of a project. These changes may include a change in the scope of work, a change in plans or designs for a specific part of the work, or an increase in materials needed compared to estimated costs when construction began.
The construction cost estimate should be a realistic assessment of the project’s total cost; however, it is important to note that many things can affect costs during construction that go beyond the contractor’s control. To avoid these mistakes, construction quotes should be obtained before the start of construction, and construction schedules should be prepared in stages to facilitate cost control during the actual work. You can also use remodeling estimate software to help you manage the cost of your next project more accurately, with zero percent error and the ability to export the data for BIM modeling.
