Last Updated on December 2, 2021 by Construction Digest
Most construction managers and owners can tell you that their job estimation process is far from perfect.
Analysis of the extremely detailed datasets collected in the field by PCMS™ (Precision Cost Management System) has shown that estimators for a typical U.S. single-family home go through an average of eight iterations to come up with a final quote.
To help improve your own estimate process, we identified tips critical to better accuracy when estimating costs for construction projects.
1. What is the scope of work really?
The work that needs to be done on a construction project can vary greatly from one job to the next.
But, often times estimators aren’t sure exactly what will need to be done until they start digging deeper into the project.
According to our data, this issue was key in many jobs where the final costs were underestimated by as much as 30%.
To identify all of the activities involved with a job and their corresponding cost, you need a plan for scoping out each individual task.
Determining all of the intricacies up front makes it easy for an estimator to brush up against or even exceed their own quote tolerance limits before he or she starts creating any meaningful quotes.
2. Know your job’s intricacies
Job intricacies are the details of a project that an estimator does not see at first glance.
Sometimes, they can even stem from seemingly harmless or inconsequential items found in the scope of work.
For example, a 5-gallon bucket listed as part of a daily job site cleanup, it turned out that there were over 3,000 buckets to be used every day during the ~2 month construction period.
These types of complexities play a big role in underestimating jobs because you never know when another activity might look straightforward on paper but actually takes three times longer than expected (e.g., cleaning up after workers).
3. Check your equipment needs
It’s important to make sure that the necessary equipment to complete the job is available.
If you don’t have enough equipment, then you may need to hire more subcontractors which increases your costs.
Furthermore, if the subcontractors are not readily available during peak times of demand (e.g., summer in southern climates), your costs will increase even further due to increased prices from market competition for those same resources.
And lastly but most importantly, if you ordered the wrong type of equipment, you may have wasted time and money because once ordered it can take months before replacement equipment arrives.
4. Know how to estimate well
As much as we’d like it to be true, there is no substitute for experience when accurately estimating a construction project.
Seasoned estimators know what questions to ask, how to get the information they need, and which resources are required.
Newer estimators may find it helpful to look at past jobs for similar projects, talk with more experienced individuals in the field about best practices, or even shadow an estimator on a job site.
5. You have three days
Estimators are typically given 3 days to come up with quotes after receiving the scope of work from contractors on any given project.
From our own analyses of hundreds of thousands of estimates across dozens of trades over several years, we’ve found that most inaccuracies occur within the first 72 hours while scoping out a job – during this time you should be talking with subcontractors about their availability while also gathering materials costs.
After 72 hours, inaccuracies tend to average out much closer to actual costs.
6. Make sure your subcontractors are available
It is imperative that you make sure all of the subcontractors you plan on using for a job are actually available during the dates and times agreed upon.
Poor planning can easily result in higher construction labor costs if any given sub is not readily available when needed.
And lastly but most importantly, remember that once contracted with one subcontractor, it can take sometimes weeks or months before they have availability again – so check early!
7. Know what materials are being used
Not knowing which materials are being used on a job can be costly – especially if these items aren’t readily accessible by other subs working on the project.
This is especially important if you’re trying to shop around for the cheapest price on a particular item since prices can vary greatly depending on where you buy it, when you buy it (e.g., purchasing early in construction versus closer to completion), and which companies are supplying them.
8. Show subcontractors your design
When working with subs, they often look at your plans and try to figure out what’s going on without any direction from you.
Sometimes it helps to give them some guidance so that they understand what materials and equipment and needed and how everything fits together.
Additionally, this task requires coordination of multiple subs working throughout the architectural/engineering process – including designers, drafters, architects, engineers etc.
If everyone isn’t on the same page, getting a job estimate to a client quickly and accurately can be an uphill battle.
9. Be prepared for change orders
Having accurate estimates is especially difficult if you don’t know what changes may come along during construction.
Change orders often result in higher costs due to added time, materials, equipment etc.
In our own market analyses of thousands of jobs with all sorts of different projects (commercial vs. residential), we’ve found that having accurate estimates becomes much easier once you’re past the halfway point of the job.
Both from a capacity standpoint as well as from a completed area standpoint – since scope tends to become more fixed after initial building completion.
10. Know your capacities
Being able to accurately quote a job time and again requires you to know your capacities.
Including how much time is required per trade for different tasks such as installing drywall, painting, and flooring.
Understanding these concepts goes well beyond construction labor. As a construction project manager, the more you do it the better you get as it.