Why Accuracy is Important in Construction Cost Estimation
Every construction project is unique, which is why construction cost estimation must be carried out individually for each project. Inaccurate estimates can be detrimental for construction projects, so it’s important to create estimates as accurately as possible.
This post will discuss the problems that can arise when overestimating and underestimating project costs and highlight ways to improve your estimating accuracy.
It’s not just underestimating costs that can have an effect on construction projects, overestimating can actually cause problems too.
Initially, the client may not continue with the project, based on the belief that it will be too expensive. If your estimate is inaccurate, you may have missed out on potential profit. Similarly, if you overestimate the costs, you are likely to lose in competitive bidding if your competitors produce a more accurate estimate.
Underestimating project costs and not considering any unforeseen expenses during a project can be detrimental to a business. If a project ends up costing more than you were originally expecting, it is likely that you will at least make less profit, or in some cases you may even lose money over a project.
The profitability of a project can be skewed due to underestimating costs, and it could mean you are taking on unprofitable jobs that could have been avoided with more accurate estimating.
Tips for More Accurate Construction Project Estimates
- Be as detailed as possible
One of the key ways you can increase the accuracy of your estimates is by being as detailed as possible. This involves taking time to calculate all the materials and labour costs required to complete the job, including how many hours it is likely to take. By considering even the smallest of details, your estimate is likely to be much more accurate.
- Define project risks
When starting the estimating process, it’s important to consider anything that could go wrong during construction. This could be done by looking back at old projects and seeing what risks they faced. By accounting for project risks when estimating it allows you to increase your overall estimate accuracy.
- Understand product and materials price fluctuations
An integral part of construction estimating is calculating material costs. In order to increase estimate accuracy, it can be helpful to understand price fluctuations. This can be done by considering factors such as demand, delivery challenges, seasonal limits and whether you need any custom materials.
Gaining a better understanding of product and material pricing can help you increase the accuracy of your estimates.
- Compare Subcontractor quotes
It is recommended to always compare more than one subcontractor for each specific scope of work in a project. It can be beneficial to use a subcontractor that can provide you a firm estimate based on project scope. By doing this, your own estimates will be more accurate based on labour costs.
- Use estimating software
No estimate is ever going to be 100% accurate, however using estimating software can definitely help to improve accuracy.
Our estimating software, esti-mate, can use digital pricing libraries, templates, and data from previous projects in order to quickly produce more accurate estimates. Our software also allows you to easily compare subcontractor rates in a variety of ways, automatically updating the estimate based on who you choose.
If you would like to see how esti-mate can help you produce more accurate estimates, download your free 20-day trial here.