We experienced great satisfaction this week observing completion of a University project that we estimated in 2020. It was completed under budget, during a time of extreme market volatility. Completion of construction projects under budget is no easy task, but is a result of consistent cost data maintenance.
Having What It Takes to Produce an Accurate Initial Project Budget
Producing accurate estimates is one of the most important aspects of job management and the key to every successfully executed project.
The purpose of cost estimation is to predict the quantity, cost, and price of the resources required to complete a job within the project scope. An accurate first budget for a project will be responsible for whether a project moves forward or is rejected.
Why are accurate estimates so important?
A recent study of Higher Education projects cited by the Project Management Institute found that actual costs were, on average, 28% higher than estimated costs. This is due to lack of visibility into job cost data on previous projects, eagerness to win a client bid, or internal pressures to get a project approved. It’s commonplace for businesses to underestimate the amount of time and resources that will be required to complete a project.
Seeing that cost estimates provide the foundation for planning the job’s schedule and budget, the accuracy of an estimate can determine if the project is able to meet its objectives.
Some of the benefits associated with producing accurate cost estimates include:
- More accurate planning: When you’re able to accurately predict what tasks and resources are required to complete work, you’ll be able to efficiently produce a work breakdown schedule, allocate funds, and communicate job progress to stakeholders.
- Improved profit margins: Several factors (such as unexpected events, poorly scoped work, and inflation) can cause job costs to increase throughout a job’s life cycle, which presents a risk to completing the work within budget and hitting profitability targets. Accurate estimating accounts for expected and unexpected costs and allows for market fluctuations. The end result is that it avoids surprises.
- Improved resource management: With greater insight into the tasks and timelines required to complete work, you can ensure you have the proper workforce needed to complete each phase, identify resource gaps, mobilize additional people, and schedule material deliveries as needed.
- Stronger client relationships: When clients understand the ‘why’ behind a project’s cost, they’re more likely to trust the Estimator’s expertise and identify with changes to the cost estimate as the project progresses, resulting in a more relaxed project management experience.
- Better reputation and repeat business: When projects are delivered on time and on budget, you’re likely to create happy customers, and satisfied stakeholders.
Accurate estimates start with accurate data
The key to creating accurate estimates is leveraging previous job data and learning from past projects. The Estimating Firm must periodically update their cost data to produce accurate future estimates.
It’s an Estimating Firm’s responsibility to be diligent about tracking all previous project costs, as well as material escalation and current market trends, and apply these ever-changing costs to each new project.
Core Services prides itself in maintaining accurate construction cost data by utilizing several resources and regularly applying updated information to our database. This results in the highest level of accuracy possible for each new project.
Let us show you how we apply our expertise to make your next project a successful one.