Tips for Accurate Construction Estimates: How To Avoid A Cost Overrun
When the Channel Tunnel in the UK was commissioned for building in 1988, no one expected its total cost to balloon to a staggering $21 billion. In fact, this final figure was 80% more than the expected price and remains to date among the highest cost overruns in construction history.
This just proves that anyone, including governments and large organizations, is prone to a cost overrun. If that were to happen, say to your project or one that you’re overseeing, yours would fit into the 90% of projects that go overboard, according to the International Journal of Innovation, Management and Technology. However, you can still shift to the 10% club by sticking to these tips:
Conduct Proper Project Planning
Before executing a project, the most effective method for preventing cost overruns is planning against them. The more detailed and precise your estimates are, the more likely it is that you will adhere to your budget. For accurate estimates, go to CostCertified.com.
It’s also advisable to insure your project against potential risks by putting in place a risk management plan. You can do this by considering all possible outcomes using historical facts, interviews, and experience. Once the plan is complete, ensure that all parties involved in the project sign off on it to ensure everyone is on board to avoid a cost overrun.
Build a Relationship With Your Suppliers
It’s common for projects to rely on third-party suppliers for either specialized support or the provision of certain supplies and tools. When working with a third party, project costs may quickly spiral out of control. Therefore, it is essential to do thorough research before committing to any new partnerships.
Check the vendor’s capabilities and see whether they can handle your demands. Verify the accuracy of the vendor’s price estimate. Then, before signing the contract, conduct some research on the vendor to find out whether they are reliable and if their previous clients were satisfied with their services.
Stay Within the Planned Scope
One of the leading causes of project expense overruns is “scope creep.” This can result from stakeholders, clients, or team members requesting changes. It’s possible that many of these will be useful additions to the project. However, too many adjustments may significantly affect the project, leading to an inevitable cost overrun. As such, it’s important to take a step back and consider the larger picture before expanding the project scope.
Include Some Wiggle Room
Studies show that humans tend to have unrealistically high expectations about their abilities. This tendency to overestimate how little effort is required leads to unpleasant surprises. It’s probable that your first guesses, like everyone else’s, will be a little too optimistic. That’s why it’s crucial to include safety nets, which in this case can be extra time and money beyond what was originally planned for in the budget. The standard recommendation is to increase your project’s scope by at least 10%.
Use Cost Estimating Tools
Since humans are to error, attempting to estimate the price of a construction project manually exposes your company to significant risk. A blunder may derail your company’s finances, slow down your staff, and even damage your brand’s image. To avoid such problems, use construction estimating software.
Not only is the software beneficial in automating the cost-estimating process, but it can also help you keep track of expenses. It also allows you to present data to clients in a way that is clear, precise, and easy to grasp. This spares you from the hassle of rummaging through numerous printouts and sending out confusing emails and spreadsheets. Additionally, using the software’s reporting features, you may easily guide customers through the entire project.
Avoid a Cost Overrun From The Start
The most effective method for avoiding cost overruns is implementing sound project management principles from start to finish. At the core of these principles is having a comprehensive understanding of each stage and conducting a thorough analysis of the project.
You should also take into consideration all factors that can affect the budget. Lastly, embrace contractors estimating software to save you time and effort in administrative tasks and also portray a professional appeal to your clients. Adhering to these tips will go a long way in ensuring you complete your project successfully and keep those costs at bay.