Estimation refers to the technical process of foreseeing the construction costs. Unfortunately, cost overrun is one of the construction industry’s grim realities. There are several scenarios that lead to underestimating the actual costs of development.
Although common, there are many ways to avoid committing these errors and bringing value engineering onboard.
Construction Estimation Errors
1) Accidental Omission
Believe it or not, but all omissions in the construction are accidental unless someone deliberately omits an item to compromise the project. Although the latter warrants litigation, there are soft and hard costs that are excluded by mistake.
It is easier to address soft cost omissions like permit fees than hard costs since these expenses are directly related to the construction processes. These are the items missing on the plans and aren’t specified. Thus, they are not included in the estimates.
What to do: Use a good checklist or a detailed plan and specification. Construction estimation software can also be quite useful.
2) Wrongful Assumption
Similar to false benchmarking, wrongful assumptions are mere guesses and unfounded at that. These are the items you think are already covered in the bid but are not. Nonetheless, assumptions can happen not just on specifications, but also apply to logistics, methods, schedules, etc. They are inaccurate and open to other parties’ own guesses, which may render the estimation useless.
What to do: Communicate with other parties clearly, especially with the sub-contractors; make sure all parties know what are expected of them based on the plans, specifications, and contracts with full descriptions of the scope of work
3) Inadequate Allowance
A euphemism for wastage, inadequate allowances refer to inaccurate measures. Unscrupulous bidders use this tactic to win contracts. The problem with this is the future shortage in the materials or the time to do all the necessary works. Both impact the quality of the construction as well as the constructed building itself – all because of the failure to consider sufficient allowances.
What to do: Put realistic allowances based on the actual quality level of the output or pick materials early on and based the estimates on these
These are just three of the most common reasons for cost overruns. The key is to be proactive about the entire process. Preemptive measures must be considered primarily and not necessarily corrective actions.