Construction cost estimate and related errors

Errors in the valuation of construction works

I guess everyone will agree, it’s difficult to find a valuation of construction works or costs estimate without any errors. Practically the bigger project, the better chance of making them. It’s often assumed, that the loss of incomes is caused by unforeseen circumstances, over which we have no influence. But are we sure?

I’d like to draw attention to a few exemplary errors found in  valuations of construction works:

  1. Lack of transparency and detail – Details of each element of the order when paying attention to transparency and clarity translate to the precision of the further work on cost estimate.
  2. No use of calculation patterns – Having a database of historical and well-priced projects, we can be boldly going back to their costs and creating “trustworthy” algorithms, scripts or computational pointers. For an example, if labor cost stand for 30% and material is for 10% of all costs, selling price should likewise reflect these percentages.
  3. Lack of awareness in self-esteem – When we are looking realistically at our knowledge and experience, we know which areas are our specialization. When we’re describing our competences precisely, we’re able to foresee which part of the valuation of construction works may be burdened with bigger estimation error.
  4. Lack of supporting system – There’re many tools on the market, made for help in creating valuations of the construction works and cost estimates and also to store history of implemented projects. The most helpful are those which makes it possible to create your own database of scopes of work matched with costs. Such a solution gives the possibility of making a good valuation in relatively short time.
  5. Poor risk assessment – Basing on the database mentioned previously, we need to analyze dangers that are lurking there. By analyzing a new cost estimate in this regard we can avoid recurring errors. An increase in construction costs may not only be caused by material or crew, but also by external factors like traffic or project place’s availability under the angle of environmental town planning. 
  6. Chaos due to rush – It’s very often that changes in cost estimations made at the last moment generate a lot of errors, which are multiplied and translate to huge loses.
  7. Bad material pricing – Taking economic situation into account, material costs fluctuate a lot, or basically gallop. This creates issues of estimated nature, specifically for the long-term projects.
  8. Using wrong units of measurement.
  9. Wrong pay rates for work.

 We see that making a good valuation of construction works, especially when for bigger projects, demands paying attention for a lot of aspects. Companies decide to prepare such an estimate by external company often. However, if you’re implementing this in your own range, it’s good to invest in time and reliable tools on the beginning of the work. It’ll translate to income and profitability of our projects. To tell you more, some of the elements of the valuation are going to evolve and change with experience gained. So you need the support of the IT system like the Contractors.ms which is going to gather all those information for you, and all future cost estimates will be burdened with lesser risk of making an error, when based on them. The system also registers issues that arose on site and duration of works among others. Those information will certainly be needed when creating cost estimates in the future.