There's no single answer to what makes a construction project successful. Success can look different depending on your goals. But one thing most construction professionals agree on is this: a successful project stays on budget. Easier said than done, as the challenge of staying on budget isn't new, and it isn't going away. Experts have written extensively about the issue. One essential point everyone agrees on is: improving estimates during preconstruction.
After all, a good beginning makes for a good ending.
So, let's look at three steps that a General Contractor can take to help your team develop better estimates during preconstruction.
Gain a Thorough Understanding of the Scope
Understanding the scope starts by poring over the bid package. Is it complete and precise? Are there elements that require further explanation? Did the design team provide sufficient specificity (for example, the quality of finishes)? GCs need to get answers to their questions so that they can get a complete picture of the project scope.
Another document to consider is the technical or construction specs, as they help the estimators understand what work needs to be done in each part of the project, including concrete, masonry, plumbing, etc. The complex elements of the design/specs pose the greatest chance of causing issues and driving up costs when construction occurs.
To get a fuller understanding of the project, teams should visit the site in person. An on-site visit often reveals relevant information regarding soil conditions, access, utilities, etc., that are not visible in drawings or photos. Information gained from the field trip will influence construction and ultimately costs.
A material takeoff, an itemized list of every item and amount/quantity needed for the project, is a standard part of the estimating process. Its accuracy improves when based on the insights gained from reviewing the specs and visiting the site. Sharing this information with project teams, including specialty contractors, is invaluable. Their hands-on experience can help the team fine-tune the details, leading to greater precision.
Evaluate Labor Requirements/Invite Suppliers and Vendors to Submit Quotes
After the material takeoff, estimators need to evaluate labor requirements. This involves what roles are necessary on the project, how many labor hours are required to complete the project, and determining the productivity level the crew can achieve.
The information gleaned by evaluating labor requirements prepares teams to solicit bids from suppliers, vendors, and subcontractors. The team goes into the process with an expectation of the pricing they'll see. Once they receive formal bids, the estimate can be fleshed out further.
A wide bidding pool is an essential foundation for an accurate estimate. It also keeps costs competitive. When preconstruction teams rely on the same small set of subcontractors, vendors, and suppliers, it limits competition, which leads to inflated prices.
Teams need to know more than just the price that subcontractors, vendors, and suppliers submit to determine if they are a good fit for the project. They need better vendor qualification (capacity, certifications, past performance) to reduce the risk of quote withdrawal, renegotiation, or contract change orders. All of these snags would drive up costs and negatively impact the budget.
When a GC has access to subcontractors that can meet the needs of the project and their bids are fully vetted, they can create a more accurate estimate.
Include All Costs
Even the best recipe won't work if you leave out key ingredients. The same goes for estimating. It has no chance of accuracy if inputs are missed or skipped.
Teams should create a checklist to ensure they account for all costs. Once again, a thorough understanding of the project is necessary as some expenses aren't standard. Project-specific costs are unique and therefore tend to be more challenging to estimate. That's why it's essential to nail down the standards.
Non-construction costs like insurance, bonds, and permits are part of every project but can be challenging to estimate accurately. These expenses, especially insurance, can vary significantly based on market conditions, timing, and location. Relying solely on data from past projects can lead to inaccurate estimates and should be avoided.
Estimators and their teams can improve accuracy by doing extra legwork on these issues. That includes reaching out to potential clients (to clarify job-specific requirements), local authorities, and insurance providers to get current information.
Overhead and indirect costs, which are not part of the bid package, are also challenging to estimate. These expenses include temporary offices, administrative salaries, site security, software subscriptions, site cleaning, etc.
Again, using a checklist and reviewing historical data from similar projects helps ensure that all potential costs are considered. The team should update the checklist as plans develop during preconstruction to reflect new details and reduce the risk of missed items.
Of course, GCs and their estimating teams need to consider what profit margin the firm expects and contingencies. These numbers are the last step and should be determined internally.
As the saying goes, "The best-laid plans of mice and men often go awry." Therefore, estimates should be updated as conditions change through the preconstruction process. The updates will help GCs create more accurate estimates.
Tough Leaf helps GCs improve their estimates during preconstruction by connecting them with small and certified subcontractors. The software delivers 3.5x more bids than traditional approaches, so GCs can find the most appropriate sub. Book a demo to learn how we can help your estimating team.