When you take up a construction project, there is a lot to do even before the commencement of work. The first and perhaps the most essential task is cost estimation because the success of the entire project hinges on how well you manage the costs. Intelligent and accurate cost estimation is vital for ensuring that a project stays within budget. However, the challenge that managers often face is that many costs can appear unexpectedly over the project’s life cycle. An accurate estimation method, which provides for coverage of such costs, can make all the difference. While having a cost management software solution in place can take you a long way for accurate cost estimation, there are certain factors that you need to consider before preparing an estimate to ensure that it scores on the accuracy front. Let us share this pre-estimate checklist to help.
Step #1: Know the project
Before starting with cost estimation for your project, knowing it thoroughly is important. First things first, the expectations and objective of the client matter the most. Here, it is essential to understand the granular details, down to what the client expects to achieve and what success is in their perspective. Unless you have a clear understanding of the strategic objectives of the project, it isn’t easy to know the areas of emphasis of effort and cost in the project.
Step #2: Create a project budget
Once you have clarity about the client’s expectations and objectives, it is feasible to get a fair idea about their budget before you get down to the estimation part. You may come across clients who claim that they do not know their project budget yet, so they expect you to discuss a few options with them. The best thing to do is to start high and then work down from there. Even if they are not sure about an exact figure, they will still have some idea about what they would be willing to pay. You can get started by helping them identify the limits of the project budget, which can save time for moving on to the next step of cost estimation.
Step #3: Have a project plan in place
When you estimate costs for a project, it becomes much easier if you have a clear and straightforward project plan you can that use as your yardstick. Instead, you may have to rework on the plan for aligning it with the estimate and the other way round as well. It would not be wrong to say that cost estimation and project planning share a symbiotic relationship. Both work in tandem and you cannot do one without the other. If you work on both of them simultaneously, you are likely to come up with more realistic costs and timelines for the project, thus increasing the chances of success.
Step #4: Understand why you are estimating
While you cannot ignore the significance of the practical aspects of accurate cost estimation, you should also know why you are doing it in the first place. If you are investing in construction management services or solutions for estimating costs, you must have a valid reason for the investment. Are you doing it to arrive at an accurate budget for your construction project? Or are you doing it to win new business from the client? Is it an initiative with a long-term vision for getting more work in the future and building the reputation of your business? Cost estimation, or in fact anything that you do for a project, always has a context. Seeing the big picture ensures that you do not end up wasting your time and effort to produce something technically correct but irrelevant for the project.
Step #5: Know the kind of estimate needed
Apart from knowing why you need to estimate costs for the project, you should also have a clear idea about the kind of estimate you need to create. Ideally, you need to define the budget with the clients, right through the initial run-up to the final signing by the client. The idea is to ensure that you are on the same page with the client through different phases of the project so that there isn’t any wastage of time and the estimates always stay within the client’s budget.
Even as you follow these steps for cost estimation, make sure that you have enough room to accommodate change orders because they often happen in construction projects. Being realistic is equally important because even the most accurate estimates can still have deviations when you get started with the project. Implementing a project cost management software solution is a good way to simplify all aspects of project costs, including estimation and budgeting. This is an investment you should happily make because of the extensive benefits it can unlock.