There are often psychological barriers to estimating that are bigger contributors to inaccurate bids than technical failures. The beauty of recognizing these pitfalls is that you’ll be able to spot disastrously low estimates long before you win the bid.
Take a look at the top 5 common blockers to achieving an accurate project estimate.
1. Client’s Quality Expectations
When was the last time you asked a client what they consider as quality in a concrete floor? Sure, there are specifications for that, but do your clients even know them? More importantly still, what do they mean in terms of finish? Long before you start estimating that concrete floor, you should have a good idea of what the client considers as acceptable quality. The same goes for the wall finish in the utility room or the kitchen cabinet style.
Knowing your client’s expectations also helps you justify costs. A client might know someone else’s paint job for the same type of space cost $1,250. However, if that other paint job didn’t include two colors and caulking baseboards, then it’s not really the same type of job. Knowing your client expectations, you can price the job right, while being able to justify your prices
2. Client’s Time Expectations
If you’re smart, you turn down jobs before estimating them when you can’t meet the deadline. If you’ve been in business for more than a month, you also know people often want the job done sooner rather than later. But, just what does “sooner” mean to them? Does it mean the same thing to you?
However, phasing may also impact estimating. Your client might be thinking you will complete the project in a different order than you intend. It might be that later completion of a specific portion of the project will affect their financing more positively. Or, maybe they think they’re going to have more time to decide final finishes because they’re expecting you’ll be completing a certain part later.
Before you start estimating, you should have a fairly complete list of their timing expectations. You don’t have to account for every activity, but having a conversation with the potential client about completion of project phases will help you prepare a better estimate.
Time is one of the two biggest sources of disagreements on construction projects, so nail down what the client demands before you start estimating.
3. Client’s Money Expectations
You’ve all been here. Money flows like water on a construction site. There are so many streams it can make your head spin. The client doesn’t see any of this on their end—they just pay you. All they know is the number you gave them. In their optimistic moments, they’re probably even thinking you might not need all of it. Then comes a change, or an accident, or a fabricator can’t deliver, and suddenly, money is all anyone can think about.
Question your rationale for each item you estimate. Make sure you’re using an accurate take-off process. Carefully consider the work breakdown structure for completeness and relevance. Confirm assemblies fit the project specifics. Verify your cost database, and wherever you can, use verified crew productivity figures.
In line with that, start tracking labor costs at the task level. It allows you to build an even more accurate estimating database in the future. Follow the project specifications and make notes on any that are missing or incomplete. Confirm your rough estimates on specialty subcontractor work with trusted subs.
Run a tight ship on the money, anticipate changes long before they’re needed, use contingencies, insure well, bond appropriately, and administer the contract.
4. Everybody’s Optimism
Everyone is optimistic at the early stages of a construction project. Sometimes, that optimism hides problems and risks. Let’s say you hit it off really well with a potential client. The chemistry is there, and you’re both chomping at the bit to get the project off the ground. In this optimistic fog, you and the client are perfectly happy to let some details languish, agreeing that you’ll work them out later. Unfortunately, later never comes, and when these un-estimated factors rear their heads at mid-project, all that good builder-owner chemistry suddenly evaporates.
The other way optimism can sink your estimates is when it devolves into wishful thinking. You know your crew has never built 200 feet of wall in a day. But, the sun is shining, you’re feeling optimistic, and by the time the crew gets started you are certain they’ll be in peak form. You’ve just let your optimism turn into wishful thinking. Try putting your estimates out for review to someone without a vested interest in the project.
5. Your Assumptions
Imagine two estimators doing the same estimate for a commercial building. One of them once worked on a similar project in the same geographic area where severe weather caused a week’s delay. The other never had such an experience. The “availability rule” tells us that the estimator who had severe weather experience may overestimate the likelihood of that happening again. Meanwhile, the other one will view the event happening as unlikely, or even as remote.
To guard against the havoc of the availability rule, keep a list of assumptions and ask others to look them over.
Getting an accurate project estimate is within reach if you learn to recognize these common blockers.