Estimates are the lifeblood of the construction business, and yet the estimating process represents one of the greatest challenges for contractors and project owners. That is because cost projections are frequently altered due to unexpected circumstances, such as modifications requested by the owner during the building process and other deviations that significantly change cost figures contained in the accepted bid. Inaccurate projections or delayed estimate revisions have a profound impact on the early relationship between the contractor and project owner.
In this environment, owners have become more sophisticated in their expectations of what estimates should communicate by necessity. As a result, they require every submission during the entire project life cycle to clearly explain where and how all costs are applied. It is up to the contractor to produce an estimate that not only thoroughly explains feasibility costs, detailed quantity takeoffs and labor costs, but does so with accuracy and efficiency.
Traditional Estimating Flaws
Although the estimating process has evolved over time, one element relied on by contractors for decades remains unchanged—the spreadsheet. Despite its older technology and widespread use, the spreadsheet is not without its challenges. Proprietary formulas and links are deeply embedded in the cells, making spreadsheet errors difficult to detect and hard to change, even after they are identified. The sources and dynamics driving costs are constantly changing, so legacy methods of cost estimating can be an Achilles' heel for users who count on projections to be accurate. Many estimators will admit that a good bit of tribal knowledge is built into their estimating process and at great risk of being lost when the estimator who created the tool leaves the company. Furthermore, hidden errors due to dated, inaccurate formulas can grow over the lifetime of a project or when reused for other projects.
The disconnect between quantity takeoffs is another challenge in the estimating process. Contractors have an ever-increasing number of projects that are model based, with the majority still based on 2-D plans. Even projects that include BIM often lack some construction components represented in the model, requiring contractors to perform a hybrid of both 3-D and 2-D quantity takeoffs. While newer 2-D tools deliver efficiencies and flexibility in performing takeoffs, contractors often still rely on multiple quantity takeoff and cost libraries. Typically, these tools act independently of the estimating software that consumes the quantities and costs, adding risk to the process and the training required to produce a truly accurate estimate.
Those multiple cost libraries negatively impact efficiency and costs because of the ongoing need to update them. With material pricing, labor rates and equipment rates varying for each quantity takeoff, the libraries demand constant attention to ensure the accuracy and transparency of subsequent estimates. Without the single database, workload and the margin for error increases.
These examples illustrate what are perhaps the greatest obstacles to providing accurate and reliable estimates: the lack of integration between estimating systems and a duplication of effort that can easily result in multiple errors. Most estimating platforms are virtual silos, incapable of communicating with other estimating platforms.
The goal should be a single, unifying analytical database that takes all of the inputs, the takeoff tools and their separate cost libraries and combines them to generate comprehensive, accurate and transparent estimates. This is essential for project success and mutual trust between the project owner and general contractor. There can be no trust without open communication. Whether the issue is with people or technology, transparency is vital to taking action confidently.
Owners can no longer accept the transparency gap caused by a convoluted estimating process. They have to understand exactly why and how seemingly innocuous design changes can result in dramatic cost increases. They need the ability to drill into the cost models to validate assumptions underlying the estimates. With the right estimating process, estimators are better able to react to design iteration quickly, accurately and transparently. Fortunately, newer, comprehensive technology is available to automate the integration of cost data from 2-D and 3-D sources for transparent estimating from a single cost library without sacrificing speed.
Software algorithms provide quantity takeoffs from 3-D models and 2-D drawings through the single database. This is a particularly vital capability because changes in BIM models can render many previous item estimates obsolete. Instead, the technology creates dynamic links between values in the models and the appropriate items and assemblies in the cost libraries. Any time there is a change in the model or electronic plan, the database automatically alerts users, which instantaneously improves the accuracy of the estimate—an example of transparency in action. This technology represents a significant time savings, reducing the time commitment required to perform future quantity takeoffs.
Integrated programs offer additional tools, such as:
- Shared methodologies to speed adjustments and streamline collaboration in estimating while providing flexibility necessary for making estimate adjustments
- Virtual construction software to augment 3-D models with constructability analysis and reporting with location-based quantity takeoffs
- Document controls that detect changes in design iterations between 2-D design sets and 3-D models
- Experience-based analytics and cost modeling that compiles past performance and validates current cost estimates
Construction executives say the single database platforms resolve time, change management, resource allocation and frequent cost issues associated with the conflict of BIM on one side and 2-D on the other side.
Some assume that newer technologies will require a major overhaul in the estimating process. In fact, the opposite is true. Here are several guidelines for choosing tools to create more efficient, cost-effective and transparent estimates:
- Look for tools that do not require a change in the estimating methodology. The idea is to capture the specific methodology in the database and update it without forcing any radical change.
- Evaluate releases within the last two to three years to learn more about the software company's track record and future potential for research and development.
- Thoroughly investigate references. Estimating is too important to rely solely on references in printed testimonials. In-depth interviews with peers are often useful in vetting new estimating solutions.
- Look for solutions that allow you to create estimates from a single knowledge base for both model and non-model-based projects, supporting the movement to a single truth source, instead of maintaining the same items and assemblies across multiple cost libraries.
Estimating is difficult enough when there are so many inputs, platforms and cost libraries that complicate the process. Integrated tools that alleviate and simplify these issues offer users a distinct advantage.
By streamlining estimating methodology with technology, contractors improve quality, accuracy and the transparency critical to a successful business relationship. Estimating transparency is as critical to maintaining the owner-contractor relationship as it is to the project's ultimate success. Good estimating software gives you the power to run your business effectively and efficiently.