I always tell owners, builders, architects, and engineers to forget construction cost estimating accuracy. I would also avoid estimators and, or cost data providers that claim to provide accurate construction cost estimates.
Why?
- There is no such thing as an accurate construction cost estimate. For an estimate to be “accurate”, it must be “correct and true in every detail.” Accuracy is referring to “the state of being exact or correct”.
- Being accurate, and/or accuracy, requires having a datum, reference point, or a starting point that is “true”. Sadly, many/most people in our industry use the “as-built” cost as the reference point for determining the accuracy of a construction estimate. This is clearly foolish. There are far too many variables involved in the “life-cycle” of a repair, renovation, maintenance, or new build activity for the comparison to provide ANY valid indication of “accuracy” of the construction estimate. Construction planning, procurement, and project delivery methodology, for starters, all have far more impact upon the final as-built cost than the original estimate.
Reliable Construction Cost Estimate
Instead, everyone should focus upon the reliability of a construction cost estimate. A reliable estimate is one that is “able to be trusted” and “consistently good in quality.” In short, reliability is the ability of the estimate to be trusted.
The ONLY reliable construction cost estimate is one that is 1.) detailed, 2.) reflects current local market conditions, and 3.) is communicated clearly and plainly in a common format that all participants can understand.
Process and Tools
Thus, a robust process and appropriate supporting tools are critical to developing reliable construction cost estimates.
A process ALWAYS should come first. Adopting continuous improvement of a robust process is equally important.
Research and case studies have proven that early and ongoing communication of all participants and stakeholders within a common data environment providing technical and cost visibility and transparency is a primary factor affecting final outcomes. In this regard integrating internal and external terms and associated planning, procurement, and project delivery activities, combined with owner leadership and understanding is a fundamental requirement. Processes centered around integrated project delivery (IPD) and LEAN job order contracting provide such environments.
Tools and services that support the above are readily available. One example is a locally researched detailed line-item unit price book, or unit price cost database. Granular tasks and their subcomponents of labor, materials, and equipment, organized in a standard data format such as CSI MasterFormat, can be combined and totaled to reliable define project technical, costs, and schedule requirements.
Summary
Reliable construction cost estimates are required in order to develop and maintain high levels of client and stakeholder trust, satisfaction, and retention.
Unfortunately, reliable construction cost estimating has not been practiced on an organization-wide basis across the public sector. For example, not a single Federal Government Department or Agency, whether DoD or non-DoD requires the use of detailed locally researched unit price cost data. Not surprisingly, the GAO has noted their associated failure to reliable predict construction related costs for decades.
So, let us forget construction cost estimating accuracy and focus upon reliably estimating costs and schedules, and implementing processes that consistently deliver the majority of repair, renovation, maintenance, and new builds in a quality manner, on-time, and on-budget.
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