The Impact of Estimation Errors on Construction Projects

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Cost and schedule control is an essential aspect in any construction project and this highlights why it is important to provide accurate cost estimates. However, estimating errors are frequent and their consequences can affect budget, schedule, quality, and stakeholders’ satisfaction levels if not controlled. In this particular blog post, we will try to identify some of the primary reasons that lead to inaccurate estimations, their impact on the project, and ways to mitigate the results.

Common causes of estimation errors include the following:

There are several reasons why the initial estimates for a construction estimating companies project often end up being incorrect to some degree: 

  • Design Changes – In most cases, as the design unfolds and even with an additional modification, this keeps on impacting the project scope and cost. Some factors are usually overlooked when preparing early estimates.
  • Lack of complete information – By the time estimators are called into the project, they do not get full information to give a perfect estimate. Details are missing.
  • Hitches – This is another factor that causes delays and cost overrun due to hitches that are unanticipated and may be attributed to the site conditions, and weather among other factors.
  • Optimism Bias: In the majority of cases, there is an inherent, implicit optimism: even though estimators are making their best effort and are following the best practices, the assumptions they make are generally too optimistic.
  • The following is what can go wrong when the estimators are inexperienced or inadequately trained or when some forces compel the estimators to contain costs:

Impact on Budget and timeline

Engagement that has been estimated too low will likely result in an over-expenditure, both in terms of cost and time. This puts pressure on the client to spend more as compared to their initial budget. It also leads to delays in the delivery of the project or the tasks that had been laid down in the project. For instance, if the construction estimators of site work contained complications that were overlooked, this would slow the entire project while the problems are being fixed.

 

Occasionally, having to spend more money and time to do a project as envisaged, means making drastic reductions elsewhere. The client is then left with a choice of either cutting down on certain features or the quality of the product to bring down the cost to the recommended level. Still, the result in the form of lowered specifications is not the preferred outcome for any of the parties engaged.

Drivers to Quality & Value Engineering

When trying to rectify errors that were made in residential construction estimating service, there is a tendency to compromise the quality of the end product. One often finds corners being cut either in the material they use or even in how well it has been made. For instance, while some portion of the work was done at lower material cost, arguably less visually important parts of the structure were given these inferior materials. Over time this erodes the design intent and quality of the product reducing it to a generic commodity.

Large variances can also cause the onset of aggressive value engineering efforts. The management of the costs and schedules is done by the project team seeking any opportunity to reduce costs and time even if this sacrifices quality and appearance. Exploration of too much value engineering as a result of poor estimates of cost is dangerous to the integrity of projects.

Strained Stakeholder Relationships

Consequently, the pressure and irritation arising from the failure to meet the set budget and time negatively affect relations with the different parties involved. It is always the case that the owner is left with no trust in the contractor and the design team if the estimates are considered to be overly optimistic by the latter. Displacement of responsibilities is a common practice between contractors, architects, and engineers.

This absence of confidence and collaboration creates antagonistic orientations. Instead of both parties searching for mutual benefits, each acts from an egoistic perspective. This dynamic aggravates the chances of changing the conditions for the better. But most often, it’s lose-lose in the case of people with this disease.

Strategies to Improve Estimating

The good news is there are measurable ways to enhance estimating processes and minimize risks of significant overruns: 

  • This problem is because where estimates are rushed, very important details are easily overlooked. Leave ample time.
  • Adhere to the best standards – The last but not the least aspect is to ensure that the estimates are made in strict adherence to all possible standards that seek to prevent random or systematic errors.
  • Benchmark metrics: Here, the idea is to identify benchmarks from past projects and try to be more accurate this time. Track key metrics.
  • Worse still, cross-check estimates involve making estimates by different estimators independently. Look for anomalies.
  • Model uncertainty – The estimate of variability must include contingency amounts. Plan for the unexpected.
  • There should be no bias – this means that there should not be any ‘optimistic’ or ‘conservative’ thinking. Cultivate objectivity.

If there is a better understanding of the various aspects of estimating in construction projects, construction estimating services teams can prevent such disasters almost entirely. Of course, there is no way to estimate any large-scale project with a perfect degree of accuracy but one thing is rather obvious and that is – enhancing processes always reduces the number of unpleasant surprises. Since there is too much to lose, it is only reasonable to improve estimating.

Conclusion

In essence, wrong estimates lead to increased expenses, elongated construction time, poor quality, and in the end low level of credibility with the stakeholders. However, if one follows the best practices in the industry by using good practices in estimating and avoiding the guessing aspect, then one can reduce nasty overruns. It benefits all parties by ensuring projects are a bit less chaotic than before thus aligning with the initial anticipated results.

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