Accuracy and efficiency are the top two challenges an estimator faces when preparing the numbers necessary to bid on a new construction project. How is it that things can go so wrong? Take a look at how cost expectations went widely off the rails for a water-park project in Westchester County, New York:

When Costs Unexpectedly Rise:

In 2016, Westchester County park officials were given approval on a plan to replace a public swimming pool and renovate the grounds surrounding it. One year later, these same officials are reporting to local lawmakers that they are going to need an additional $300,000 to complete the project. How did this happen? At issue are materials’ cost increases that occurred over the past year since the winning bid was accepted. So, it wasn’t that estimators failed to factor in necessary materials or short-changed labor demands. The market changed the game, increasing the cost of materials before the job could be completed.

In 2016, Westchester County park officials were given approval on a plan to replace a public swimming pool and renovate the grounds surrounding it. One year later, these same officials are reporting to local lawmakers that they are going to need an additional $300,000 to complete the project. How did this happen? At issue are materials’ cost increases that occurred over the past year since the winning bid was accepted. So, it wasn’t that estimators failed to factor in necessary materials or short-changed labor demands. The market changed the game, increasing the cost of materials before the job could be completed.

When Estimating Needs To Predict Possibilities:

Is it possible for estimating technology to predict the future? In essence, an estimate is, itself, a prediction in its entirety. That being said, it is a prediction based on sound data. Although an estimate is expected to have a margin of error with regard to accuracy, this margin should be reliably slim. When a construction company consistently underbids projects based on inaccurate estimates, that company is at risk for one of two things to happen, and, quite possibly, both: losing revenue that leads to business failure and/or developing a bad reputation. So how does an estimator compensate for the unknown of future market increases of materials that affect job cost?

Flexible Database:

High-tech estimating tools, like Sage, empower estimators with a vast database that improves accuracy. Precision bids can be crafted rapidly when information pre-populates and calculations are automated. Redundant tasks are eliminated and data entry errors become a thing of the past. But in order to truly be a predictive cost tool, estimating software needs a key feature, the flexibility to customize certain details. By including an extensive collection of custom cost features, an estimator can fine tune the numbers of material costs if there is an expectation that certain material costs will rise before project completion.

Market Forecasting:

One way to customize an estimating tool, making it a better predictor of materials cost, is to create a factoring feature that aligns with expected market trends. This may sound complicated. After all, prices for commodities, like steel, fluctuate daily. There are all sorts of factors that can affect market prices beyond typical supply and demand, like natural disasters.

Custom Flexibility:

A measure of greater certainty can be built-in to an innovative estimating tool that is flexible enough to customize with a materials cost forecast feature. Estimators who stay abreast of what is happening in industries like lumber, steel, etc. can see what market experts predict. For example, market experts may indicate an expected rise in lumber prices of 2% within the next year or predict steel prices to continue to bottom out. For projects that may not be ready to launch for some time, being able to apply an expected rise in materials cost becomes invaluable. For example, the cost of lumber at the time of an estimate may result in materials cost of $10,000 at the present time. However, if a project launches months later, lumber cost may have increased significantly. Other factors can also be applied. Consider how local lumber prices rise in coastal areas during hurricane season. When preparing an estimate for a project scheduled when common local natural disasters may affect a job, this factor can also become a custom calculation feature.

Trusted Technology:

The most widely used and trusted technology in the construction industry today for estimating can take predictive cost modeling to the next level. With “what-if” capabilities that adjust pricing conceptually, companies can bid with the greatest confidence in their numbers analysis. Software that is adaptable delivers reliable bids that result in real cost consistency. This empowers a construction company to build a reputation as solid as the foundation beneath a high-rise. Contact a Sage consultant to build and grow your construction company’s reputation through reliable estimates and bids.