Mistake 2 - Estimating at the Wrong Level
As the saying goes, "when you fail to plan, you plan to fail". Many construction projects have ended up with significant cost overruns because the original estimate failed to take into account all of the materials needed for a task or work item, or that labor rates had changed. The project manager or estimator didn't break the project down into identifiable and measurable tasks. With a vague work breakdown structure, their ability to approach a customer with a change order to recover their costs may be affected. They really have no idea where they under estimated - in short, they failed to plan.
The only way to improve is to spend time after the fact, when the damage is done, evaluating the actual results against what was estimated. But by then, who knows how many other projects with the same estimating weakness are already underway?
If your project is small and the scope is limited, it may be okay to go with a high level guesstimate. But without a formal estimate, that small construction project with seemingly little risk may turn into a much larger problem. When high-level estimates are made, they are usually too low, and you either end up making less profit, or losing money.
How to avoid this mistake -
Start estimating at the task or work item level
No matter if your construction project is small and simple, or large and complex, get in the habit of creating an estimate with the right amount of detail. It will help you ensure that all of the tasks and the costs in the project have been accounted for, and thereby increase the likelihood of running a profitable project.
So, exactly what level of detail do you need to get down to? Well, if you can visualize what a task in your project looks like when it's completed, and you can measure its progress, then that is the level to which it should be broken down. Breaking down a project into specific phases and tasks that are measurable and meaningful will ensure that you won't overlook a key task, needed materials or labor … or at least you won't miss it more than once. Let's say you had a large construction-remodeling project and part of the project plan is coded to Structural Work. Within Structural Work, you may have several deliverables, including one called Walls and Roofing.
This may be where you consider the detail that it needs to be taken down to: Structural Work/Walls and Roofing. However, when you dig into the details more, you determine that in fact there are more tasks or work items in this phase - Remodel Existing Main Floor Wall and Extend Existing Main Floor Wall to Second Floor Addition for example. Both of these tasks are measureable, identifiable - and you can visualize what each would look like when completed. The most accurate estimates will start at this level, i.e. the task or work item level.
Once you have developed an estimate that has captured the tasks involved in your project, you use that estimate as your "master" - and create a series of "master" estimates for different types of projects you run. Update or replace that master estimate regularly, to reflect the ever-present conditions of change in everyone's business. Whenever you start a new project, start with the master that you have created for that project type. It's much more efficient, far easier and less risky to delete unnecessary tasks and costs. And if you are using a construction estimating software program that allows you to store a variety of estimates (see Mistake #3), you're even further ahead of the game.
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Mistake 1
- Not Getting the Information You Need Up Front
