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June 10, 2019

4 Common Cost Estimating Mistakes and How to Avoid Them

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In the construction industry, preparing detailed and accurate cost estimates is a must. Certainly, the process is tedious and time-consuming. But you can’t afford to make errors because turning out a high bid can make you lose the job to your competitors. On the other hand, submitting a bid that’s too low may cause you to record a loss instead of a profit.

If you want to respond to a request for proposal (RFP) with a competitive and accurate bid, here are some common mistakes to avoid.

1. Forgetting to Visit Your Project Site

Inexperienced or highly confident contractors tend to overlook the importance of site inspection. They may assume that they understand all the details about the site from the project description. However, visiting the site helps you clarify things that you can’t get from the proposal request including:

  • Site structure or topography: Some sites require special drainage or grading.
  • Demolition requirements: You may need to demolish some structures before you start working.
  • Closeness to supplies: The distance to sources of labor, materials and other construction supplies can have a significant impact on project costs.
  • Site access: Some sites don’t have roads or access routes that can handle heavy construction vehicles.

Always ensure you visit a site and pay attention to these issues while making project bids.

2. Surprises and Contingencies

No matter how many times you visit a project site, you’ll experience some unexpected events after the project starts. In some cases, you may discover deep termite or insect damage, water infiltration or other serious structural issues that were hidden below the surface.

Although it’s not possible to completely avoid some of these unexpected events, you need to make some allowance for them in your bid. Include what you think will be the cost for the normal scope for the project and then add additional costs that can take care of surprises. For instance, you can write: “X dollars will be required to set up a sump pump where there’s water damage.”

3. Ignoring Soft Costs

Some costs are not so obvious, but they can still add up and have a significant impact on your bottom line. Costs like inspection fees and permit charges are commonly left out of cost estimates. But these and other fees may add up and cost you thousands of dollars.

Other fees you must factor into your estimates include the cost of site preparation, waste management and use of temporary power like diesel generators. To avoid overlooking such costs, you should always use a detailed checklist. Estimating apps like Sage Estimating software have comprehensive cost checklists you can use to avoid this common error.

4. Errors in Labor Cost Estimation

Estimating labor costs isn’t always an easy task. In addition to calculating the total number of man hours and the number of skilled workers needed, you must factor in the experience of the workers and the need to allocate work to subcontractors.

Hourly rates vary in different regions of the country, and you must obtain the current rates for construction workers through very reliable sources. Some of these challenges may, however, be overcome by using innovative estimating tools like Sage Estimating software. This tool can pull in current wage rates from reliable sources so you can use them to prepare accurate bids.

Schedule Free Software Demo

Would you like to see Sage Estimating Software in action? This tool helps you avoid many estimating errors and enables you to prepare more accurate and competitive bids. Schedule your free demo today.Blog_CTA3-1

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