How to Use Project Data to Improve Construction Estimates
May 19, 2021
How do you know what to charge for a project? Most construction estimators start by determining the potential costs for performing the work, then mark them up to cover their overhead expenses and profit. The cost of the work is often based on industry averages or educated guesses. Using these figures doesn’t take into consideration the differences between companies, including their level of overhead, and differences in location, which can lead to overinflated estimates.
Contractors can improve the accuracy of their estimates by using cost data from their own past projects.
Benefits of using project data
The primary benefit of using past project data to inform your construction estimates is that the cost data is more accurate. It’s based on costs from real-life projects, not averages or general figures. By using real-life data, your estimates will be more accurate, which means your pricing will be more competitive and you’ll have a greater chance of winning the work. You won’t have to include as much padding in your bid to protect yourself from unseen costs, as you’ll know what the costs truly are.
The project data you use is customized to your company and situation. You may have additional benefits or expenses that other companies don’t carry that influence your cost to perform a project. Or your company may run really lean, allowing you to keep costs down when compared to other companies or industry averages. Either way, using your own project data will ensure that your pricing is consistent and that it reflects your true cost to perform the work.
The location of the project and where your company is located will have an effect on the price of both materials and labor. By comparing projects in the same area or city, you’ll have a better idea of material costs and labor expenses. Costs may also differ by the type of project. For example, equipment-heavy projects will be more expensive than a standard office remodel.
Using project data speeds up the estimating process, as much of the calculations and figures are already determined. Estimators can focus on quantifying the work and ensuring the accuracy of the information they’ve gathered.
Each new project that a contractor works on provides lessons learned that can be used on future projects. By capturing this information and using it to inform future project bids, companies can continually improve the accuracy of their estimates. You may have gained experience with a new product or technique that can be used on the next project to save time and money. Or site conditions may have hampered a project, and you now know how to address them and can include the costs in future work.
What data to collect
There are lots of types of data on construction projects that can be used to better inform your estimates on future work.
Raw cost data
You’ll want to capture the raw costs for materials, labor, burden, equipment, and other expenses that are directly related to the work you are performing. Depending on the size and scope of the
project, you may need more detailed information. You can use the data you have to determine your cost for a particular unit or measure of work, such as linear feet or cubic yards. This makes it easier to calculate costs on future projects of similar scope.
Determine what portion of your overhead costs should be allocated to each project. Overhead costs are those not associated with specific projects. They include office administration, insurance, rent or mortgage payments, taxes, and other business expenses. Adding overhead expenses to your project costs will allow you to calculate your profit more accurately.
Know how many labor hours you spent on each project. Classify them by trade or worker classification so you’ll know the type of work that will be needed on the next project. Tying worker hours to labor rates and labor burden costs allows you to quickly calculate your labor expenses for a new project.
Record the start and finish dates for each project, so you know how long it took you to complete your work. Note any delays or other issues that influenced the scheduled completion time. This helps you know how much production time to allocate on future projects and plan your workload. The dates the work was performed may also influence costs or the duration of the project. For example, seasonal productivity changes are often seen when working outdoors. You’ll also need to know when the project took place so you can calculate inflation and other potential changes to costs.
Type of project
Whether a project is a remodel or new construction will determine the duration of the project and the scope of work involved. You’ll also want to note if the project is commercial or residential, and what type of industry the project involves, such as medical, restaurant, or office. By tracking this project information, you can easily assign costs based on the type of work and the general scope of the project.
Scope of work
Record a general description of the scope of work that you provided on each project. This is especially helpful if you have multiple trades in your company. This allows you to quickly compare the scope to new projects so you can determine if pricing will be similar or not.
How project data can be used to improve estimates
Once you have gathered as much project data as you have available, you can start to use the data to provide a rough order of magnitude for future project pricing. Look at projects that are similar to the one you’re bidding, in size, scope, equipment, and materials. Based on the costs for similar projects you can get a good idea of what the current project will cost. This figure can also be used as a gut check when you’ve completed your estimate to ensure that you haven’t missed something.
Past project data can also be used to calculate costs based on quantity of work, labor hours, units, or other measures. By comparing costs for these measurements, you can quickly estimate a current project with a similar scope of work. Records should include the quantity of work completed, hours, and other measurements. This allows estimators to calculate the cost
per unit or square foot quickly and easily.
Data can also be used to make specific cost comparisons between types of work or trades. For example, a siding installer can compare the price for installing cement board siding versus cedar shakes. This information provides a basis for comparison when estimating a current project where the owner is looking at multiple bid options.
Collecting project cost data can help you improve the accuracy of your estimates. Using past performance history, you can more accurately estimate the cost and duration of a project. Cost data can be used to determine a rough order of magnitude for a project, calculate pricing based on quantities, and provide information to compare costs.