Key to Being a Construction Estimator – Avoid Assumptions
Developing an accurate estimate is a key skill required by any company looking to be successful in the construction industry. Without the ability to estimate accurately, companies cannot compete in the highly competitive business environment that most find themselves in.
Poor quality estimates result in one of two outcomes. Pricing will be either too low which will lead to financial losses. Or, their pricing will be too high which will result in not winning enough projects. Either way, pricing that is consistently too high or too low will quickly force the company out of business.
A major cause of poor quality estimates for estimators and their employers is the avoidable habit of making assumptions. For many reasons, estimators make assumptions regarding different aspects of a project that they are estimating. This amounts to a guess in most situations, and depending on the magnitude of the guess these assumptions can lead to major losses on a project.
So, how can companies and their estimators avoid the assumptions trap?
Begin the Estimate with an Accurate Take-Off
In many ways, the success of a company in the construction industry is directly tied to its ability to develop a good estimate. And a good estimate begins with an accurate take-off. Whether the take-off is done from plans and specifications or it is done at the project site, it is comparable to a starting block in a sprint race. If you don’t get out of the starting blocks correctly, it is hard to contend for the win.
“If you don’t get out of the starting blocks correctly, it is hard to contend for the win.”
The assumption trap threatens a company’s ability to get out of the starting blocks correctly. In order to avoid the assumption trap, an estimator needs to understand the information that the company needs to gather in order to develop an accurate estimate. Companies need to train their estimators on the information that is needed and how to gather that information. By showing the estimator how critical the information is to the company, the estimator will be more likely to gather the information while completing the take-off.
Use the Estimate throughout the Entire Project
A good site take-off leads to an accurate and competitive estimate, which, in turn, will lead to winning more projects. However, once the project is won, the work on the actual project has just begun. Project estimates become critical tools that can be used for managing a project from start-up to final completion. Inaccurate estimates make project management more difficult.
A good estimate will continue to be used as a tool for the following:
- Project management and job planning.
- Project buy-out and material purchasing.
- De-scoping subcontractors.
- Accounting functions including billing and WIP adjustments.
When the estimate is used as a management tool, there is a greater chance to catch areas where assumptions and guesses were used to develop the estimate. This will encourage estimators to gather the information accurately if they know that their team members throughout the company will be using the estimate as a tool to manage the project.
Assume Assumptions are Being Made
The process of developing an estimate for a construction project requires the estimator to use their intuition in order to develop the estimate. Intuition is defined as the ability to understand something immediately without the need for conscious reasoning. It is something that develops as a result of experiences which estimators accumulate over time.
The danger occurs when intuition causes an estimator to make assumptions. The estimator creates an ad hoc relationship between a perceived condition and the result of that condition. They fail to check their assumption and therefore base their estimate on their perceptions. They fail to check their facts.
The best way to avoid this pitfall is to assume that an assumption is being made. Estimators need to question their assumptions and if possible walk those assumptions back one step. They need to check their thoughts and if they are correct, then they can proceed from that point.
Assumptions are the Achilles Heel of a construction estimator. For many reasons, estimators can grow complacent in their responsibilities. But more often, estimators are extremely busy attempting to develop good estimates. This busyness can create collateral damage in the form of assumptions. The estimator makes assumptions in order to get their work done, which opens the company up to potential losses as a result of these assumptions.
Encourage estimators to guard against the temptation of making assumptions. Communicate with the estimators and prompt them to think about their projects and where they are making assumptions. There is no time like the present to find the assumptions with bids, before the bid is submitted.