Cost estimate reviews in construction projects involve carefully reviewing the predicted costs for a project. These reviews make sure that the initial cost estimates are accurate and cover everything, including the project’s scope, materials, labour, and other expenses. They are essential because they can identify potential budget problems, financial risks, and mistakes early on. By doing this, cost estimate reviews help keep the project within budget, secure the necessary funding, and maintain control over costs, leading to the successful completion of the project on time and within the allocated budget.
In-house estimators may review cost estimates prepared by the contractor or external consultants for different projects. In addition to these internal reviews, owners or contractors also send their estimates to outside consultants to check for accuracy and help make informed decisions.
Key Tasks for Reviewing an Estimate
The reviewing estimator might not need to create a separate estimate but is expected to do the following:
- Ensure the estimate matches the project scope.
- Verify the accuracy of quantities, especially for significant items.
- Confirm that the assumptions and basis of the estimate are suitable.
- Validate unit rates and ensure the markups are appropriate and reasonable.
- Check that the estimate is complete with no missing parts or inconsistencies.
Key Factors to Consider
There are various factors to consider for construction cost estimating review.
Checking the Basis of Estimate (BOE) in Cost Reviews
After making sure all supporting documents like drawings, specifications, and scope narratives are available, the next step is to check if the estimate comes with a Basis of Estimate (BOE). Before looking at the numbers, the reviewer should verify if a BOE was prepared and ask for it if it is missing. A good BOE helps the reviewer understand how the estimate was created and why the numbers were chosen.
It explains the design basis, cost basis, assumptions, and what’s included or excluded in the estimate. If there is a BOE, check if it answers any questions the reviewer might have. If a BOE is available, make sure the information in it matches what’s in the estimate. Note any differences in the review report.
Cost Modeling and Alternate Pricing Considerations in Construction Cost Estimating
A cost model breaks down costs into parts, usually by building systems. Some owners might prefer estimates in their own format or Work Breakdown Structure (WBS). For example, they may want to see costs for different disciplines like Structural, Architectural, Mechanical, or Electrical, or by contractor’s trade packages. They might also want costs divided by project areas, phases, buildings, or funding sources.
Make sure the project cost estimating follows the right cost model. Also, ensure the summary matches the detailed information. Double-check spreadsheets for any maths mistakes or formula errors in the estimates. When getting bids, owners can request prices for certain items as ‘Alternates’ in addition to the main project scope. Alternates give flexibility to adjust the budget by choosing which items to include or exclude.
For instance, if the main plan includes carpet flooring, an alternate might be wood flooring instead. Another example could be replacing an expensive light fixture in the main plan with a more affordable one as an alternate. If your estimate includes alternates, make sure there’s no overlap or duplication between what’s included in the main project scope and the alternates. This ensures clarity and avoids confusion during the bidding process.
Verification of Quantity Accuracy and Pricing
Quantities Accuracy: To verify how much material is needed and its cost, the level of inspection can vary based on the project’s size, value, and complexity. For smaller projects, you might check every item. For larger ones, Pareto’s law suggests focusing on the vital few: roughly 80% of costs come from 20% of items. Verify construction material takeoff to figure out the exact quantity of materials needed for a specific project.
Price Verification: To verify prices, review the breakdown of labor and materials if it’s available. If the estimate uses composite unit rates, break down these rates for major items and check a few to ensure they’re reasonable. If adjustments to unit rates are needed, list those items in the review report and explain how the rates should be changed. Also, estimate how these adjustments will affect the total estimate.
Review of Markups: Markups are added to direct costs to cover things like general conditions, overhead, profit, insurance, bonds, contingency, and escalation. Make sure these markups are reasonable. Check if the design and construction contingencies are appropriate. If adjustments are made to these values, ensure they are acceptable.
Additional Factors Affecting Estimated Costs
In addition to checking the estimated numbers thoroughly, there are other factors that could affect them. For instance, the reviewer might note if the project schedule seems too tight and unrealistic. The CD (Construction Documents) estimate is made using complete design drawings and specifications before the project is put out for bids. Besides checking and confirming the total estimated cost, reviewers may also comment on the following items if they find them.
- Risk factors affecting costs
- Sole sourcing of materials impacting prices
- Complex bid packages and trade groupings or Other bid constraints
- Owner’s requirement for pre-qualified subcontractors increasing bidder prices
Estimate Review and Reporting
The goal of an estimate review is to ensure the estimate is accurate and reflects the correct scope of work. The reviewer should create a report summarizing their observations and findings, emphasizing any cost impacts if adjustments are needed based on their findings.
If you need any construction cost estimating services Dekr Estimation is here to help you with. Contact us today and avail our expertise.