Intermediate size remodeling projects those with
some demolition, construction and finish work as opposed to
additions usually do not lend themselves to piece rate estimating.
They tend to be very labor intensive and open to unexpected
contingencies. While potential customers for this type of project
prefer a fixed price contract, it’s often difficult to accurately
estimate what the costs will be.
The keys to making sure that all of the costs are covered is to
carefully evaluate the project, have a systematic process for
preparing your estimates and a system in place to provide you with
feedback at the end of such jobs.
This is the time to educate both yourself and your clients about
what is involved in their project. In most cases, the clients are
only vaguely aware of what will be involved and what the cost will
be. From the cost standpoint, you are walking a tightrope between
establishing a reasonable budget and scaring the client off. If
you’re too brutally honest, the client may get discouraged or be
tempted by a competitor’s low-ball estimate.
In the evaluation stage, the objective should be to make sure
that you fully understand what will need to be done to execute your
proposed design. It’s also an opportunity to make sure your clients
know how you will approach their project and the level of detail
that your design and estimating process will involve.
“Low ball” estimates are often produced without a thorough and
detailed estimate, so the time spent educating your clients will
help them make an “apples to apples” comparison of your company
with competitors. During the evaluation stage, you should avoid
guessing at total costs since this will only serve to hem you in
when it’s time to present a more studied “ballpark” estimate.
The preparation of an
estimate must include the client. The first stage of preparing an
estimate involves trying to establish a budget for the project. One
way to accomplish this is to prepare the fairly detailed “ballpark”
estimate mentioned above. In order to be reasonably accurate, you
should have a method of making sure that all portions of the work
will be included. Based on experience and your previous job costs,
develop several computer spread sheet templates for use in
preparing these ballparks.
This process will be most effective if it can be structured to
allow the clients to feel that they are a part of developing the
project and its budget. If the clients feel that they are in
control of where the process is leading, they’re much more likely
to approve a budget and move forward with the planning and actual
Once a scope and budget for the project have been agreed upon,
the actually planning and estimating can proceed. After you have
completed the ballpark estimate and your client has agreed to move
forward, it’s time to prepare the detailed estimate that will be
the basis of the contract.
In this phase, accuracy and completeness are paramount. Planning
and estimating should proceed together so that the budget is not
blown as the client is exposed to new and exciting products. While
it’s normal to have the cost of a project increase during the
design process, it’s important to bring the clients along with such
changes and not surprise them at the end with a big jump from the
As noted previously, estimating mid-size projects is extremely
difficult due to the fact the there are a lot of elements that are
labor intensive and somewhat unpredictable in the degree of
difficulty that may be encountered. It’s a fact, however that the
biggest errors in any construction estimate are not due to
underestimating a portion of the work, but rather from completely
missing that portion.
The danger of leaving out significant (or even fairly
insignificant) parts of an estimate is the most compelling reason
to develop a systematic method of estimating projects. Again,
computer spread sheet templates can provide a step-by-step
accumulation of the detailed cost that build up for different types
of projects (kitchen, bathroom, small addition, etc.). By utilizing
such templates, it becomes less likely that pieces and parts of the
project will be overlooked. You can also combine these spread
sheets with the project specifications to allow a cross check that
everything specified is costed.
While every project is different,
there are many similarities that run across each type. For
instance, removing lath and plaster from a kitchen will take a
certain amount of time, and that’s different from how long it takes
to remove sheetrock. Adding a circuit, running a gas line and
installing appliances are all things that recur on a regular basis
from job to job.
The trick is to track what it costs to perform these functions, and
to use this as a basis for jobs going forward. The way we do this,
of course, is with some form of job cost system. A useful job cost
system will allow you to track your labor costs for each job by
function, i.e. demolition, framing, plumbing rough-in, etc. It will
also accumulate material costs in a similar breakdown. Once this
information has been gathered, it can be compared to the amounts
that had been budgeted.
Then, by adjusting your estimates based on this experience, you
will be able to improve the accuracy of future estimates. It should
be noted that the true value of a job cost system is not just the
history it provides. It must be used to analyze how to manage and
control costs on future jobs.
The best way to ensure that one covers all of the costs involved
in a project is to make a careful evaluation of the project itself
prior to putting forth a guess at the ultimate cost. When there is
a sense that cost will be an issue with the client, there is a
temptation to gloss over some costs in order to “sell” the project.
Systematically accumulate all of the costs to make sure that such
costs are consistent with previous experience.
If you include your clients in developing the plans,
specifications and cost of their project, you will find that
“selling” the final project will virtually take care of itself.