Common errors in construction estimating

COST ESTIMATING: COMMON SOURCES OF ERRORS

ParsCo Cost Engineers are experts in the field of cost estimating. Over the years, ParsCo has identified with clients the most common source of errors within their cost estimating systems.  

For most companies, it is seldom that a cost estimate for bidding on a construction project that is perfect,  doesn't contain errors of one kind or another, or leaves out a scope all together. Too many errors on the plus side can be a major reason for a bid not being competitive. Too may errors on the minus side can cause the contractor to lose money if awarded the contract.  Below are some of the most common sources of errors in construction cost estimating that ParsCo identifies with clients:

1. Errors in arithmetic: Estimates made on construction projects are arithmetical calculations of quantities and cost of materials and labor costs to install materials or perform various operations. In order to avoid errors in arithmetic, the estimator should use an electronic calculator with a recording tape, have the calculations checked by another person, and attach the tape to the estimate sheet for backup. 

2. Taking Wrong Measurements from Plans and Specifications: Errors in measurements and dimensions taken from plans, drawings, and specifications result in corresponding mistakes in the cost of construction items based on those measurements. 

3. Using the Wrong Wage Rates for Labor: Hourly labor wages for construction workers vary countrywide. You should consistently verify current wage rates and fringe benefits for the building trades involved through local union offices, other contractors, supply yards, and other reliable sources. Overtime rates are generally one and one-half to two times regular rates depending on labor agreements and union rules. 

4. Insufficient or Excessive Allowances for Labor: A frequent cause of error in estimating is allowing too much or too little for labor to do the job. 

5. Materials and Supplies Improperly Priced: Always be sure that building materials and supplies are correctly described as to kind, quality, size, and dimensions. Also confirm that they are priced competitively. 

6. Using Incorrect Units of Measure: Using a wrong unit of measure can result in substantial cost increases or decreases. For example, be careful not to record lineal feet for lineal yards, square feet for square yards or cubic feet for cubic yards, and so forth. 

7. Including Poorly Maintained Machinery or Equipment: Machinery or equipment to be used in construction, and included in the estimate or bid, must always be checked for efficient serviceability. Preparing an estimate on a construction project and contemplating the use of poorly maintained machinery or equipment is unwise. Breakdown, repairs, and idle time can be costly, delay completion of the project and invite penalties. 

8. Failure to Visit the Project Site: This source of error might well be number one on the list because of its importance in the early stages of cost estimating. Visiting the proposed site of the project enables the cost estimator to inspect topography, check the soil by boring if necessary, determine if protection of adjacent properties will be needed, and check distances to railroad sidings, supply centers, and the proximity to sources of labor. If existing structures have to be demolished or removed from the premises, the estimator is able to properly determine the probable cost. 

9. Overlooking or Miscalculating Haulage Costs: The cost of hauling materials, supplies, machinery, and equipment to a project can be a very expensive item in an estimate. Access to the job site may be difficult because of poor roads or no roads, heavy traffic to and from supply sources, or the requirement to obtain permits, and so forth. 

10. Failure to Review Building Codes, Permits, and Inspections: Cost estimates and bids on construction projects are subject to local, state and federal building codes, permits, and inspections. 

11. Failure to Consider Quality of Workmanship Required: A contractor who is accustomed to working on projects that require high quality workmanship may not be set up to bid or estimate projects of mediocre, low grade workmanship. Conversely, a contractor who usually works on cheap structures is frequently at a disadvantage when it comes to bidding on the construction of upscale residences or commercial buildings where only the finest quality of workmanship is acceptable. Failure to give proper consideration to the quality of workmanship a project warrants can lead to overestimating or underestimating. 

12. Ommitting Items the Cost Estimator Considers to be Minor: Sometimes items such as scaffolding, ramps, and guardrails, are left out of an estimate on the assumption that their cost is relatively minor and can be absorbed in the overall bid. On small projects a contractor may gamble on his workers handling such items routinely. This can be a costly error. 

13. Duplicating the Work of Subcontractors: Subcontractors often prepare their cost estimates from the plans and specifications without the guidance or supervision of the general contractor. They take off details and include all of the items they assume to fall within their particular trade. As a result there frequently is overlapping with the work of the general contractor or other subcontractors. 

14. Failure to Review the Bids of Subcontractors: The owner looks to the general contractor for the completion of the work in compliance with the plans and specifications. The owner does not look to the subcontractors. It is very important that the estimates of subcontractors are carefully reviewed to be sure they comply with the plans and specifications. 

15. Overlooking Items: The causes of overlooking items when preparing an estimate or bid are many. The following are typical: 

a. Lack of attention to details.

b. In too great of a hurry to complete the cost estimate.

c. Too heavy a workload.

d. Basic lack of experience.

e. Delegating part of the estimate to others.

f. Failure to use a reliable checklist. 

An important safeguard against overlooking items is to have ParsCo independently review and double check the cost estimate. 

16. Taking Shortcuts in Cost Estimating: Taking shortcuts when making an estimate can be risky. Often there is a temptation to take shortcuts when under pressure because of time-limit in which to complete the cost estimate or because of a heavy backlog of work. Shortcuts take the form of guesstimating, using square feet or cubic foot costs in place of details, and using lump sum figures picked out of the air, all of which have inherent risks. 

17. Not Allowing for Realistic Contingencies: Some construction projects may have inherent and unusual problems that should be recognized when the cost estimate is being prepared. Failure to make the allowances or contingencies may result in not getting the contract or losing money if awarded the contract. These contingencies include severe winter weather conditions, or extremely hot and humid climates. The project may be located in an area of the country subject to heavy rainfall. Justifications for a realistic contingency include anticipated labor troubles, material shortages, or political problems. 

18. Including Contingency Items Without Reason: A opposed to making allowances for realistic contingencies, it is poor policy to make flat allowances for contingencies without good reasons, particularly when competition is strong. 

19. Inadequate or Excessive Overhead Charges: There are two types of overhead: 

a. Specific overhead charged to a specific job or operation.

b. General overhead not chargeable to specific jobs or operations. 

The cost estimator should distinguish between two types in allocating overhead. Assuming an overhead charge of 10, 15, or 20 percent without analysis may be too high or too low. There are overhead charges that range as high as 30 percent or more of the job cost. But these are usually confined to subcontractors specializing in such things as refrigeration, heating and air conditioning, power installation, and so forth. Whether a general contractor is justified in charging overhead on a subcontractor's cost estimate is a matter of judgement. 

Attention to detail is critical when completing an estimate.

If you are in need of cost engineering and estimating assistance, contact ParsCo professionals. 

ParsCo Construction

Office: 850.696.7656

Fax: 850.390.4943

Visit us on the web at www.parscoconstruction.com

ParsCo Value Engineering: Tips and Process Overview

ParsCo Construction located in Pensacola Florida services the entire Gulf Coast Region and Southeast - www.parscoconstruction.com. With over $500M in experience, ParsCo has devised solutions to construction cost budget issues. It seems that all too often Owners end up with a project that they can't afford to build and they are forced to cut costs and sacrifice design elements to make a project a reality. 

ParsCo is an expert in the value engineering process. If ParsCo is engaged on the front end of a project, the Owner will rarely find themselves with a design that can't be constructed for their budget. ParsCo makes sure they govern over the design process to prevent over design. 

However, if ParsCo is not involved in the design stages, they can still be brought in to to "value engineer" a design and make a project a reality.  

Value Engineering (VE) is not a design/peer review or a cost-cutting exercise. VE is a creative, organized effort, which analyzes the requirements of a project for the purpose of achieving the essential functions at the lowest total costs (capital, staffing, energy, maintenance) over the life of the project. Through a group investigation, using experienced, multi-disciplinary teams, value and economy are improved through the study of alternate design concepts, materials, and methods without compromising the functional and value objectives of the client.Value Engineering is a conscious and explicit set of disciplined procedures designed to seek out optimum value for both initial and long-term investment. First utilized in the manufacturing industry during World War II, it has been widely used in the construction industry for many years. 

ParsCo's VE services can be applied at any point in a project, even in construction. However, typically the earlier it is applied the higher the return on the time and effort invested. The three main stages of a project and VE's application are described below.

Planning

At the Planning stage of development, there are additional benefits to be derived from a ParsCo Value Engineering Workshop. The ParsCo team can:

• Review the program
• Perform a functional analysis of the facility
• Obtain the owner/users definition of value
• Define the key criteria and objectives for the project
• Verify/validate the proposed program
• Review master plan utility options (e.g. Central Utility Plant versus individual systems)
• Offer alternative solutions (square footage needs per function, adjacency solutions, etc.)
• Verify if the budget is adequate for the developed program

The benefits are tremendous.

• Any changes to the program at this stage have very little if any impact on schedule and A/E time and redesign costs.
• The project will be developed with fewer changes, redesigns, and a greater understanding by all parties of what the final function and space allocations will be.
• An independent team can bring a fresh outside view of alternate solutions from other similar projects.

Design

This is the stage that ParsCo is used to becoming involved, when the design has at least made it to the schematic stage. Most government agencies require at least one VE session at the design stage on projects over a certain $ size. The primary tool available to the VE team is the ParsCo Workshop—typically a 40-hour session (or less for smaller or less complex projects).

The ParsCo Workshop is an opportunity to bring the design team and client together to review the proposed design solutions, the cost estimate, and proposed implementation schedule and approach, with a view to implementing the best value for the money. The definition of what is good value on any particular project will change from client to client and project to project.

Methodology and Approach

During the actual ParsCo Workshop portion of the VE study, the five-step Job Plan is followed:

The ParsCo VE Job Plan follows five key steps:

1. Information Phase
2. Speculation (Creative) Phase
3. Evaluation (Analysis) Phase
4. Development Phase (Value Management Proposals)
5. Presentation Phase (Report/Oral Presentation)

These five key steps are described as follows:

1. Information Phase:
At the beginning of the ParsCo VE Study, it is important to:

• Understand the background and decisions that have influenced the development of the design through a formal design presentation by the design A/E.
• Analyze the key functional issues governing the project. The functions of any facility or system are the controlling elements in the overall VE approach. This procedure forces the participants to think in terms of function, and the cost and impacts associated with that function.
• Define Owner's objectives and key criteria governing the project.
• Determine Owner's definition of Value.

2. Speculation (Creative) Phase:
This step in the ParsCo VE study involves the listing of creative ideas.

• The VE Team thinks of as many ways as possible to provide the necessary function within the project areas at a lesser initial or Life-Cycle Cost which represent improved value to the client.
• Judgment of the ideas is prohibited.
• The VE Team is looking for quantity and association of ideas, which will be screened in the next phase of the study.
• Many of the ideas brought forth in the creative phase are a result of work done in the function analysis. This list may include ideas that can be further evaluated and used in the design.

3. Evaluation (Analysis) Phase:
In this phase of the Project, the ParsCo VE Team, together with the Client and/or Users,

• Defines the criteria to be used for evaluation.
• Analyses and judges the ideas resulting from the creative session. Ideas found to be impractical or not worthy of additional study are discarded. Those ideas that represent the greatest potential for cost savings and value improvement are developed further. A weighted evaluation is applied in some cases to account for impacts other than costs (such as schedule impacts, aesthetics, etc.).

4. Development Phase:
During the development phase of the ParsCo VE study, many of the ideas are expanded into workable solutions. The development consists of:

• Description of the recommended design change.
• Descriptive evaluation of the advantages and disadvantages of the proposed recommendation.
• Cost comparison and LCC calculations.
• Each recommendation is presented with a brief narrative to compare the original design method to the proposed change.
• Sketches and design calculations, where appropriate, are also included in this part of the study.

5. Presentation Phase:
The last phase of the ParsCo VE Study is the presentation of the recommendations in the form of a written report. A briefing/oral presentation of results is made to the Client and Users, as well as the Design Team representatives. The recommendations, the rationale that went into the development of each proposal, and a summary of key cost impacts are presented at that time so that a decision can be made as to which Value Management proposals will be accepted for implementation and incorporation into the design documents.

In addition to the monetary benefits, a VE Workshop provides a valuable opportunity for key project participants to come together, then step aside and view the project from a different perspective. The ParsCo VE process therefore produces the following benefits:

• Opportunity to explore all possible alternatives
• Forces project participants to address "value" and "function"
• Helps clarify project objectives
• Identifies and prioritizes Client's value objectives
• Implements accepted proposals into design
• Provides feedback on results of the study

Construction

During this phase value engineering is still possible through the use of Value Engineering Change Proposals (VECP). ParsCo, a Certified General Contractor, can propose solutions that offer enhanced value to the owner, and share in the financial benefits realized. Clearly the owner must consider the proposals very carefully, from a life-cycle perspective and a liability perspective. The A/E team must be brought in to the decision-making process to agree to the proposed change as not having any negative impact on the overall design and building function. The evaluation of a VECP is treated similarly to any change order during construction, with issues such as schedule and productivity impacts being considered along with the perceived cost savings generated.

Conclusion

In the final analysis, Value Engineering is not only beneficial, but essential because:

• The functionality of the project is often improved as well as producing tremendous savings, both initial and Life-Cycle Cost.
• A "second look" at the design produced by the architect and engineers gives the assurance that all reasonable alternatives have been explored.
• Cost estimates and scope statements are checked thoroughly assuring that nothing has been omitted or underestimated.
• Assures that the best value will be obtained over the life of the building.

If you have a project that is over budget, needs design and cost analysis, or want to start a new project, contacting ParsCo will be the first step to addressing all of your construction needs. 

ParsCo Construction

Office: 850.696.7656

Fax: 850.390.4943

Email: info@pars-co.net

Visit us on the web at www.parscoconstruction.com

Check out our blog at parscoblog.blogspot.com

Restaurant Design and Construction - Pensacola, FL

ParsCo Construction recently completed a new restaurant project in Downtown Pensacola in a historic building.  The Owner didn't have a set of design drawings and was limited to a tight budget.  With this in mind, ParsCo used past methodologies and  design approaches to assist the Owner in saving money on the restaurant design and putting that money towards construction.  In the end the project was completed and the Owner was satisfied. 

 

 

 

 

 

 

 

 

If you are planning a new restaurant project it is important to plan/budget properly for the following: 

 

Restaurant Design and Construction Budgets – Usually one of the first questions we’re asked by those embarking on restaurant projects relates to budget.  How much does it cost?  Well, budgets can swing dramatically from project to project, but here are some rules of thumb.  Generally, restaurants are built between $25 – $300 a square foot (some mega projects or ultra-high-end projects have gone for a few thousand a square foot), but this also depends on whether we are doing a renovation, or new construction.  The cost for “restaurant design” and planning is often around 5-10% of the construction budget (considering strictly the design phases of the project, not larger concept development issues involved in large scale development projects).  The type of restaurant you are building is certainly a factor – you’ll spend more per square foot for a fine dining restaurant than a fast-casual concept, generally speaking.  Also, you should expect an entirely different financial model in approaching the creation of a new restaurant concept you plan to roll-out nationwide versus a single one-off concept.  The former requires much more planning and development.  An average Red Lobster is believed to cost around $120 per square foot and an average Starbucks around $85 per square foot.  However, these companies have spent millions and millions in design, branding and purchasing planning/efficiencies, so a start-up shouldn’t expect to be anywhere near these ranges in creating a new concept from scratch.  It is amazing how often someone thinks they will be the next Starbucks within a 10 year period and with a $500,000 investment.  Starbucks has spent hundreds of millions of dollars to perfect what we see today in their latest restaurant prototype.  It’s more than just wishful thinking to think it can be duplicated as a growth concept within the cost of what they can today build a single unit they’ve spent so much perfecting.  Mega chains can afford seven-figure per year Executive Vice President’s and teams of hundreds working on a new concept.  It’s believed well over $10M (“soft” costs) is spent developing just the prototype plans some projects.  So can a new prototype be created for less than $10m?  Of course.  By all means.  It’s less likely though that the next billion dollar brand can be conceived within less than the cost of opening a single unit though.  At a minimum, you can expect to spend a lot more in the years to come correcting the mistakes of the under-funded prototype.  There’s a saying, “Measure twice and cut once”.

 

ParsCo prides itself in working with customers that don't have the budget but have the vision to create a new concept and make it a reality.  This requires the ParsCo construction team to assist them through the design and building process.  No matter how large or small a new project is, ParsCo will work with you on developing the design and budgets necessary to make your project a reality. 

 

 

 

 

Construction Documents - If you’re going to build or remodel a restaurant, ParsCo will need a set of scaled construction documents, often called "working drawings". These documents can be drawn on a CAD system or by hand and consist of space plans, elevations, schedules and details. These drawings are generally prepared by several design consultants and engineers, integrated into one set for submittal to your local building and health department.

 

Building Codes - All your plans, drawings and specifications should be in compliance with the building and health codes that are applicable to your location.  Your drawings, plans, equipment and finish specifications should be approved by the following regulatory agencies:

• City or County Health Department
• Building Inspections/Planning and Zoning Departments
• Dept. of Building and Safety
• Fire Marshall
• Department of Restaurants or Authority Having Jurisdiction over Licensing

Each department will have an application and permit/licensing and possibly even a plan review fee.  Note that during this review process it is not uncommon to find out that additional design changes may be required which may also change the costs of the construction for your project. 

 

 

 

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ParsCo, LLC

55 South A Street

P.O. Box 12862

Pensacola, FL 32591

O:  850.696.7656

F:   850.390.4943

Visit us on the web at www.parscoconstruction.com

 

Benefits of using a Pre-Engineered Metal Building

ParsCo Pre-Engineered Metal Buildings - Gulf Coast Pensacola, Navarre, Destin, Mobile, Panama City, Southeast Region-  contact ParsCo at 850-696-7656 or email us at info@pars-co.net. 

In a rapidly changing economy, owners, builders, and architects are looking at a wide variety of options to get the most for their dollar. ParsCo Pre-engineered metal buildings offer a cost-effective, sustainable, long-term solution to our clients that are looking to maximize square footage on a tight budget.

ParsCo employs a top-notch drafting and engineering team skilled in Computer aided design and drafting (CADD).  ParsCo's design team members are able to use our state-of-the-art computer tools to custom design each building system and all building components based on each customer's needs and specifications.

Every ParsCo Metal Building is based on local and national building codes making each metal building system to be engineered to the required dimensions and designed to meet the loading conditions that are required based on the location of the project. Once the building is designed and detailed, computerized instructions are sent to the fabrication plant where steel members are cut to exact standards. That precision custom manufacturing also reduces construction waste.

Metal buildings are extremely versatile and traditionally have been used in the commercial and industrial market segments as warehouses, distribution centers and industrial facilities. They're making inroads into other markets, however, such as churches, schools, shopping centers, office buildings and other commercial and mixed-use facilities.  The flexibility of using a ParsCo metal building as your frame and structure saves customers money and the savings can be used towards upgrading the facade and interiors to meet the clients needs.

The structures can incorporate many architectural finishes—including masonry, brick, tilt-up, ornamental metal or stucco façades—while still being cost competitive. Basic elements reign across all metal buildings: primary rigid frames, secondary members (wall girts and roof purlins), cladding and bracing. All of those elements work together to create an efficient system. Engineered systems also withstand extreme loading from disasters such as earthquakes and hurricanes.

The buildings also are a good fit for developers, many of whom are starting to look at buildings as long-term investments. Due to the permanence, durability, stability and quality of metal buildings, life cycles can reach up to 100 years. Metal buildings can also help meet green initiatives. About 35 percent of steel used in buildings comes from recycled products and steel is 100 percent recyclable. In addition, metal buildings are easy to insulate and, when paired with cool roofing, can help lower heating and cooling costs.

If you are interested in a Pre-Engineered Metal Building contact ParsCo at 850-696-7656 or email us at info@pars-co.net. 

ParsCo Construction Management Advantages

ParsCo Construction Managers in Baldwin County Alabama and Pensacola Florida are the most qualified and best when tackling a project that requires vision, professionalism, and integrity. 

Under a construction management approach to a major building project, professional expertise in the specialized areas of cost estimating, systems analysis, value engineering, "constructability" review scheduling of activities, procurement, and construction coordination and supervision is added to the capabilities of the traditional project team of owner and architect.

Best suited for larger new or renovation projects, the ParsCo Construction Manager is responsible exclusively to the owner and acts in the owner's interests at every stage of the project. Comprehensive management of every stage of the project, beginning with the original concept and project definition, optimizes the level of comprehensive services and advocacy to the benefit of owners from construction management.

A project using this approach typically has two phases: preconstruction (concurrent with the architect's design), and construction. In the preconstruction phase, the ParsCo CM provides input to the architect and owner regarding cost estimates, scheduling, constructability, value engineering and general insight. During construction, the ParsCo CM oversees contractors on behalf of the Owner. 

The involvement of a ParsCo construction manager (CM.) during the entire design process as a collaborative yet independent member of the design team helps ensure that every major design decision is balanced by proper analysis of its cost consequences, and impact on project schedule.

The role of the ParsCo construction manager in a building project may vary substantially, and can be performed under a variety of contractual terms. The most traditional, and some would say "purest" form of construction management is that where the C.M. acts as the owner's agent as a consultant, providing estimating, cost control and scheduling services and undertaking administrative responsibilities during construction. Under this arrangement, all construction contracts would be executed directly between the owner and contractors. This approach may permit the construction work to be broken down into a significantly larger number of trade contracts also, thereby eliminating the need for one or more "general" contractors.

A major benefit to the construction management approach is that, under the disciplined scheduling of the C.M., the project may be phased or "fast-tracked" whereby the design and construction periods are overlapped to permit an earlier start and completion of construction.

Major Advantages

Construction costs are identified and predicted reliably during the design phase. The ParsCo Team interacts relating to construction cost, completion schedule, and quality work to maximize owner's value. ParsCo C.M. contributes to a synergistic team approach in the owner's interest.

Value engineering by ParsCo C.M. can be done at this time when it can be implemented into the design. Major design decisions can be made on the basis of complete information.

ParsCo C.M. early involvement facilitates financial planning and avoids potential delays for redesign caused by budget problems recognized too late. All records, books, estimates are "open book".

Prudent buying and value engineering with trade contractors results in cost savings reverting to owner, not general contractor. Competitive bidding is retained on all work. Flexibility to pre-qualify trade contractors for better control of schedules and costs.

Schedule is controlled during design phase to ensure that design efforts are integrated with construction phase requirements. Facilitates fast track methodology or phased construction providing earlier completion. Cost savings available through earlier start and pre-purchasing. Ability to pre-order long lead items.

Single prime responsibility for construction. No additional owner personnel required to monitor construction.

Contact ParsCo at 850-696-7656 or email us at info@pars-co.net for more information. 

NOAA Disaster Response Center (DRC) successfully completed ahead of schedule

On behalf of Charlie Henry, Director of NOAA DRC, and myself, we thank you Amir and ParsCo for a project well done. Please convey our thanks out to your team they did an exceptional job on the project. 

Jason Kilgore 

National Oceanic and Atmospheric Administration (NOAA)