I earn my living by providing estimates for a fee. Before going too far, a disclosure is in order – ninety percent of my clients are contractors, construction managers and subcontractors of virtually all types. We provide them with estimating services for design-build and design-bid-build bids, changes orders and claim situations. We also have been known to work for owners in the pre-construction phases starting at the budget phase.
Construction management firms are my main competition and headache on some projects. This is especially true when they earn their living providing estimates for free and/or at reduced rates. Based on the prices charged by the construction managers for these estimates, sometimes the owner gets what they pay for. I will say I have seen the construction managers under and overly compensated for their estimates.
On one project we were called in to determine the project budget. The project had been underway for about a year. It seems that as more drawings were issued each month, the construction manager raised the budget. After a reported multi-million dollar budget increase one month, we were called in to independently prepare the project budget and resolve any differences. With less than 35% of the project designed, our practice is to prepare detailed estimates for all disciplines. Our details include the MEP scopes, leaving nothing to question.
In attempting to resolve the estimate differences we found the construction manager was “using and abusing” MEP firms to prepare the mechanical and electrical scopes. Part of this concept was to have the firms prepare the estimates for free, with an enticement that they may be awarded a contract. These estimates were prepared on a square foot basis, generally one page in length, not on a detailed basis. This also occurred where the construction manager was using other subcontractors for the estimating such as with interior finishes and structural components such as steel and masonry.
There were several problems with this approach, not just the ethical ones. The subcontractors either did not consider these estimates were a budgeting exercise, not a bidding event for a contract award; or they did not understand the true scope of the project; or did not want to bother developing the right numbers since they were “free estimates”. This was compounded by the construction manager not being able to determine if the subcontractor pricing was valid or not. Detailed quantities could not be compared due to the square footage prices. No substantiation was provided by them for the stated historical pricing basis. In short, these were not estimates that could be used for a reliable budget determination.
While the construction manger may feel the best procedure is to use local subcontractors for pricing, there needs to be a responsibility or obligation to developing the correct budget. The construction manager should not be having it done for free. The costs need to be charged to the project. A free estimate may be done in an hour when forty hours is more appropriate. But since it is free, little or no consideration is given to providing the right number.
In these chaotic economic times there will be more pressure put on construction managers, contractors, and subcontractors, along with material and equipment suppliers to deliver estimates for free. This is a step in the wrong direction. Owners need budgets that can be controlled from the onset. Reliable estimating takes time and after all, time is money.
