Success for an owner is having a budget that can be met at bid time by the contractors. This isn’t due to luck. It is due to the project management team understanding that budget development on a project is not a one shot effort. Budgets for projects are oftentimes bandied about by project participants early in the concept of a project. These are usually not sustainable figures. They do not have a basis and are merely conjecture. Sadly, these figures tend to stick in the mind of the management responsible for authorizing the project.
To attain a successful project budget requires paying attention to the details in the very beginning, through the development of the design and into the construction bidding period. The budget is highly dependent upon having the right scope from the onset. Rough parameters regarding use, area or production output may be the most information known when setting the initial budget. This requires trained estimators used to working with historical cost information to develop the best budgets. They are experienced with having holes in the information but can compensate by adding details that are inherent to the project type. Project type and size influence the time required to prepare a reliable project budget. I have seen reliable building budgets prepared in a few hours. Process plant budgets may take a few days or weeks with engineering support required. The budget estimates may be a few dozen line items to hundreds of line items of detail.
The project budget that is set without further cost verification during design is the one that will fail. The cost monitoring must begin because conditions change. It can be due to scope, material prices or other changes. Established professional guidelines can be used for cost control points. On a building project this would occur at Schematic, Design Development and Construction Documents Milestones. On process and industrial facilities it will occur with a different set of milestones. Some project may require only two or three intermediate cost control points and others may require five or six before the bids are received. In order to maintain the viability of a project, some projects may require extensive value analysis if the initial project budget was not set properly. This may also be required if conditions substantially change after the budget was set.
Continued success in the preconstruction estimating is also in the detail. When preparing estimates, the more detail the better! This applies to the traditional design, bid, build process along with the design build process. To prepare reliable estimates on any of these types of projects, details must be used in the estimate. Historical parametric pricing should be reduced. With the use of estimating professionals the budget will begin to reflect more project factual detail and costs than parametric costs.
By the time the final estimate is prepared on a project, it should reflect the same level of detail as if prepared by one of the bidders. This estimate preparation process can be used as a final quality control check on the bid documents. It can be used as the “fair cost” or bid evaluation estimate. It can be used to verify the progress payment schedule of values. It can also be used to verify the project schedule has correct durations, relationships and values. It can be used to determine if the scope and costs in change orders are appropriate.
Success is in the details. Estimating provides these details. Estimating does not cost, it pays with a successful project!
