Importance of estimation in construction: The Cornerstone of Every Construction Project || SBC

Why Is Construction Estimating Important?

No matter what type of commercial construction project you’re about to embark upon, the objective will always be the same: to fulfill your vision and accomplish the goals you’ve set out to achieve. However, before your ambitions can become a reality, your company needs to carefully examine real-world finances in order to determine the feasibility of a proposed construction project. The only successful way to pursue this is with an accurate construction estimate. In this article, we’ll explore the reasons why construction estimating is an essential step before undertaking any commercial project.

Table of Contents

What Is The Purpose Of Construction Estimates?

Whether it’s a brand-new commercial facility, add-on facility or a renovation of an existing office space, construction estimates are used to provide clientele with an in-depth description of the expenditures needed to complete a project. They are also used to give clients a projected estimate of total costs involved with the proposed construction project at hand.

When building a new office space or manufacturing facility, there are tangential costs that run well beyond the scope of craftsmen and materials needed to complete the job. According to the United States Census Bureau, commercial construction estimators are capable of completing accurate estimates by gathering information on a number of factors. Because these components directly impact the total cost of a construction project, it is important to compile detailed data points. Such factors may include materials, labor, locations, project duration, building codes, special machinery, and even soil conditions at the site of a job. For instance, clients might overlook the cost of land acquisition for a construction project, or may not be aware of the role inclement weather can play throughout the duration of a project. In locations that experience severe climates, construction projects often experience cost-overruns when the weather forces project delays.

Additionally, there are other factors that estimators must take into consideration, including the availability of gas, electricity, water and sewer, surface topography, drainage, and the specific materials required to complete the project. For example, a company building an eco-friendly facility may utilize green materials that are more costly than a standard project but will realize reduced operating costs over time. Material lead-times also come into play, as not all materials are immediately available and must be ordered in advance.

Construction Cost Estimation: An Overview

Cost estimators depend on a variety of estimation techniques, which vary in speed and potential accuracy. The primary approaches to cost estimating include:

Allocation of Joint Costs: In order to allocate costs that are difficult to assign to individual project elements, different mathematical formulas must be implemented. For example, you can prorate field supervision proportionally to tasks based on their share of the total basic costs.
Empirical Cost Inference: This statistical method uses regression analyses to relate the cost of construction to a model of predictors. The accuracy of this method depends on the quality of the predictive model, so it requires a substantial degree of familiarity with individual predictors of total construction costs, as well as statistical methods expertise.
Production Function: A production function relates the amount built (the output) to factors such as materials and labor (the input). Therefore, if you want to achieve a certain level of output (number of square feet built), you must define the optimal input (labor hours per square foot). Production functions can be fairly accurate for forecasting input-output relationships for projects of a particular type, and there is extensive data available to draw upon for specific project types (e.g., existing research based on large structures such as hospitals and schools).
Stick Estimating: Extremely accurate but incredibly time-consuming, stick estimating is the practice of determining total expenditures by listing, in order, the costs for every single component of a job. It is not uncommon for human error to occur, as the sheer amount of time it takes to produce a stick estimate can lead to a loss of concentration or carelessness during the process.
Unit Cost Estimating: Simply put, unit cost estimating associates unit costs with each assembly involved in a construction process. It is a relatively quick and accurate form of estimation, particularly if an individual has used the assemblies previously, and there is evidence to justify the unit costs for each assembly.

Why Estimates Matter: Understanding The Value Of Accuracy

When a company is considering development – whether it’s expanding into a new facility or adding square footage to their existing floorplan – the budget isn’t always their primary concern. Although companies will eventually arrive at a feasible budget, identifying whether or not their spending cap is enough to turn their visions into reality cannot be achieved without an accurate and well-researched construction estimate.

Typically, a client will get several bids from competing construction companies, and in turn, each company will present their projected estimate for costs entailed and project duration. From there, the client will hire the company that they believe is best suited for their job and budget. In some instances, contractors have estimators on staff, while others may use a third party. Whichever method is used, the estimator must be highly qualified for the job. In order to be an effective estimator, they’ll require a robust knowledge of the blueprints, as well as the costs of necessary building supplies and labor.

As touched upon earlier, there are unforeseeable reasons for going over the original estimate, such as inclement weather. However, because your construction estimation is one of the most important pieces of criteria used to hire a contractor, it must be as accurate and possible. In the event that a project goes beyond the scope of an estimate, the client will either have to find a way to pay for the additional expenditures or decide to sacrifice a feature to save money. Again, this is yet another reason why obtaining an accurate estimate is so crucial to your company’s bottom line.

Pro Tip: One way to investigate the accuracy of an estimate is to ask the company about their track record and review their portfolio. They’ll likely have a few big projects they’ve completed in the recent past, so ask them about these projects and see if they were able to abide by the estimate they quoted.

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Getting An Accurate Estimate From A Qualified Estimator: What To Expect

As we’ve reviewed, when it comes to any construction project, getting an accurate estimate from an experienced estimator is an invaluable service to your company. Whether they’re a construction company’s estimator or an independent contractor, the estimator you choose to work with should be able to furnish an accurate estimate that’s detailed enough for you to secure adequate financing and begin your project.

A professional estimator should possess some (if not all) of the following qualifications:

A proven method for preparing accurate estimates
A thorough understanding of architectural drawings
An in-depth knowledge of building materials, construction methods, building codes, and industry trends
Extensive experience in construction work and knowledge of the cost of materials, material lead times, hourly output of workers, overhead expenses, and other costs
The ability to calculate costs with accuracy and precision
The ability to collect, classify, and evaluate relevant data

A construction company that works with inexperienced estimators can suffer from cost overruns, resulting in added client expenditures and a damaged reputation to your business. As a client, working with amateur estimators may endanger the future of your company. Therefore, it’s essential to ascertain that the estimator you hire is a dedicated estimator whose only job is estimating. Many construction firms utilize their project managers to prepare estimates when they’re busy; however, this does not follow best practices. A successful business requires the expertise of a seasoned, professional construction estimator who deals with trade contractors and suppliers on a daily basis, not just when the workflow is stagnant.

Common Pitfalls For Construction Cost Estimators

Most experienced cost estimators will agree that you can frequently avoid common pitfalls by following standard procedures on a consistent basis. One of the most common problems is attributed to individuals who fail to read the project documents carefully. This often leads to a poor comprehension of the project scope, as well as certain associated costs. In other instances, inaccuracy in mathematics is to blame, either by entering costs incorrectly or forgetting to incorporate costs during the estimation. These issues can be further compounded by neglecting to check the completed estimate thoroughly.

Other oversights include the failure to visit the site, as well as the inability to fully understand the site conditions. As previously discussed, a site’s natural conditions and location can impact costs in a number of ways, and a cost estimator will develop an eye for spotting and asking about these issues; this makes visiting a job site imperative.

Finally, some cost estimators who draw from cost data repositories will fail to adjust costs based on local conditions or will make arbitrary adjustments without considering prior experience or quantitative comparisons. Either one of these miscalculations can potentially throw estimates off and make it more difficult for another cost estimator to verify an estimate.

Looking Ahead: How To Address An Inaccurate Estimate

The goal of an estimator is to furnish the most accurate information possible; therefore, in the event that an estimator furnishes an inaccurate estimate, there truly are no winners. While factors outside everyone’s jurisdiction can change the course of a project, the ultimate goal of an accurate estimate is to ensure that all sides are aware of the costs going in.

With a proper estimate in hand, the client is able to ascertain that the project matches their budget and scope while posing little threat to the financial (and physical) future of the company. Construction companies need accurate estimates to ensure that the final budget number does not turn into a nightmare. If a construction company submits a price with an inaccurate estimate and costs are consequently driven up, the company is left to either pass that along to the client (and damage their image) or absorb the cost into its own finances (damaging their credit).

If your project financing is contingent upon supplying an accurate estimate, you need to be confident that the numbers you have been supplied with are accurate and not understating your needs. After you’ve entered the construction phase of a project, if your estimate is faulty, you may not have enough money to complete your building. In order to meet your budget, another option may entail making concessions to allow for additional expenditures.

Once an accurate estimate is secured, both sides can conceivably avoid delays, financial difficulties, and potential litigation while enjoying a fairly seamless experience from beginning to end.

Summary

It is vital for design professionals and construction managers to realize that while the construction cost may be the single largest component of the capital cost, other cost components are not insignificant. For example, land acquisition costs are a major expenditure for building construction in high-density urban areas, and construction financing costs can reach the same order of magnitude as the construction cost in large commercial projects.

From the owner’s perspective, it is equally important to estimate the corresponding operation and maintenance cost of each alternative for a proposed facility in order to analyze the life cycle costs. The large expenditures needed for facility maintenance – especially for publicly-owned infrastructure or structures undergoing expansion – are reminders to consider the implications of operation and maintenance cost in the design stage.

Ultimately, the most important part of any commercial building project is affordability and using an independent cost-estimating service is crucial when planning a new construction or renovation project. By using the appropriate construction estimating services, your company will be able to price-check builders’ quotes and material costs. In turn, it will help you to track the affordability of your building project while enabling you to set a budget. This is not only following best practices within the industry and improving your company’s bottom line, but also your reputation, as implementing a professional construction estimator can protect your good name while preventing needless expenditures that affect both you and your clients.

Why Is Estimation Important in Construction?

Articles

5 Min. Read

August 18, 2021

It doesn’t matter what type of construction your business does, estimation is an important part of it. The estimation process is integral to construction businesses, as well as customers. Accurate estimates give them an idea of how much they’ll be spending, and are the next best thing to exact answers. Providing reasonable estimates increases your chances of winning a bit, as well.

If you’re running a construction company, it’s important to know why accurate estimates are a big deal. Keep reading to learn more about the way that cost estimation can impact your potential projects!

Here’s What We’ll Cover:

What Is a Cost Estimate?

Why is Cost Estimation Important in Construction?

Are Estimates and Quotes the Same Thing?

What is the Best Way to Create Estimates?

Key Takeaways

What Is a Cost Estimate?

In construction, a cost estimate is the company’s approximation of what a job will cost. In most cases, it’s the deciding factor when it comes to winning projects, as well. While an actual answer can never be provided about what a job will cost, an accurate estimate can make a customer happy. After all, how much money they spend on construction can affect their everyday life.

Here are some of the criteria that go into making accurate cost estimates:

Labor hours
Cost of materials
Outsourced labor (contractors)
Indirect costs (delays due to staffing or material availability)

Typically, the more criteria you’re able to plug into an estimate, the more accurate it is.

Why is Cost Estimation Important in Construction?

There are a handful of reasons that cost estimation is important in construction. See the below reasons that estimates should be a construction company’s number one priority!

Estimates Influence Business

When a business is able to provide accurate estimates, they are more likely to receive business. If a business provides inaccurate estimates it can create negative relationships with customers. Those will soon bleed out into negative reviews, which will cause a downturn in business, most times.

Estimates Take Time, and Time is Money

Estimates for any construction project take time to develop. Inaccurate estimates can cause revised estimates to be needed. The more time you take creating new estimates, the more money you are losing. Time is also critical for customers. Having to have more than one estimate be done by a company slows down their plans. If you are working on commercial construction projects, this can cause your clients to lose money, as well.

Estimates Drive Expenses

When you’re creating an estimate for a project, you’re also estimating your company’s associated costs. Estimates include how many labor hours a job will take, as well as the materials needed. If your estimates are incorrect regarding either, there’s a good chance your company will have to absorb the costs. Many jobs are done using a flat rate, or the materials for them are bought in bulk. If your cost estimate doesn’t include all of the necessary labor or materials, you’ll likely end up going over budget.

Are Estimates and Quotes the Same Thing?

No, the two are very different, in fact. Estimates are just that, a rough idea of what a job will cost. Quotes, however, are more detailed. They outline exactly what a client is going to pay for the job that your company is doing. An initial estimate will give them a ballpark idea, where a quote will break the cost down line by line.

It’s also important to realize that quotes come with contractual obligations. The service provider must abide by the cost of the quote. An estimate can change, while a quote remains concrete.

As such, it’s important that your estimates are close in price to your quotes. An original estimate is done well when the quote that follows it isn’t vastly different.

What is the Best Way to Create Estimates?

When you’re looking to create accurate construction estimates, you’ll want to use estimation software. Estimation software comes with plenty of built-in tools that help you create accurate estimates. Many of them also have integrated material costs, and can update on their own. This way, you’ll never be surprised with the actual cost of materials, and neither will your customer.

In the past, many estimates from construction companies have been guessed based on prior experience. That, or they’d take a long time, being calculated manually. While experts can generally tell you what a job will cost, there’s no need to guess or wait any longer. Estimation software can do most of the work for you!

Key Takeaways

Construction estimates are some of the most important estimates when it comes to business. They need to be accurate and timely to ensure that projects can be won. Thankfully, thanks to technology, construction estimates have been made easy. Many software programs exist, and they do most of the estimation for you!

If you liked this article, we have plenty more like it on our resource hub. Be sure to give it a visit today!

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Building Estimator | Importance of Building Cost Estimation in a Construction Project

The Importance of Building Cost Estimation in a Construction Project

Regardless of the project anyone is about to undertake, the sole objective is always the same; to accomplish the vision of the project owner and fulfill the strategic goals of that project. This applies to any type of project; be it a construction project, IT Project, Research Project etc. Although, the focus here is Construction projects.

Thoughts and visions are important things but however, before these things become a reality, it is imperative to carefully explore its feasibility through a cost benefit process. The most practicable way to explore the feasibility of any project is through a cost estimating process.

As there is a common saying by Laozi a Chinese philosopher “A journey of a thousand miles starts with a single step”. Likewise, every small construction project like renovating a small space or an add on facility or your large-scale construction project, it is very important that they all commence with a cost estimate which is critical in creating and maintaining a feasible budget for that project. This also, provides the project owner/ client with a comprehensive description of the total expenditure required to complete their project. This may be inferred as that one step that commences the journey of a thousand miles (the construction project to be embarked upon).

Cost Estimate?

This is an evaluation of the probable total expenditure to be incurred for a future project as accurately as possible. An estimates’ degree of accuracy and detail increases as the project progresses, specifications and work items become clearer, more information is made available and coherent decisions have been made. The true cost of any project becomes evident when actual costs are incurred, and the project has been completed.

Estimation for construction projects are very unique and differ from project to project. No two projects cost, or its estimates are the same.

Why do you need a Cost Estimates for your construction Project?

– Budget for the Works and Proper Planning – A good cost estimate will predict the material, labour and preliminary costs inclusive of any other resources needed to complete each item of work for a project. With this in hand, proper planning may be carried out by both the contractor and the client i.e. the client knows what amount of fund is due and required for each stage of the work, the contractor as well can plan ahead either in the provision of labour for certain aspects of the work and or bulk purchase of materials or in bits. The importance of a good cost estimate for proper planning Is endless.

– Cost Control – At the commencement of a construction project usually a cost estimate should have been developed for that project. During the course of the project, good cost estimates should ease the control of expenditure of funds. Items of works are usually benchmarked against the cost estimate set by the estimator for that work item and afterwards, the actual cost is compared with the budgeted cost for that item of work. This comparison allows to discover where cost savings have been made, or productivity levels need to be increased or where losses have been made. Generally, a good cost estimate eases the cost control process during the life of a construction project.

– Decision Making– Asides the major quality of a good cost estimate which assists a client or a project owner judge whether the project is feasible or worth embarking on during its concept stage, during the course of a project as well, a good cost estimate helps to make clearer decisions on the approaches towards work, alternative approaches (materials & labour)which may be used to save time and cost. On the hand of Financial decisions which could impact the going future of a project, a good cost estimate plays a major role too.

There was a residential construction project where the contractor abandoned the works after completing 65% of the works. The Building estimator was then invited by the project owner (the client) to appraise the work done. It was however evident that the bill submitted for the works was underpriced hence not allowing the contractor to finish the job. I mean how does one quote in the material and labour scheduled costing too the client for a trip of 30tons of granite at N165,000:00 (the going rate for a 30tons trip of granite is between N210,000 – N225,000 depending on the vendor supplying). This may have been strategy on the contractors part but If the contractor had a good cost estimate as per the works and an estimator on the job, this issue may have been averted. Although, claims from the contractor was fluctuation claims which the client was not willing to entertain.

What makes up a good cost estimate for your construction project

The process of cost estimating requires a bit of research, experience, judgement and decision making. With all these in play, your cost breakdown is not only a list of costs but it a detailed basis of estimate which composes of;

– Inclusions – Material required, their units and costs, labour required and cost associated, Preliminary items required to make the work possible like scaffolds, cutting/ grinding machine etc.
– Exclusions – these are usually provisional items which their scope of work are unable to be estimated at the time of estimating hence, a sum maybe developed for it but stated. Later on, in the project when its scope is clearer, a good cost estimate is then developed which is then termed an inclusion.
– Any other aspects – this may detail out any other processes of preliminaries required to be done before the actual project is commenced of works needed to assist the project on its course. This may be approvals or consent from relevant authorities, storage for materials, workshop drawings, light and water for the works.

Also, it is important to note that it is almost impossible that an estimator’s initial estimate will be same as the projects final cost.

New Trends in Estimating

Excitingly, as new trends develop, and technology emerges, estimating has shifted from the hands of just the estimators to now almost every stakeholder in the construction process.

The Building Estimator which is a web application has now made it easier for anyone involved in the construction process to estimate for construction works required to be done. With The Building Estimator, users can now estimate by themselves within seconds the material quantities, labour and preliminary requirements for different items of works like concrete, formwork (carpentry works), blockwork, screeding, plastering, ceiling works, tiling works, clearing works, excavation works etc. with the Automated Building Estimator

Also, There is a Custom Budget calculator which allows you have a concept estimate for your different construction works like a residential building, commercial building, a fencing project and amazingly, if you want a more detailed and good cost estimate outside these, then you can upload or email your drawings to our team and we reply within 2-4 hours.

On the platform you can also check and verify Construction Material Prices and Labour Rates which are updated weekly.

There is also opportunity to access Construction Tradesmen like carpenters, bricklayers, welders, Tile installers etc. and Construction Vendors and Suppliers.

There is also a Construction Inventory and Cost Tracker which allows you get real-time updates of the ongoing expenditure of your construction project by automatically doing out an Expenditure Analysis – Amount Budgeted vs Actual amount spent on material and labour.

Also, at The Building Estimator, because of our vast knowledge of construction practices over the years, we adopt a cost benefit approach with our cost estimating processes by taking a critical look at material and design choices following the designers preferences and clients’ needs of a project in order to present options that increase value to the client while reducing cost.

Generally, The Building Estimator is a quick and easy to use construction solution that gives you estimated quantities of your material and labour requirements. Also aids your construction processes.

A good cost estimate is the difference between a successful project and a failed one as often time, its vital parts are usually overlooked.

In simple terms, Building Estimating is to accurately know the worth through money interpretation of your construction project (be it a small renovation project or your 30 storey construction project). Having a construction project today and need to know its money interpretation, contact The Building Estimator today – [email protected] or visit our web application on www.thebuildingestimator.com

What Is It & Why Is It Important? – 1build

What is Construction Estimating?
Accuracy in Construction Estimating Is Essential to a Project’s Success
Overview
Why Is Accuracy So Important in Construction Estimating?
Key Components of Construction Estimating
Accuracy Levels of Construction Estimating
Conclusion

What is Construction Estimating?

Given how rapidly estimating is evolving, it might be prudent to ask: what exactly is construction estimating? At its most basic level, construction estimating is the process of predicting the cost of building a physical structure. But predicting the cost of a structure is just the start of a complex process. Construction estimates need to be accurate because profit margins are typically razor-thin in the industry, so even a slight miscalculation on costs can determine whether a contractor makes or loses money on a project. For these reasons, successful construction projects include multiple cost estimation phases with varying degrees of scope and accuracy.

Accuracy in Construction Estimating Is Essential to a Project’s Success

Over time, construction estimators have traded in their pencils and calculators for software, making a paperless process an achievable objective. While construction estimating has definitely come a long way in the past few decades, there’s still considerable room for improvement since only 31% of today’s construction projects come within 10% of their original budget.

The construction estimating process is highly detailed and requires a specialist with the extensive training and experience needed to develop reliable cost estimates. In this post, we take a closer look at construction estimating by examining who performs cost estimates during a construction project, why it’s so important to achieve an accurate assessment, and what are the key components and levels of construction estimating.

Overview

Although cost estimators in the construction industry must be generally familiar with design and construction, they don’t need to be an architect or engineer. They do, however, need to be skilled in dealing with the expenses and data associated with any construction project, which includes quantity take-off, material prices, costs (equipment, capital, and operational), contingencies, variances and more. As construction has become increasingly more competitive, the role of cost estimator has been growing steadily in recent years. In fact, the U.S. Department of Labor’s Bureau of Labor Statistics (BLS) estimates the U.S. had 217,400 cost estimators in 2018, with an increase in employment opportunities of 9% expected over the next decade.

Sample Construction Estimate for all Trades by 1build

Why the demand? As costs continue to be a major concern for clients and builders due to the extreme financial risks involved in any given construction project, having a skilled estimator who can provide accurate cost estimates can help offset those risks. Therefore, it’s in the best interest of both parties to spend the time needed to properly research a project’s expected costs before proceeding. For these reasons, estimates are “touched” by almost every major role in a construction project.

Construction roles that are affected by cost estimates:

Project owners: Typically allocate their budgets based on cost estimates when they define a project’s scope and assess its feasibility
Contractors: Also use cost estimates to determine whether they should bid on a project
Architects and engineers: Usually provide input for these estimates to ensure the project remains within scope and budget
Project managers: Use cost estimates to track a project’s performance

It’s now even becoming common for contractors to review multiple cost estimates from independent estimators, allowing each estimate to serve as a check on the others. Employing this strategy allows contractors to more accurately predict costs, especially on large projects. Ultimately, by keeping all parties focused on delivering a project on time and under budget, accurate cost estimates help to prevent builders from losing money and customers from overpaying.

Why Is Accuracy So Important in Construction Estimating?

Of course, cost estimates should be accurate regardless of industry, but accuracy is particularly important in construction. Accurate estimates are critical in construction because unlike other sectors where businesses set the price for their products and services, contractors must routinely bid on projects and the accuracy of the estimate can be the decisive factor in determining whether a project is won or lost. Furthermore, the unpredictable nature of construction makes cost overruns and project failures more common than in many other industries–which means a contractor assumes less risk the more accurate a project’s estimate is.

Let’s take a look at how accuracy impacts a project’s bottom line. Consider a project’s budget. The budgets and timelines of each project is closely linked to the schedule for repaying lenders, which also require the project to generate revenue as quickly as possible. What’s more, large projects that affect the entire community have a particularly strong need for cost estimates due to the scope and likely use of public funds, which usually requires greater accountability and transparency than private projects. In terms of large projects, accuracy is critical for these projects because even a small error in the unit price of a material is typically multiplied many times, resulting in a large difference in the project’s final cost.

While absolute precision is obviously impossible in cost estimation due to factors outside an estimator’s control, skilled estimators do strive to account for as many cost factors as possible. Factors outside of human control include fluctuating market conditions according to the time of the year as well as highly variable timelines due to specific weather conditions. Indeed, cost estimates are even affected by human factors such as the quality of the project plan, the estimator’s skill and experience, and the procedures and tools that the estimator uses.

Cost estimation is always complicated, but becomes especially challenging with large projects, which typically require a team of estimators, rather than an individual. In these cases, the members of different roles may provide cost estimates for the same task. For example, contractors and subcontractors may prepare cost estimates for their particular projects. Sometimes, estimates are drawn from someone whose primary role isn’t cost estimation, as when a salesperson in the construction business creates an estimate or architectural firms perform cost estimation in-house. The differences in these roles often result in a large difference in estimates, which is why many construction firms now use qualified independent estimators.

Last but not least, the competitive bid environment in construction usually favors the contractor with the lowest bid that meets standards specified for that project. The time and effort spent preparing these estimates are, therefore, a business investment that can result in a winning bid that will still yield a profit. The more accurate an estimate is the more likely it is the bid will be the lowest–thus delivering a return on the business’s investment in the estimate.

Key Components of Construction Estimating

Although there are many components of construction estimating, cost estimators typically rely heavily on the project’s take-off, the document that describes the quantities and types of materials the project will require. This list of materials also drives the estimates for the time and labor needed to complete the project. Cost estimators typically classify these expenditures into direct and indirect costs.

Direct costs can be associated with a specific activity. Materials and labor are the most obvious direct costs in construction, but the depreciation, maintenance, and repair of equipment is also a direct cost that estimators must take into account. Indirect costs, also known as overhead, can’t be associated with a specific activity. The costs found in construction estimating would be:

Administrative costs
Legal fees and building permits
Quality control
Security
Temporary structures
Utilities

Accuracy Levels of Construction Estimating

Cost estimates generally become more accurate as the project progresses and estimators gather more information. Each estimate, therefore, begins with a wide range that becomes more narrow with a more precise definition of the project’s scope. For example, the American Society of Professional Estimators (ASPE) defines five levels of cost estimates.

Level 1

The ASPE’s Level 1, or order of magnitude, estimate is the roughest cost estimate since it’s created before the project has been completely defined. This estimate is based entirely on the estimator’s judgment and experience with similar projects. A Level 1 estimate typically has a range of 25 to 75 percent.

Level 2

The Level 2 estimate is commonly known as the intermediate estimate. Its primary purpose is to determine the project’s general feasibility. It’s typically used to determine if a large project should proceed as planned.

Level 3

The Level 3, or preliminary estimate, is typically used to consolidate unit costs. It requires a more detailed scope because it typically provides the basis for project financing. Managers occasionally authorize project budgets solely on preliminary estimates, making their accuracy significantly more important than for lower levels.

Level 4

Level 4 estimates are also called substantive estimates. Unit costs form the basis of these estimates by analyzing a project’s design, deliverables, and objectives after they’ve been reasonably finalized. Project managers typically use substantive estimates to keep expenditures within budget.

Level 5

Contractors prepare level 5 estimates based on all the information in the project documents, which will determine the bid that a contract makes on the project. Level 5 estimates may be classified into design estimates, bid estimates and control estimates, based on their specific uses.

Design Estimate

Design estimates are prepared during the project’s pre-design or design phase to provide an initial assessment of the project’s expenditures.

They include an order of magnitude estimate, which is also known as a screening estimate within the context of a design estimate. The purpose of the screening estimate is to determine the most viable construction method and type. A design estimate also includes a preliminary estimate, or conceptual estimate, based on the project’s schematic design. The detailed estimate, or definitive estimate, is based on the design development. The engineer’s estimate is the final part of the design estimate, which is based on various construction documents.

Bid Estimates

Bid estimates require an unusually large amount of research that’s typically drawn from a variety of sources. They include direct costs, take-offs, subcontractor quotes and the cost of supervising the project.

Control Estimates

Control estimates are prepared after the project contract is signed but before construction begins. These estimates serve as a baseline for accessing and controlling the actual construction costs. Control estimates also allow contractors to plan for their upcoming costs in advance and determine the total cost of completing the project.

Conclusion

Estimating construction costs is an increasingly vital part of project management, but construction companies must invest in the technology needed to make it effective. An estimate’s accuracy can make or break a project, which can also put a company’s survival at risk since many construction businesses live from project to project. Cost estimates are part of the bidding process, which is essential in construction. Estimators routinely develop many other types of estimates during the course of a project, which are typically classified according to their required accuracy.

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What a Construction Estimator Does: An Important Role in the Construction Process

Construction estimators are one of the most crucial, yet least recognized, players in the construction process. Building projects don’t come assigned with prices. Rather, it’s the job of a construction estimator to compile a list of materials to determine the estimated cost of a construction project. And as simple as that may sound on its surface, construction estimating is actually tedious, time-consuming and requires a high level of skill from estimators.

Who Are Construction Estimators?

While construction estimating is its own expertise, construction estimators normally have backgrounds in a few fields of study connected to the construction industry. Having experience in construction design, like engineering or architecture, is common for estimators. This makes sense, as part of the design process is determining which materials to use in order to fulfill the building design. But estimators can also have degrees in mathematics or work history in manufacturing and construction management.

Just as important as work background are the particular skills that construction estimators use every day. Estimating requires an extreme attention to detail and accuracy. Not only do estimators need to keep track of the types of materials being used for a building project, but also specific measurements for materials and the count of each item being used. If the materials are miscounted, the entire estimate will be inaccurate.

In order to account for all the needed materials, construction estimators need to be able to analyze building projects from multiple angles. Most often, estimates are built from the ground up, meaning that estimators start with the foundation of the building and move upward as they account for materials. But projects can sometimes include multiple buildings or multiple types of construction within a single building. In those cases, estimators will have to determine the best way to work through plans for the varying building types.

Beyond mathematical and analytical skills, construction estimators also need strong communication skills, as they work with several other construction professionals. First, estimators work with construction designers, including engineers and architects, to review plans for the project. Although the designers create technical documents that cover the scope of the project, estimators need ask thoughtful questions in order to assure no important details are missed. Second, estimators also often work with material and equipment vendors, contractors and labor unions in order to determine material prices and labor rates. And lastly, construction estimators need to be able to present their finished estimate in detail to several parties.

What Does a Construction Estimator Do?

An estimator is responsible for determining the total cost of a construction project. The first step of doing so involves validating the project’s Scope of Work. The Scope of Work is a document that lays out the entirety of work that needs to be done in order to complete the building project. The scope documents, along with the building plans and specs, give an estimator a place to start for compiling a list of materials, called a quantity takeoff, that will be needed to construct the building.

If there are any steps missing from the Scope of Work, the estimator’s takeoff will omit materials needed to get the job done. So estimators should take time to familiarize themselves with the Scope of Work before beginning their estimate.

It’s also a good idea for estimators to visit the construction site before beginning their estimate. While the specific site may not have an impact on the materials that get included in the quantity takeoff, it can determine what pieces of equipment will be needed to complete the project and how long the construction team will need to do their work.

Buildings built on hills will require more equipment, effort and time to transport materials up to the jobsite than buildings built on flat ground. Also, weather and time of year may impact the work. For example, it is much more difficult to dig a foundation in winter than summer, and it will be harder to complete framing when it’s raining as compared to mild weather. All of this will have to be taken into account in order to estimate labor hours and equipment rates accurately.

The heart of a construction estimator’s job is the quantity takeoff. It gives line-by-line costs for the types and amounts of materials needed to build a structure. But creating a takeoff involves more than just a list of standard materials. It also requires being familiar with the local market for materials. Some materials may be more economical in certain areas, like wood in regions near lumber mills. Choosing the right materials to match the project’s locale can be a savvy way for estimators to work with a tight budget.

Once all the material, labor and equipment needed to create a building, the estimator has the important job of adjusting costs to account for profit, overhead and indirect costs. All of this and more is needed to create a comprehensive and successful estimate.

What Challenges Do Construction Estimators Face?

Working with fixed budgets and schedules can also be challenging. If an owner, designer or contractor has unrealistic expectations for how much they can fit in the project budget or how quickly the construction team can finish the work, then the estimator may feel pressure to inaccurately report costs in the estimate. This unfortunate circumstance will inevitably lead to the project going over budget, in turn leading to excess costs for the owner. It’s a hard position to be in. However, accuracy is paramount to an estimator’s work. Frequently producing inaccurate estimates will harm a construction estimator’s reputation and damage working relationships.

The hardest part of an estimator’s job is predicting the future. It’s not enough to create estimates that are accurate to current costs since the building projects they’re estimating won’t be started for another six to 18 months after the estimate is complete. This means that construction estimators are constantly chasing a moving target. Prices and availability for materials, equipment and labor are always shifting, so estimators must stay attuned to market trends. Shortages in supplies or labor can drive prices up past normal rates and wreck an estimate’s accuracy by the time the project breaks ground, even if the estimate was accurate to market prices at the time it was completed.

This is why having reliable data on costs in the construction industry is imperative. Trying to estimate a project with outdated cost data will make an estimator’s work much harder. Luckily, there are tools that can help make sure that your cost data is never behind, one of which is RSMeans Data Online from Gordian. The data in our easy-to-use, cloud-based estimating platform is updated automatically each quarter, so estimators can stay on top of every cost change for materials, equipment and labor for almost 1,000 locations across North America. And our predictive cost data enables estimators to accurately build estimates for projects up to three years in the future.

The work of construction estimators is a cornerstone to every successful construction project. No building is built without their expertise, and every project that comes in on budget and on schedule is a testament to their skill.

Why Accuracy Is Important in Construction Cost Estimation

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Why Accuracy Is Important in Construction Cost Estimation

Construction projects are very different from products manufactured in assembly lines: each building is unique, and this applies even for groups of buildings that look similar externally. Due to this fact, construction cost estimation must be performed individually for each project. This approach is very different from assembly line manufacturing, where all products are identical and have the same cost.

Inaccurate cost estimation is detrimental for construction projects. Both overestimation and underestimation have negative consequences:

When costs are overestimated, the owner ends up paying more than necessary or may decide not to proceed with the project. Contractors can also face negative consequences if they overestimate project costs: they are likely to lose in competitive bidding or they may be regarded as scammers, hurting their reputation.
When costs are underestimated, there are many unforeseen expenses during the construction phase. Based on how the contract is structured, these costs may affect the owner, the contractor, or both. There have been cases where developers or contractors end up bankrupt due to drastic underestimation in a large project.

There is always some uncertainty when estimating the cost of a construction project, but accuracy can be improved if the calculation is performed by experienced professionals, using reliable data and aided by software to speed up repetitive calculations.

Cost overestimation should not be confused with over-engineering, although both are detrimental for your project. Overestimation occurs when certain project elements have unreasonably high prices, while over-engineering occurs when excessive capacity is specified – your project costs more than necessary in both cases!

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Main Challenges in Construction Cost Estimation

The construction process of a building uses a wide variety of materials, and many of them are shipped from remote locations. Some of these materials have volatile prices in the international market, and a key example is steel. Also keep in mind that construction requires a significant input of man-hours, fuel and electricity.

Another limitation when estimating construction costs is time. In theory, estimators can break the list of materials down to exact quantities of bolts, nuts and nails. However, this approach demands a prohibitive amount of time, especially in large projects. This is also an expensive approach, since it consumes many hours of work that are paid for.

In modern construction practice, cost estimators use software-aided methods to speed up the process. A common approach is using unit prices, where construction costs are calculated for a discrete amount of work and then multiplied by the project total. Competitive bidding normally has a deadline for participating contractors, which means they can lose the job for being late.

How Construction Cost Estimators Manage Uncertainty

No construction estimate is 100% accurate, even if performed by an expert using the latest software package available. The normal practice is adding contingency as a percentage of the total project budget, determined by estimators based on their experience and the perceived uncertainty in each project.

Large projects are more susceptible to cost estimation errors, especially when unit prices are used. If a project element is repeated many times in a large construction, even a slight error can be amplified. Assume a skyscraper has 20,000 windows – if the cost of one window is overestimated by $50, the project becomes more expensive by one million dollars.

The project contract may include a special clause for materials that have volatile prices, such a steel. General price inflation and yearly wage increases are also important factors to consider, since they affect the price of all project inputs. Their effect is more noticeable in large projects that are built over several years, but an experienced cost estimator will take this into account.

The American Society of Professional Estimators classifies construction cost estimates according to five levels of accuracy. The following table summarizes them, in order of increasing accuracy:

LEVEL	DESCRIPTION
1) Order of Magnitude Estimate	A very general cost estimate, used to assess the overall feasibility of the project and to decide if it merits further consideration.
2) Schematic Design Estimate	As implied by its name, this cost estimate is based on a general schematic design, providing more accuracy than an order of magnitude estimate.
3) Design Development Estimate	This cost estimate is based on an intermediate design, but before having the complete set of construction documents.
4) Construction Document Estimate	Cost estimate based on a complete design with detailed drawings and specifications.
5) Bid Estimate	The most accurate level of cost estimate, prepared by contractors who are competing for the project.

Final Recommendation

Although you cannot have complete accuracy when estimating construction costs, you should get the best possible estimate. A common error in construction is hiring the contractor with the lowest bid, if when the price is unrealistically low. The project cost is normally inflated with change orders in these cases, and the contractor may be unable to complete the job under a fixed price agreement.

Having a high-performance building design is beneficial, but you can take even better decisions if you also have an accurate cost estimate. This way, you can hire the contractor with the lowest realistic bid that meets your project requirements. New York City has the highest construction costs in the world, according to the Turner & Townsend 2018 International Construction Market Survey – accuracy pays off when estimating construction costs!

Concerned about code violations in any of your properties? Nearby EngineersNew York Engineers is a certified special inspection agency in NYC. Contact us by email ([email protected]) or phone (646-877-0767212-575-5300).

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available methods and new features

Participants in the construction and real estate market are well aware of the importance of a correct assessment of capital costs at the stage of making a decision on the implementation of a new project, when its architectural appearance is being formed.

The volume of investment in construction determines not only the financial metrics of the project, but also the main technical and economic indicators of the future facility, which are determined taking into account the acceptable cost of construction work and materials.

Ultimately, capital expenditures have the most significant impact on the economic viability of a real estate project (subject to proven demand).

Consequences
Mistakes made in the analysis of construction costs have a variety of negative consequences, up to the complete failure of the project and the loss of money in a much greater amount than the amount of underestimation.

Meanwhile, performers still make a number of typical mistakes in the process of assessing the amount of capital costs at the concept development stage, in particular:

Incorrect selection of analogues when using the comparative evaluation method.
Failure to take into account all the features of the object.
Use of outdated data on prices for labor and materials.
Non-inclusion in the calculation of indicators such as future inflation, contingency reserves and risk coverage (due to excessive optimism or insufficient forecast information).
Lack of independent verification to check the relevance of all indicators entered into the model and eliminate technical errors.

In this regard, the choice of the evaluation method plays an important role, which makes it possible to obtain the required accuracy and reliability of the result.

Let’s consider what assessment tools are used today by market players and what additional opportunities investors get thanks to new developments of specialists.

International experience
The professional community in Europe and the United States uses a number of cost estimation methodologies that are designed specifically for commercial projects, prepared by independent experts and include benchmarks, detailed price guides and models for calculating the cost of finished objects. Among them, the following effective technologies are worth noting:60s. Currently, it includes more than 20,000 models of objects with specified parameters and purpose, 12 directories of various indicators of the construction industry (costs, tender offers, volumes of orders and commissioning in the construction sector, market prices, etc. ), and See also other useful materials and market research.

Using the system, users can estimate the cost of a particular project, predict its payback and get an idea of the trends in the market as a whole.

Unfortunately, this method is intended for the UK and cannot be used by Russian developers.

2. Compass international is an American company that operates internationally and annually publishes 8 guides on the cost of construction of commercial and industrial properties for various purposes, covering a wide range of countries and regions.

The peculiarity of Compass guides is that each of them is dedicated not to a separate type of objects, but to a certain area of work in the construction industry: assessment and budgeting, comparative analysis of cost models of objects, repair and maintenance rates, cost of construction of infrastructure facilities, international construction procurement and supply, etc.

These guides also contain information about Russia, but in a rather limited volume, without taking into account all the features and necessary detail.

3. RS Means is an electronic database that contains a large number of unit prices in the construction industry, cost calculations for components and systems, repair costs and models for estimating the cost of building new buildings. It is constantly updated and contains information about residential and commercial real estate for various purposes.

For the Russian audience, the base is not of interest, as it is focused on the North American market (USA and Canada).

4. Spons Price Books are price guides for the UK construction industry compiled by a team of AECOM experts and updated twice a year. They contain information on all major construction costs (both for materials and equipment, and for work) and are applicable to objects of different types and sizes.

But even these directories are irrelevant for Russia, since they do not contain data on our country.

What then do domestic investors and developers use?

Russian practice
In Russia, until recently, the set of professional tools for estimating the size of capital expenditures was very limited.

1. First of all, domestic companies have always used their own experience and accumulated statistics . When implementing the same type of projects in a stable economic environment, this option helps to obtain acceptable accuracy, but in a volatile and differentiated Russian market, such conditions are rare. Therefore, the effectiveness of this approach is limited by the amount of accumulated knowledge and qualifications of the staff, in addition, the internal materials of companies rarely represent structured bases that are convenient to use.

2. Another source of data for estimating the size of investments is state aggregated construction price standards (NCS) , approved and published by the Ministry of Construction of the Russian Federation in the form of collections for objects of various types. However, they are updated only once a year and not in a timely manner, given the dynamically changing economic situation.

The data in the NCS collections differ from the real market prices, and besides, they do not contain all the necessary items of construction costs, for example, they do not allow taking into account reserves for covering risks. Therefore, the possibility of their application for the implementation of commercial projects is also limited.

3. Another external information resource is offered by the group of companies “KO-INVEST” . It annually publishes guides on aggregated indicators of the cost of construction of objects for various purposes for Russia and some countries of the CIS and the Eurasian Economic Union, as well as quarterly bulletins “Price Indices in Construction (PPI)”.

However, the data from these collections are mainly suitable for the valuation of already built real estate by the cost method, the information in them is not detailed enough and is practically not used for cost analysis of new construction projects.

Thus, in the Russian construction industry, the need for an analogue of commercially oriented international methods for assessing the cost of real estate construction is long overdue.

New Perspectives
And such a tool has finally appeared: in November 2021, Connexus https://www. cnxs.ru, the Russian leader in the field of cost engineering, announced the launch of project Globecost . http://globecost.com

Globecost is a system for calculating the cost of construction of various categories of real estate: residential, retail, office, warehouse, hotel.

In preparing the calculation calculators, 20 years of practical experience of experts in the field of capital cost estimation was used, best foreign practices were taken into account, a deep statistical analysis of data on more than 1000 implemented projects was carried out, as well as price monitoring from available open sources and completed tender procedures .

All cost information used in the calculation algorithm is verified before release by five independent experts who have been leading experts in this field for many years.

The database contains more than 1000 design models of objects with specified typical parameters, is constantly updated with new projects and is updated 4 times a year. The reports on the result of calculations provide information on all items of the construction budget, including design, direct costs, indirect costs, project management, risks, inflation.

The geography of information contained in the database is also expanding: in the spring of 2022, they will provide information on Moscow and St. Petersburg, in the summer they will be added to Yekaterinburg and the Krasnodar Territory, and by the end of the year there will be issues for Uzbekistan and Kazakhstan. The Globecost settlement service will be useful to investors, developers, builders, companies that build real estate for themselves.

This product has already been highly appreciated by industry professionals during the Russian PPP Week 2021. It is currently the best tool for assessing the cost of capital expenditures for the Russian participants in the construction industry, as it provides both accuracy, relevance and completeness of the analysis and contributes to making the right investment decisions on stage of the architectural concept.

Construction expertise – the importance of its participation in construction projects

Today, a variety of business entities are multiplying and very actively working, the development of construction everywhere generates many business and economic situations. A significant part of which is conflict, and requires the participation of a third, highly qualified party – which is successfully performed by our certified expertise in construction and projects.

Here we will briefly describe the importance of building expertise, and the possibilities of assisting in the construction and design activities of your company.

A huge number of participants in these activities and processes related to construction

Builders, contractors, customers, other participants in construction projects, investors and sponsors, buyers and tenants, certified experts – they all participate in the life of the construction market and the construction industry . Which may include such areas of activity as geodesy, design, logistics, management, construction, repair, renovation and restoration, storage and transportation of materials and structures. And also – the organization of construction sites and safety on them, ensuring the safety of various construction processes, the creation and maintenance of various documents and estimates, landscape and construction design, topographic survey and geodetic work, security of facilities, operation, production and adjustment of automated systems, and other works.

At all stages of construction work, business relations and disputes arise between different participants. Or there is a need to find, prove information about the processes. Or there is a need to optimize and improve processes. This is done by an independent certified building expertise.

We can solve your problems without trial or investigation, without resorting to these authorities. In our case, this means a balanced and scientific approach to solving problems. To finding the parties that made a mistake, to analyzing situations, to assessments, to legally and technically correct scientific, expert, engineering and construction surveys.

Finally, on a scientific basis and guided by many years of experience, we approach the analysis and optimization of a wide variety of processes that are part of the construction industry. All this is offered to you today by ANO Judicial Expert, one of the largest independent expert organizations operating in all regions of Russia and in the CIS countries.

How and why our construction expertise can be used

We have already presented a huge amount of work and a number of activities that are contained in the field of construction. Our expertise covers all of these areas. To illustrate the possibility and importance of appointing an independent construction expertise in a powerful organization, we list in a free order some of the features of its work:

when arbitration courts and courts of general jurisdiction, or other courts and instances consider conflicts in the construction industry, the results of the construction expertise involved are the main factor for the decision that the court or the authority of the instance makes;

construction expertise is also decisive in cases not related to construction activities, but when evidentiary conclusions of the investigation depend on it;

building expertise can be initiated and ordered both by the court, in the event of a conflict and filing a claim, and by one of the parties involved in the lawsuit, if a request is made to conduct such a study to clarify the facts. Then the court approves or disapproves of this initiative, and invites experts;

A party, a participant in a conflict or a process that wants an independent and accurate examination to be carried out, may state in the petition that the examination should be carried out in ANO “Forensic Expert”, in an independent organization, in any other expert organization. This is an important point for us and for you – for our customers;

without the help of a construction expertise of a high level of competence, you will not be able to be sure of the correctness of the conclusions of the investigation and the court, and you will not be able to get answers to all questions that arise in the process of a complex case;

independent construction expertise in ANO “Judicial Expert” has all the features of a truly independent and truly competent construction expertise. You can read more about this and make sure on the pages of our website. And learn from our workers;

our expertise will protect you in advance from conflicts with government agencies and those organizations that control construction activities, real estate and related processes and facilities.

The work of ANO “Forensic Expert” also includes the assessment and optimization of construction projects of any complexity, of any scale. Evaluation of any type of real estate, evaluation of any work in their scope, quality and details. It is possible to assess any type of damage received for any reason, in any volume and at different facilities.

Differences of cooperation with construction experts ANO “Judicial Expert”

In the case of working with our organization, you will have the opportunity to receive assistance from specialists who have:

wide and many years of experience in different projects and sites, in different places;

narrow and specialized knowledge – if you need it to consider any cases and complex situations, processes or objects;

principles of good service, market work, customer care and individual approach.

All this together creates the foundation on which our status, quality of service, success with customers and reputation stand. You can see reviews about the work of the expert center on the pages of our website, as well as recommendations from various authorities, and reviews from our customers.

Specialists and management of ANO “Forensic Expert” have experience of working with investigating authorities, arbitration courts and other institutions, where the rights and interests of our clients have been successfully and many times protected.

The policy of working with clients is democratic, we are open, and we offer reasonable prices for any kind of research. We consider a variety of cases, and we can provide assistance to any legal entities and individuals, solving their problems that arise in the course of legitimate activities, among themselves, between parties and project participants. Between owners and tenants, residents and citizens and urban, large, or municipal and construction institutions.

For example, these can be conflicts about works, their cost, division of property, conflicts about ownership, transaction support. Insurance cases and conflicts between the parties on an insured event. As well as conflicts and cases of material damage suffered for various reasons and in various ways. On compliance with contracts, on the evaluation of work and materials, projects.

Real estate damage assessment covers all types of cases and conflicts that may occur between project parties and owners and tenants of housing and structures and structures and others. Between public or private utilities, construction organizations, contractors or customers of construction sites, companies and enterprises of various types.

The peculiarity of working with ANO “Forensic Expert” is that with our help you can easily involve any specialists in the consideration of the case, in our expert project, and not just purely construction expertise in the usual sense of the word. We conduct a very large number of studies, and we will solve all the questions that will appear before you in the process of resolving conflicts, solving work problems, finding out and proving the truth.

Optimization of construction projects with the help of independent expertise

Of course, the construction expertise – experienced and competent – can offer you the optimization of projects and individual processes. Including – analysis of costs, estimates, optimization of estimates. And these are wonderful prospects for those who want to organize their projects as best as possible, achieve the best result, get the most profit with a good and conscientious attitude to business.

Independent market experts can take a close look at the logistics and delivery of building materials and equipment. Consider the organization of construction sites and the level of safety. Consider ways to increase automation and save resources in your construction process.

Construction project estimates are also analyzed and can be optimized, if possible. All works that may relate to the construction industry are correctly evaluated. Works and materials, objects and projects are evaluated, both in terms of quality, and in terms of cost, in terms of profitability, and other parameters. Competent economic expertise also works in our center.

The cost of objects, processes, works or materials in our organization, ANO Judicial Expert, can be estimated using different algorithms. We can calculate the cost of works and objects, ready and under construction, for different purposes and for different types of activities and transactions in the field of construction, design, businesses or real estate.

With the right assessment of projects, processes and materials and a comparative analysis of your costs, and the current parameters of the open local and general market, there are opportunities to increase the profitability of your enterprise, office, construction company or individual projects. Since we work with simple, not only large customers, we help to analyze any projects – even if it is your own small repair or some kind of construction work.

What and why is the control construction expertise considered

Arbitration, courts, disputes and appraisals, transactions and insured events, optimization and assistance – these are not all areas in which a competent examination of objects, processes and construction projects may be very necessary.

The fact is that all processes, objects, projects, materials, works, documents related to construction work must be in a certain form. This is regulated by a variety of state and professional documents and laws, the observance of which is monitored by many state and professional authorities.

In order for you to be able to carry out activities in the field of entrepreneurship and construction with complete peace of mind, it is necessary that various types of state, professional, and legislative rules comply with a variety of things. Processes, documents, relationships, prices and amounts, materials and works and other details of your construction or design, or economic and economic activities.

Our independent expertise of construction and projects and documents to ensure the safety, legality and success of your projects carries out the following work:

investigates and normalizes, or helps to normalize project components and elements of documentation and work;

analyzes, possibly with the help of other professionals working in our organization, your economic and business activities;

professionally and quickly examines design and estimate documentation and other documents, in particular on accounting activities, contracts and documents on the conduct of activities and relations with other entities, executive and other documentation;

analyzes the types, volumes, quality, compliance with the standards of any work related to the construction or design field;

checks for compliance with international and Russian professional or legislative standards the conduct of work, projects, documentation, storage of materials, organization of work and sites, norms and operating procedures;

checks the status of material costs and other nuances related to the work of construction projects;

checks building products and building materials for compliance with standards;

explores terrain and sites that are practically, directly or indirectly related to construction projects, facilities and processes;

explores documentation from the field of topography, and all kinds of other documents, objects and processes related to the construction and design, as well as the operation of objects and structures.

In general, as you probably already guessed, we, as experts and professional consultants, check the compliance with the laws of any processes included in such an area as construction. This is itself, and such works as repair, renovation, reconstruction, restoration, dismantling, demolition, operation, and all other more private types of work related to the construction industry.

And we have been doing this quite successfully for many years now, in various cities and regions of the Russian Federation. We can say that today ANO “Forensic Expert” is already one of the most reliable and leading expert organizations in Russia. Thousands of professional studies and consultations we have carried out are the baggage that gives us the opportunity to work successfully in the future. And therefore, like other customers, we are waiting for you among our customers.

Valuation of construction in progress

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Valuation of property, appraisers

Valuation of construction in progress

5

Under the object of construction in progress, it is customary to understand buildings and structures of various types of purpose, that is, real estate. But, until the developer receives the act of the state commission, objects under construction are not real estate, in connection with the current legislation.

Various factors influence the cost of an object under construction:

various options for the most efficient use of the land plot on which the object under construction is located, with the definition of the most promising and profitable options for using the land plot, affecting the further functional orientation of the future structure;

the amount of costs necessary to complete the construction, and

degree of completion of construction.

Evaluation of the market value of construction in progress allows:

to put an object of construction in progress on the balance sheet;

determine and fix the market value on a certain date of the object of construction in progress;

make a decision on the further use of the object of construction in progress.

make a decision on the sale and purchase of an object of construction in progress;

to determine options for the most efficient use of the land plot on which the long-term construction is located.

The current design standards provide for the presence of public buildings and structures, buildings and structures for industrial purposes, as well as residential buildings.

For a successful assessment of an object under construction, it is necessary to correctly classify the object. For the appraiser, the most important is the classification in terms of whether the unfinished object has the ability to act as real estate, which will continue to generate income.

Buildings and structures for industrial purposes, in turn, can be divided into two groups: extractive industries.

the second group includes objects in which you can change the functionality.

Construction in progress valuation methods

Valuation of construction in progress does not use a comparative approach, due to the practical impossibility of collecting information on sales of similar properties in progress on the open market.

For the assessment of construction in progress, the most used is the preparation of estimates, which is the main part of the calculation. It should be borne in mind that budgeting increases the cost of the assessment itself, since in this case the help of experts in the field of budget design is usually needed.

The extent to which the elements of an unfinished object were exposed to weather conditions depends on Physical deterioration. In this case, everything depends on the climate of the area, the duration of the impact, as well as the degree of impact, depending on the stage of readiness of the assessed object.

For completed buildings, functional depreciation is measured as the loss of a certain part of the income due to any functional defect in the building, or as the cost of correcting this deficiency. For properties under construction, the effect on value of poor design or the use of inefficient materials is difficult to determine.

A small loss of value due to other external factors may be a consequence of changes in the market. The cost of an object also depends on the possibility of changing its purpose at a particular stage of construction.

Determination of loss of value due to physical, functional and external factors serves to reduce the cost to a level that reflects the real possibility of completing the construction of the object, which is possible to replace the property being valued as an existing building in a competitive market.

It should be noted that one of the main components of the initial permit documentation is the condition for the engineering support of the facility, the conditions for connecting the facility to communication networks agreed by city (district) services. Basically, the technical specifications for the engineering support of facilities under construction have a limited validity period. This period averages 3-5 years.

If the period of validity of the initial permit documentation has expired or the planned change in the functional purpose of the facility requires additional capacity in terms of engineering support, then the costs associated with obtaining a new set of initial permit documentation must be taken into account again. Which, in turn, can significantly affect the value of the construction in progress.

It is especially important when evaluating construction in progress to have the most complete information on the object, because this greatly affects the cost of evaluation work, and especially the timing of the evaluation.

As practice shows, during long-term construction, many of the documents necessary for evaluation disappear or are lost. As a result, one of the main ways to determine the value of an unfinished construction object is a visual inspection and photographing by the appraiser of the appraised object.

Over time, the cost of capital invested in construction, including construction in progress, changes due to inflation, with changes in demand, and also changes under the influence of other factors, including the moral and physical aging of the object.

For lending, the assessment of construction in progress is carried out taking into account all factors affecting the value of property, which is construction in progress, taking into account the location, neighboring facilities and the availability of infrastructure, and taking into account the volume of construction work performed.

It is especially important that if construction in progress is being appraised for lending, it should be done by personnel with expertise in commercial real estate appraisal. Facts and documents must confirm the assessment of objects under construction. The developer presents their content as of the moment when the assessment of construction in progress is carried out.

Evaluation of objects under construction is carried out on the basis of a deep analysis of market criteria, on the basis of real, documented information.

Only experienced specialists are able to conduct a competent assessment of all objects of construction in progress.

To assess construction in progress, you must provide the following documents:

Certificate of registration of ownership of the object of construction in progress.

Documents confirming the rights to a land plot.

Permits for construction.

General explanatory note to the construction project.

Accounting statement of the book value of the building.

Conservation act for an unfinished building.

Information about the presence of encumbrances on the object of construction in progress, including the encumbrance of a pledge or debt obligations, and other restrictions on the use of the object.

Industry affiliation of the object;

Construction start date and construction completion date

Details of the structural system of the building;

Permitted annual power input;

Building area;

The degree of completion of the construction as a whole and for individual structural elements separately.

Valuation activities are carried out in accordance with international treaties of the Russian Federation, Federal Law No. 135 of 2907/07/1998, as well as other federal laws and other regulatory legal acts of the Russian Federation governing relations arising in the course of appraisal activities.

Aleksandrova Olesya Alexandrovna

Specialist in economics and law

Stages of development of a chemical production project

In our practice, we sometimes encounter a misunderstanding of our partners about how the development of a project for the organization of chemical production goes, what resources and time it requires. To clarify the situation, we suggest that you familiarize yourself with the program material based on an article in the world’s leading chemical publication Chemical Engineering on the main stages of project development in the chemical industry and the importance of cost estimation for each of them.

The Importance of Staged Cost Accounting

The key to staged work is that following a standardized project development process, coupled with a robust cost estimate classification system, ensures that projects meet financial targets.

Cost analysis is critical to decision making in the development of projects in the chemical industry. Even at the initial stage, this work makes it possible to assess the capacity of the planned production, select the optimal technology, determine the location, and consider the market strategy.

The final approval of the project and obtaining financing permits critically depend on the cost estimate, which, in fact, allow you to proceed to the construction stage, selection of equipment and launch of production or its modernization.

Green Lights are given to projects with an approved potential return on capital investment based on a detailed economic analysis. That is – in the presence of a carefully justified estimate. Engineering, design work, documentation development can take months, if not years. But without their complete completion, the “authorization” of the project is impossible. If the economic analysis and cost estimates do not meet the target payback indicators, the rationally thinking investor will not agree on the project.

In order for the capital cost estimate to be reliable and effective, and the resulting analysis sufficiently accurate, taking into account all factors, including risks, appropriate competencies, technical skills, the right model, experience and knowledge of the review team are required.

What is a capital project estimate

In its most general form, an estimate is a forecast of possible costs. For capital projects, it means the calculation of the likely costs for a given and documented production volume, a certain geographic location and an assumed market situation at the time of launch.

A capital project in the chemical industry is a commitment to develop, build, or improve a major asset (such as a chemical plant). As a rule, these are long-term measures, including specific stages of its development, which will make it possible to make a decision on construction.

Each project is a unique undertaking consisting of interrelated tasks. Even if the physical and technical scope is almost the same (for example, for repeat projects developed “by analogy”), differences in location, construction time and other issues such as contracting strategy can cause cost fluctuations between projects. It is impossible to operate exclusively with historical data, the market is changing rapidly, all input data on prices, materials, competitive environment, sales markets, etc. will be new.

Quantifying the cost of resources needed to implement the pledged volume of a capital project is not a trivial task. The specialist must select a unique combination of materials, technologies and labor resources, calculate the associated costs.

It is important to make an estimate based on as many factors and reliable data as possible. The problem is that during its preparation, all parameters are often not available. The appraiser and the customer must understand that in the process of analysis, opinions and judgments are permissible with a certain degree of certainty. We are dealing with future events and a forecast of future conditions, that is, we choose the most probable scenario.

The key task is to reduce the level of uncertainty , to carry out high-quality and valuable work at the preliminary stage, to choose the right methodology, to use adequate references in terms of assessing material, labor, energy and other costs. Uncertainty will remain (within the given parameters), its degree, the risks associated with it also need to be written down and discussed.

Chemical production project development process

Classically, most major capital projects follow some form of stage-gate process (or phase, stage-gate process ) development and management process. It implies a phased deployment of the technical and economic results of the project from its inception, implementation to the final launch and transition to the operation of the construction site.

The division of the process into stages makes it easier for the funder to manage risks by step-by-step allocation of funds for each of them with an audit of the achieved results and intermediate “authorization”. If the economics of the project, timing or key goal (for example, capacity or quality) at any of the stages do not correspond to the inputs laid down in it, the project may be suspended without full funding being allocated. The content of the project or other characteristics may be changed, it may be returned to an earlier stage of development.

The steps leading up to the launch of a project are often referred to as the front-end loading process. As a rule, with the passage of stages, the project gradually becomes more complex with the addition of new data.

Project Life Cycle by Stage

The global chemical industry has adopted the cost estimate classification of AACE International (Association for Advancement of Cost Engineering), a professional organization providing services in cost estimation and plant design. Evaluation classes define the level of maturity of engineering deliverables that must be created at each stage of the design development process.

The following briefly describes the project development phases FEL 0 to FEL 3 that typically end with project authorization, and describes the associated cost estimates that are prepared to support the exit decision at the end of each phase.

FEL 0: identify opportunities and priorities

This step can easily be performed by the business unit of the organization itself, without the involvement of an external project team. It includes long-term identification of potential opportunities for creating a new or modifying an existing production. The economics department can prepare a cost study or a preliminary estimate for a Stage 0 decision (Gate 0) in order to include the corresponding costs in the long-term planning budget.

As a rule, the participation of engineers in determining the total scope of the proposed project during FEL 0 is not required, the technical parameters are entered later. a preliminary assessment at stage FEL 0 can be made using methods on analogous objects without the participation of a specialized evaluator.

Typical development results at the FEL 0 stage (accuracy – determinations of the order of magnitude ):0009
OPEX

approximate location

identification of capital equipment

FEL 1: business case

design team. Here we are already entering the development stage of FEL 1. The purpose of this stage is a more detailed study of all materials, economic and technical parameters for the preparation of estimates class 5 . Various alternative schemes and designs can be considered, and an assessment is prepared for each option.

For the project (or each alternative scenario), its key parameters are developed taking into account the production capacity, specific technology and geographic location. At this stage, the main technical indicators can be determined, such as block diagrams ( process flow diagram, PFD ) and the initial selection of proposed technologies, and an assessment of the potential location for the object is also carried out.

A class 5 assessment is being developed to prepare the business case and decide on stage 1 (Gate 1) whether to proceed to the next stage of the project (FEL 2) or not. The technical description is still at a fairly high level of uncertainty. Class 5 estimates are usually prepared using conceptual methods of analysis: analogy estimation, power factor estimation, parameterizing unit.

So far, this estimate corresponds to a relatively wide range of expected accuracy. It is not used to authorize the launch of a project. The purpose of the Class 5 evaluation is to be accurate enough to support the FEL 1 decision on whether to allocate the necessary additional funds to proceed to the next phase of project development.

Typical results of development at the FEL 1 stage ( accuracy +50 . .. -30% ):

Preliminary technological schemes

Pre-40015

Preliminary expenses for equipment

Pre-assessment of cost

strategic business assessment

financial and economic model (justification of return on investment)

location and logistics assessment

preliminary project schedule

FEL 2: equipment selection, detailing plans and schemes understanding of the specific scope of the proposed project. A preliminary list of equipment with key design parameters should be drawn up, technological schemes should be developed, with appropriate thermal and material balances.

Preliminary site plans and general layouts of equipment, its specification are being made. All necessary engineering networks, requirements for external and internal infrastructure and site conditions must be determined. A general scheme of workflow and management principles should be prepared.

During FEL 2, many documents are prepared, including equipment lists, layout plans, operating principles, and diagrams.

In addition to the technical parameters, it is necessary to develop preliminary comprehensive project administration plans: search for counterparties, procurement, equipment manufacturing and project implementation strategies, as well as a preliminary general schedule.

The Class 4 cost estimate, to be prepared during FEL 2, is based on the more specific and mature level of sophistication identified in the FEL 2 technical and design deliverables. based on factorization of the equipment (its modeling), and in some calculations more deterministic methods can be used. The use of equipment as a functional basis for class 4 cost estimation (at least for process installations within the process part boundaries (ISBL, inside battery limits)) ensures that the list of FEL 2 equipment was sufficiently exhaustive. It is important to write down the needs for secondary, auxiliary and spare equipment (even if the key parameters of the project have not yet been determined).

The output of this phase of the assessment is an updated business case which, together with other more clearly defined project deliverables (such as plans and schedules), forms the basis for the second phase decision: again, whether additional funding should be provided to further expand the project team and the end of FEL 3.

If a single alternative has not been selected during FEL 1, then by the end of FEL 2, this should be done. Moving to FEL 3 with more than one potential technology solution alternative can be costly for the project owner, which is not a good thing.

Typical development results at FEL 2 stage (accuracy +20…-20%):

preliminary material and energy balance

preliminary process diagrams and instrumentation (p&id)

preliminary technical specifications and equipment

updated project schedule

additional project cost estimate +/- 20%

overall project implementation strategy

approval and compliance planning

operating costs update / pro forma improvement

FEL 1 and FEL 2 stages require special attention due to the need to select a single design alternative for transition to FEL 3.

The main goal that should be achieved by the end of the FEL 2 stage is to choose the most preferred option for the implementation of the object (taking into account capacity, technology, location, etc.), taking into account the cost and time parameter. The decision at this point has a key impact on the ultimate ROI.

The choice of an option may be based on a preference for an option that provides a particular return on investment. Subsequent decisions on project execution will be largely based on an attempt to maintain the planned rate of return on investment.

As a special note, during FEL 3, unfortunately, it becomes easy to negatively affect the rate of return on investment, but almost impossible to significantly improve it.

FEL 3: project design and technical solutions

FEL 3 includes front-end engineering design (FEED). The purpose of this stage is to expand the team to complete the required engineering and scale-up, which allows you to capture the overall design of the project and all the necessary technical solutions.

Formation of the final list of equipment (indicating all design parameters), all technological and engineering schemes and instrumentation ( process and instrumentation diagram, P&ID ), final layout plans and layout drawings provide an estimate of the required technical scope to prepare a Class 3 assessment.

This estimate is accurate enough to allow the project owner to make the final decision on the allocation of funds to complete, commission and start the project. The quality of the Class 3 assessment will also depend on the results of the non-technical part of the project (general plans, project schedule, etc.) as outlined in the AACE recommendations.

Fixing the project in its current form does not mean that all work on the design and design of the technological part has been completed. We are talking about the fact that the defining results of the design, such as a list of equipment, schemes and instrumentation, a layout plan, etc. ready and approved to proceed to detailed design.

For the owner organization, the transition from the third stage at the end of FEL 3 is most often used to start a project, allocate funds for detailed design. Class 3 estimating is usually based on a deterministic estimating methodology. Individual project components, including civil engineering, concrete, steel, buildings, equipment, piping, electrical equipment, instrumentation, are quantified either using bills of materials created from engineering models or by manual assessment based on engineering analysis. Project evaluation includes labor productivity and other price adjustments related to the characteristics of the region.

At this point in the work, there should be confidence that the project and the technical deliverables are of sufficient maturity and quality to make a final funding decision for the project. Ensuring that the results of the assigned tasks meet the expectations for adequately quantifying the scope of the project and preparing a class 3 estimate is a key responsibility of the evaluator. If there are exceptions to the expected parameters, they should be mentioned in the document that accompanies each assessment of any class and taken into account in the risk analysis to establish the expected range of assessment accuracy.

A class 3 score should be used to determine the baseline costs against which both progress and performance will be measured in the delivery of the project. The budget will establish control budgets for bids or tenders, monitoring procurement, evaluating detailed design and construction, and tracking changes in scope and execution strategies.

Estimating and Scoping

Moving from stage to stage in the project development process leads to greater maturity of the technical results and a more accurate definition of the scope of the project. Accordingly, methods for preparing cost estimates for each stage will become more complex from “by analogy” methods to more deterministic methods. This is a completely natural progression of increasing the level of technical and technological development of details that become available over time.

Methods for estimating factors (stochastic) use ratios for estimating costs. For example, for the evaluation of class 4 equipment, the cost of instrumentation (dependent variable) can be calculated from the cost of capital equipment (independent variable). These factorized methods can consist of simple or complex modeling based on either an assumed or statistical relationship between dependent variable costs and independent variable costs (or other measure).

In a deterministic evaluation, the independent variables represent more or less finite parameters of the object under study. For example, piping costs can be calculated based on material and labor prices applied to the linear size of the pipe (the independent variable). Deterministic estimates for large projects can consist of tens of thousands of individual items (even if aggregated across similar items across work breakdowns and other coding structures).

In the next, no less interesting part, we will talk about the options for estimating costs at different stages of the implementation of a chemical production organization project, how estimates are formed and how decisions are made on their basis.

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Construction Project Management and Better Tools

In the construction business, an effective system for implementing projects is important both on the side of the customer and the contractor.

Construction project management requires basic management skills as well as constant monitoring of the environment. It is the art of curating human and material resources. It matters throughout the life cycle of the project.

Construction project management tools must be flawless. Even the smallest details depend on them, because construction is always associated with financial risks, accidents, injuries, unforeseen expenses and other dangers. So the choice of software for such projects is a responsible task.

In this article, we will talk about the features of construction project management, offer useful theory and examples, and share an independent look at the best tools that can turn construction management into a dream job.

This material will be useful to novice managers and experienced project managers, those who are learning to manage construction projects, as well as anyone who is interested in the topic of construction.

Content:

What is project management in construction?

Project management in construction is the area of activity in which clear goals for a construction project are defined and achieved.

It takes into account the balance between the amount of work, resources (materials, people, money, energy, space, etc.), time, quality and risks.

Project management in construction begins long before the first brick on the site or the selection of a contractor.

As in other areas, any initiative begins with a detailed and structured project plan containing all the necessary design and estimate documentation.

Money, time and quality are the three most important building parameters. In professional vocabulary, this trinity is called the “iron triangle”. Problems on either side of this triangle will lead to a problem with the implementation of building initiatives.

Quality project management in construction guarantees:

What is a project in construction?

A construction project is a temporary undertaking involving the creation of a unique product or service in accordance with the original terms of reference and allocated resources.

What is the main difference between construction projects and others?

First of all, the construction is based on a specific mission. The organization of such a project ends with the end of its assembly or implementation.

Work in construction requires a broader outlook. If only because in it you will encounter many limitations that must be taken into account when designing and implementing construction projects.

What is a project product in construction?

A product in a construction project is a finished object.

Construction objects include any structures or buildings under construction with all engineering communications, equipment, auxiliary structures and devices related to them, which are provided for by the project plan.

Building – a structure with an underground part (foundation), an above-ground part (the building itself) and engineering networks (ventilation, water supply, sewerage).

Structure is a linear system that includes several structures with underground and above-ground elements.

What is their fundamental difference?

Buildings intended for living or other social activities of people.

Structures used to move people or goods, store products, or carry out production activities (eg dams, bridges, roads, etc.).

A product in a construction project must be completed to be considered a product. This is important regardless of the type and classification of construction.

By the way, the classification in this case is important, so let’s pay due attention to it.

Building classification

Each type of construction work and objects is characterized by its own characteristics. Classifications may differ in some countries.

In the most general form, the classification of construction, its objects and processes is presented below.

Construction by types of objects

According to the types of objects, construction is classified as follows:

Construction by sector

The construction industry can include various projects, depending on the sectors of construction, from landscaping work to highway design. It can also be a water or sewer layout, which is often supervised by a civil engineer.

There are generally three sectors in construction: residential, commercial and industrial. The above examples are one of three types.

Residential. These projects cover the construction of any type of residential building, from private residences to apartment buildings.

Commercial. Such projects include the construction of schools, shopping centers, restaurants, sports facilities, and many other social facilities.

Industrial and engineering . Usually these are large structures related to safety, functionality and life efficiency. For example, bridges, power plants or oil rigs.

Types of construction work

Construction work also comes in many forms. Here is the most general classification:

There are other classifications in construction, but we have listed the most basic ones.

Construction management in the context of history

Projects of various formats and scales have existed since the construction of the Egyptian pyramids.

The forerunners of project managers were involved in the construction of complex construction projects. For a long time, this responsibility lay on the shoulders of architects.

Let’s remember the Renaissance, which gave us many unique projects from specific architects.

St. Paul’s Cathedral in London in the late 17th and early 18th centuries, designed by Sir Christopher Wren of England. It is difficult to imagine that such a grandiose structure was created in an environment where no modern construction project management system was involved.

However, the formally professional branch of project management emerged in the 50s of the twentieth century. It was connected, first of all, with the planning and implementation of the most important construction projects and national defense programs.

Gradually developed specialized methodologies: configuration management, performance evaluation, critical path method, network planning and management technique, project plan evaluation system with PERT chart (Program Evaluation and Review Technique), etc.

In the 1960s, project management began to be recognized as the main approach that organizations used in operations characterized by a well-defined life cycle and management system.

By the 1980s and 1990s, project management was at the center of product development, service implementation and delivery, and organizational process change. This is detailed by David Cleland in his book Project Management: Strategic Design and Implementation, 1999.

Modern project management is closely connected with widespread digitalization. This trend also applies to the construction industry.

One of the benefits of this is the ability to monitor and manage workflows from anywhere thanks to innovative technology and software.

Enough in the industry and complexities. So, the main obstacles in the development of the global construction industry are:

However, construction projects simply have a future. Society is developing, which means that the field of construction will also develop.

The Institution of Civil Engineers (ICE) professional community predicts that the global construction market will grow to $8 trillion by 2030.

Who are these successful managers who “bring to mind” the construction of huge houses, bridges and enterprises?

Construction Project Management Team

Managing a construction project team is more than just setting goals and putting things in order at a construction site. This process includes setting goals and strategies, evaluating performance, monitoring schedules, workloads, and more. It’s also about identifying problems early, resolving conflicts, and stimulating productivity.

Several people can manage construction projects at once. Below we provide a description of the main roles that have received this responsibility.

Project owner

Owner or owner commissions a project and finances it (directly or indirectly). In addition, in the area of interests and responsibility of this person is high-level monitoring of the project and making important decisions. Such as determining the bidding process, choosing the method of project implementation and selecting contractors.

General contractor

General contractors are responsible for overseeing day-to-day operations at the construction site, sourcing and securing equipment, materials and labor.

They may hire subcontractors for certain tasks.

Here are some more general contractor functions:

Construction project manager

The project manager is the person who manages the construction work and all communications. He is responsible for planning, coordination, construction project supervision, budgeting and risk management.

The main task of the construction project manager is to make informed decisions that will increase the effectiveness of the people entrusted to him and other resources of the organization.

These managers are responsible for ensuring that all employees on the construction site perform their duties on time and, as a result, bring profit to the project.

They also determine the motivation of the project team and what each worker strives for.

The main tasks of a construction project manager also include:

Along with the roles and responsibilities in a construction project team, the order and structure of all processes and stages are equally important. That is, the life cycle of the project.

5 phase construction project

The life cycle of a building object is the period of time during which it exists. From A to Z. From the birth of an investment idea to cutting the red ribbon or liquidating an object.

The standard life cycle diagram of any project consists of five phases:

Initiation.

Planning.

Version.

Control.

Completion.

These phases can be supplemented by others. It all depends on the specific project. For example, your tasks may require the introduction of a procurement phase, change management, etc.

Construction projects usually follow the Waterfall methodology. However, the Waterfall-Agile hybrid method is also ubiquitous. It supports the Waterfall framework and applies phases with the adaptability found in Agile.

Regardless of the choice of project management methodology, the construction management lifecycle starts with initiation.

1. Initiation

Any project begins with an idea, “burning eyes” and a couple of lines on a piece of paper.

Imagine the construction of a residential building. Before you start building, you need to carefully analyze the area, assess the technical requirements, do a soil analysis and find out if there are any specific features of the site.

This is the preparatory stage, at which it is important to understand that your project can be realized, and only then invest in planning and tasks.

The initiation stage includes a description of the project, creation of terms of reference, charter, business case, list of key participants and approval of the project by all interested parties. It is important to immediately assess the potential risks.

Many underestimate the importance of the first phase, believing that no work is done during the initiation process. In fact, it is the first phase that is the foundation for the successful implementation of the project.

Pay special attention to your project charter. It should contain the main business benefits associated with your project. This will contribute to the achievement of goals and ensure that time is not wasted.

2. Planning

In a simple example of building a residential building, you would need to draw up an estimate and set a date for the completion of the building.

The importance of planning is obvious, but some companies still neglect this important phase, going straight to work.

Any expert and successful project manager should strive to become a master planner by investing time and effort into this process.

Planning involves careful consideration of the many elements associated with a project. These are items such as:

These elements (and possibly some others) should be described in a detailed plan that you present to the team and then refer to throughout the work.

3. Version

Construction of the house continues, and the next phase requires serious and painstaking work.

Execution is the actual implementation of the project. You need to mix concrete, lay floors, build walls, install windows, and much more. At this stage, you implement your plans one by one.

Execution requires constant monitoring, because any work can go awry at any moment. Planning actions is easier than doing them.

This phase must begin with an organizational meeting. It includes processes such as work management, knowledge management, communication and quality management. Managers acquire materials, develop the team, and track risks.

It is very important to make sure in time that each employee adheres to the overall plan and does his part of the work.

Don’t forget to properly allocate additional resources and give instructions for action. Don’t waste time and get down to business right away.

4. Control

Very often, the control phase coincides with the implementation phase of the project. The builders work on the site, and the manager monitors the progress of the work, checking the estimate and schedule to make sure everything is going according to plan.

At this point, many people realize that the construction project management life cycle can require some flexibility. There can always be situations that require adjustments to the plan.

Focus on regular meetings during which you periodically monitor progress and make course corrections. Such meetings are a good opportunity to promptly collect feedback from all employees.

Having an online project management platform will help ensure data transparency, keep abreast of all current tasks, and track the workload of performers.

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5. Completion

Completion of the project indicates that all work on the project has been completed. In our example, this means that the house has been built.

It’s time to start cleaning up the garbage, checking documents and planning new projects related to the development and settlement.

However, it is important to remember that the last impression is no less important than the first. Often a few more steps are required to complete:

In the end, the completion of a construction project is important to celebrate well. So don’t forget to take care of that too 😉

This classification of the phases of the life cycle of projects in construction is the most common. However, other processes and stages of construction are often distinguished, or they complement the classical phases. These processes are:

Pre-construction stage. It is similar to the initiation and planning phases and may also include market analysis, property selection, strategy formation, documentation, investment analysis, etc.

Investment stage. Its peculiarity lies in the adoption of strategic decisions that will allow investors to determine the volume and timing of investment. At this stage, contracts and work agreements are signed, as well as capital investments are made.

Operational stage. This phase includes the purchase of raw materials, the production and marketing of products, marketing activities, etc. Here there is close communication with contractors, suppliers, intermediaries and buyers.

Liquidation stage. At this stage, investors and users of capital investment objects determine the residual value of fixed assets.

Before describing useful tools for projects in construction, let’s add a little “tar” in the form of unsuccessful examples. Unfortunately, these are always worth remembering.

Unsuccessful construction projects

Construction projects, like any other, can fail.

The end result may seem very positive in the end, but often it is just a “shell” that is fraught with continuous problems.

Individual examples of failed construction projects may be the result of poor planning, disorganization, bureaucracy, funding problems, or other factors.

Here are some well-known projects that didn’t end up the way they were supposed to, and not when they were supposed to.

Denver International Airport . The facility was presented with a 16-month delay and cost overruns ranging from $2 to $3. 1 billion (according to various estimates).

Sydney Opera House . This object is also characterized by cost overruns. Its authors planned to complete construction in 1963 and spend $7 million. In practice, the project was commissioned in 1973 and cost $102 million.

Eurofighter-Typhoon . This defense project was jointly developed by several European countries. Typhoon was commissioned 54 months later. 19 spent on itbillion pounds sterling instead of the planned 7 billion

That’s enough bad stories. It’s time to move on to what will help lead the construction project to success and the long-awaited cutting of the red ribbon, namely, management tools.

11 project management tools for construction

What are online project management tools in construction?

Construction management software is designed to help organizations manage all phases of construction and manage teams remotely.

Every construction project is unique, so there is no perfect tool for every company. It all depends on the scope of the project, its purpose and the needs of the team.

If your plans include a large-scale construction of a large facility that will drag on for years, then you will not get by with one tool. This could be the construction of an airport terminal, a city block, or a major irrigation system.

If your project does not differ in scale, then, quite possibly, one or two tools will be enough for you. For example, it can be the arrangement of a city beach or the construction of a mini-market.

According to Software Connect’s 2018 Construction Technology Trends Survey, two-thirds of construction software buyers need tools to calculate costs, track projects, and evaluate results.

As a universal tool for construction projects, it should offer the following features:

In addition, your construction management tool may contain many secondary functions and features. This is the presence of a mobile application, online file storage, reporting, email alerts, and many others.

Below we offer a list of tools that are designed for different building needs.

Some of them are multifunctional and can replace dozens of others. Some offer narrow functionality. Some platforms allow you to work for free in test mode, some involve a moderate fee.

Among their variety, there are sure to be those that will help turn your construction projects into real masterpieces.

Let’s get it right.

1. Planning Tools

Planning is the beginning of a project journey. It begins with the participation of managers and stakeholders in the process of developing the concept of the project and continues with the selection of strategic decisions, the development of details, the conclusion of contracts and the completion of works.

Planning may seem like a very simple procedure. But this impression is deceptive. A high-quality project plan will help you competently organize working time, track the employment of the work team and increase its productivity.

Online planning with the help of a convenient tool allows managers and contractors to assign tasks to project participants, monitor the progress of tasks, set priorities for activities and manage the timing of work.

GanttPRO is one of the most reliable online planners for construction and any other projects.

A Gantt chart-based tool helps you break down your construction plan into specific tasks, milestones and milestones, and plan each activity without missing anything important.

You can add as many tasks as you need using the convenient online Gantt chart for visualization.

Set time frames, mark deadlines, add task dependencies and track progress. The combination of the vertical and horizontal axes of the Gantt chart will clearly show you how your construction project is progressing and guide your team through the plan to a successful outcome.

In addition, you can find the critical path of the project on the Gantt chart in GanttPRO, which is of great importance in construction work.

All you have to do is add dates and dependencies and activate the critical path, and the tool will do the rest.

For example, this is what a small project might look like, the purpose of which is to restore order in the building and on the territory after construction work.

Critical project tasks are colored red. This means that they require special attention from the manager.

George Rossle, Production Manager at A+ Construction Pro, rates GanttPRO:

George Rossle

Production Manager at A+ Construction Pro

We use GanttPRO as our main tool for planning and handover. We also use it for deadline management, time tracking, file sharing and transfer, and smart scheduling.

In GanttPRO you will find ready-made templates for project management in construction:

Any ready-made template is easy to customize. You can even save your plans as templates for future reference.

2. Task Management Tools

The goal of construction task management is to deliver deliverables on time, within budget, and in line with stakeholder expectations.

Construction projects can be very complex and include many activities. This includes making decisions quickly, taking into account changes that may occur in real time.

Task management also includes control of budget, time, resources, and other factors.

Monday is one of the popular project management tools that provides task control, monitoring and analysis.

With it, you can monitor the status of ongoing construction projects in real time and optimize communication between employees in the office and on the construction site. This ensures a trouble-free operation from start to finish.

Monday offers ready-made templates for project management in construction, which can be visualized in a convenient way for you. These are Kanban board, calendarA, timeline, Gantt chart, geographic maps, workload charts, etc.

3. CRM systems

Modern CRM-systems help construction companies track the effectiveness of tasks, plan work, generate reports and find new customers.

They allow contractors to store customer contact details or import them from other sources. Many platforms allow you to automate scheduling and send reminders to clients.

One of the solutions worth paying attention to is Flowlu.

This CRM system offers all the necessary tools for construction companies: access to the history of negotiations on objects and documentation, the ability to plan and control costs, construction time and supply of materials, and other features.

Flowlu has a convenient and intuitive interface and a maximum of useful widgets. The system promptly provides the necessary information and creates a complete working picture of the project.

4. Team management tools

Construction sites are full of jobs and professions, ever-changing priorities and tight deadlines. Managing all this requires well-coordinated teamwork of both individual teams and the company as a whole.

Teamwork includes open communication and participation of everyone in improving work processes to achieve the goal of construction. Good teamwork makes the workplace safer and work more efficient.

The best team management tools focus on overall progress, task status, and time management. They provide opportunities for the coordinated work of the entire team, so that each employee is aware of all changes during the course of the project.

If you need a flexible project management tool that will allow your team to work the way they want, Teamwork is a great solution.

This tool makes it easy to collaborate, scale performance, and do it all with agility and tight deadlines.

Teamwork will suit those construction teams who prefer to structure their work using linear task lists and those who are used to visualizing tasks using boards.

The platform offers ready-made project templates that are designed to minimize manual effort.

5. Tools for managing project time and deadlines

By managing deadlines, you can assign tasks to project participants, track the progress of activities, set priorities, and also competently manage project time.

The best tools for managing deadlines create opportunities for coordinated work within the team so that each employee is aware of all changes in the course of the project.

Zoho Projects is an all-in-one solution that allows you to coordinate multiple construction projects in parallel with professional management functionality.

With this tool you can carry out all phases of a construction project. But the most interesting features of Zoho Projects are related to time management and task deadlines.

You can automate your daily, weekly and monthly work log entries with digital timesheets. Everything is stored in the cloud.

6. Prioritization tools

Prioritization of tasks consists in choosing the order in which they are performed based on various factors that determine the importance of these tasks. This is important enough for construction.

In no construction project will you be able to complete all the tasks on your list on a given day. You have to choose their order.

“Infinity is a trap,” says celebrity author Seth Godin on his blog. And he is right, because it is the prioritization of tasks that determines the success of the entire team and allows you to avoid the “trap”.

Online tools with prioritization capabilities are a great help to managers.

Hygger offers six structures for professional task prioritization at once: from the simplest Eisenhower matrix to the popular RICE methodology.

For example, the Eisenhower Matrix ranks ideas and tasks according to importance/effort, importance/risks, or urgency/importance.

Construction project managers can choose any level of complexity to prioritize their tasks.

7. Finance and accounting tools

Accounting and financial management is something that any construction project cannot do without. This usually includes budgeting, payroll, invoicing, billing, cash circulation, etc.

Such tools help to make informed decisions (sometimes right at the construction site) when you need to quickly plan expenses and make a financial forecast here and now.

PracticePanther is an accounting, financial and legal management tool often used in the construction industry.

With the power of this software, organizations can optimize their costs, time, billing, customer communications, and more.

In addition to expense, case, document, and workflow modules, PracticePanther provides data-driven resource allocation with real-time business intelligence and custom reporting. Its intuitive mobile app allows users to complete everyday activities on the go.

8. Tools for managing logistics and resources

One of the main conditions for the successful operation of a construction organization is the timely provision of production with materials, products and structures.

It is very important to timely identify the company’s needs for resources, find suppliers, place orders, determine the optimal delivery time and minimize the cost of acquiring inventory items.

However, resources are also people. In construction management, it is essential to be able to manage meeting scheduling, conference room bookings, phone line bookings, and other resources in one synchronized calendar.

An example of a simple and user-friendly system for resource planning that is suitable for organizations of any size – Resource Guru.

With this application, you can book and change schedules using the calendar function and scheduling tool, as well as calculate the amount of free time available for users, employees and other resources.

9. Document management tools

Construction documentation management software also plays an important role.

Such tools ensure that all parties are working with the same up-to-date information. It doesn’t matter if they are in the office or working remotely.

DocsCube is a good example. The tool provides automated workflow for construction. This not only automates workflows, but also simplifies repetitive administrative tasks, controls credentials, and certainly reduces the need for “manual” operations.

Thanks to DocsCube, you can reduce human error and redundancy. This will provide an opportunity to increase profits and ensure the safety of personnel.

In addition, you will forget about the need for constant monitoring of industry compliance. The tool will do everything for you.

10. Risk management tools

The construction business is always associated with certain risks. By investing impressive amounts in construction projects, organizations are at great risk, because you can lose money due to changes in the prices of materials, poor-quality work, non-fulfillment of contractual obligations, etc.

The risk management system is designed to reduce the likelihood of any adverse effects. A high-quality tool will help to assess possible risks and minimize them in time.

RiskWatch is an example of a professional tool that allows you to structure risk management throughout your organization. It helps to automate the risk and security management program.

You can use RiskWatch’s real-time dashboards and user-friendly reports.

The platform helps to identify risks, regardless of their source, categorize them, evaluate them, determine optimization strategies and initiate processes to counter adverse factors.

The system easily adapts to your unique needs and preferences, creating an efficient and convenient process.

11. Analytical systems

Online analytics-enabled solutions help construction companies keep projects on schedule and on budget.

They allow you to analyze large amounts of data and solve strategic problems.

The Autodesk Construction Cloud tool provides extensive opportunities for construction work analytics.

The system integrates workflows, teams and data at every stage of construction to reduce risk, increase efficiency and increase profits.

By customizing the platform’s dashboards, you get a detailed view of each project, you can analyze current tasks and find out which ones should be given priority.

The

Autodesk Construction Cloud enables managers, builders, contractors and professionals to achieve better business results.

All of the above tools can be tried at an affordable price or (for most) request a trial period of use. However, sometimes construction companies, especially small and start-up companies, need free tools.

Free Construction Management Tools

Free tools are not always distinguished by high-quality functionality and frequent updates.

However, our list would not be complete without such platforms. Here are some interesting options:

eSUB

If you’re looking for a free construction management solution that creates tasks, stores documents, and gives your team access to all work, then this tool is also great.

The

eSUB is often the choice for subcontractors.

Fieldwire

The

Fieldwire serves as an excellent link between the office and remote parts of the team. The tool allows you to timely detect and eliminate problems at the facility and design shortcomings.

Fieldwire is useful for builders, designers, engineers, foremen, site managers and subcontractors.

Takivesoft

This free construction management software monitors the performance of projects, operations, team workloads, material usage and more.

Taktivesoft will provide complete transparency of all your work. With it, you will definitely enjoy the decision-making process. A convenient mobile application will help you always keep your business within reach.

OrangeScrum

This is another interesting construction project management solution that will help you manage time, ensure collaboration between all team members, managers and stakeholders, and help you allocate resources.

OrangeScrum offers a free plan with unlimited projects and tasks for up to three members. If you need to involve more employees, you will have to pay.

OpenDocMan

OpenDocMan is another popular open source document management system that allows construction teams to store important documents in a single space.

Unfortunately, apart from document storage, this free tool does not have any advanced project management features. However, multilingual support, convenient notifications and other advantages make it in demand in the field of international construction projects.

5 Benefits of Universal Construction Management Software

The main advantages of implementing online project management tools in construction include the following points.

1. Everything under control

Integrated project management system in construction allows you to use various features and functions within one software.

2. No hand work

Tracking projects or budgeting with paper and pencil has not yet become obsolete. However, the methods used by some are becoming less and less effective.

3. Organized approach

Construction management tools provide a consolidated view of the business. It helps construction professionals to use their time more efficiently by tracking projects, as well as reduce costs by calculating the cost of work.

4. Workflow optimization

Teams can collaborate by creating and sharing documents, improving process quality and increasing job satisfaction. With this data, contractors can better manage daily tasks, time and risk.

5. Remote work

Construction software provides real-time collaboration.

This means that users get access to contacts, plans, drawings and photos of the project while working remotely. In any location and at any time.

Conclusion

Project management in construction covers the most important stages and processes. From planning to closing and analysis of work. Each stage requires attention, involvement of different specialists and, of course, innovative online tools.

The right programs and applications will keep your projects from collapsing or breaking halfway through. Some of them may offer universal functionality for working with most building processes (for example, GanttPRO), and some specialize in a narrow area of work (for example, DocsCube).

Your choice depends entirely on your needs, project specifics, team and budget.

The ideal tool is the result of trial and possibly error. Try our suggested tools. They will become effective assistants in construction matters and processes. With them, your projects, products and objects are waiting for success and recognition. Reinforced concrete!

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Valuation of the object under construction RusBusinessEvaluation in Moscow, price

Content

Assessment purposes

Evaluation features

Assessment Methodology

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Sometimes, in the event of an unsuccessful or suspended investment project, the construction of planned real estate objects is frozen, as a result of which an item “construction in progress” appears on the balance sheet of the company. In such cases, the organization faces the question of how to deal with such objects. Regardless of plans for their use in the future, there is a need to assess the market value of objects under construction.

Purpose of assessment

In order to minimize future losses or recover part of the investment, the organization must assess the current value of construction in progress and decide on plans for such objects.

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The main objectives for market valuation can be the following:

Acquisition or sale of an object under construction.
In the event of a sale, the company must estimate the costs it incurred during the construction process and after it was frozen in order to recover them. For the buyer, at the same time, it is important to understand the condition of the purchased object and how much investment will be required to complete it (documentation, connection of communications, reconstruction, etc. )

Putting an object on the company’s balance sheet.
To include an unfinished object in the list of assets, the company must know its exact cost. For this purpose, independent appraisers are involved, who will take into account all the features of a particular object and its price, taking into account the realities of the market.

Litigation in respect of an object under construction

Decision to use an unfinished object in progress in the future.
The company may decide to change the purpose of the object and the purpose of its operation. In some cases, unfinished buildings may be converted to serve other purposes than those originally planned. To determine this possibility, a professional assessment of experts is necessary.

Management of land plots on which the object is located.
Sometimes the value of land exceeds the price of objects located on it. In such cases, it may be more expedient to demolish structures in order to obtain greater benefits from the use of the vacated site. To make the right decision, it is necessary to accurately assess the costs incurred for the construction of the facility and the costs that may arise in the future if the construction in progress is retained.

Obtaining financing secured by an object under construction

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Classification of objects under construction

Construction in progress objects can be classified according to different criteria. In the context of future costs for such facilities, the most appropriate criterion can be considered the degree of readiness of the facility. In this case, the structures can be logically divided into 3 large groups:

35-50% complete. This group includes objects for which the foundation was laid and part of the walls and ceilings were erected, but the work was suspended for some reason.

51-75% complete. The objects of this group lack interior decoration and communications. As a rule, they include buildings under reconstruction, restoration or in the stage of major repairs.

76-95% complete. The objects of this group are almost ready, but the documents for commissioning have not yet been prepared for them.

Evaluation features

In the case of construction in progress, the features of assessing its real value are directly related to the purposes of using unfinished facilities in the future. Depending on whether the objects under consideration can generate income in the short term, experts choose the most appropriate approach to their valuation.

It is also worth remembering that a very important factor for the possibility of operating these facilities is the availability of all necessary documentation – a building permit, a project for the execution of work, the type of permitted use of land plots on which the facilities are located; technical conditions for connection to communications (sewerage, gas supply, water supply), etc. On average, such documents are issued for 3-5 years.

If the necessary documentation has expired, the cost of obtaining it again must be taken into account when assessing the objects.

Methodology for estimating construction in progress

Most often, objects of construction in progress include buildings and structures unfinished due to the bankruptcy of the developer. Depending on their type, appraisers use different valuation methods.

If the object in question can only be used for highly specialized purposes and cannot change its functionality, the cost approach is considered the most appropriate.

If unfinished buildings are more versatile and can be used for a variety of purposes and types of industries, a combination of the cost and income method is used in their evaluation.

Our experts have extensive experience in appraising properties under construction. When providing a full package of documents required for the valuation, RusBusinessEvaluation will prepare a detailed report on the cost of your unfinished buildings and structures, taking into account their features and purposes for further use.