In a market this competitive, you have to estimate construction costs to make a difference between a lackluster and a healthy profit margin or an accepted or rejected bid. While it may seem logical to focus on the external causes for high estimate construction costs, the first step is to conduct a thorough audit of internal estimation practices. In this post, we’ll look at the smartest ways to lower your estimate construction expenses.
Step one: fire the spreadsheet
Spreadsheets are infamous for causing billion-dollar errors in the finance industry, but they can cause just as much damage when used on much smaller projects. According to numerous surveys, estimation errors cost the construction industry billions in overpayments, lost productivity, and miscalculated margins. That’s because spreadsheets tend to foster human error during data entry, even when the data collection process itself is well-planned and mostly error-free.
The act of entering data into a spreadsheet remains a high-risk activity if you plan to use that data to estimate construction costs simply because of the lack of fail-safe measures in a spreadsheet. If your calculations are off by a single digit, your bid may be higher than your competitors and fail. That’s a situation that you can avoid, but if your team must manually verify each data set after each entry, then you are looking at a lot of time (and the continued prospect of human error) to presumably have more accurate estimates.
Deciding to skip verification may save time, but is just as risky. Researchers have found almost 90% of spreadsheets have significant errors that can impact the validity of calculations and one out of five large American businesses have experienced financial loss due to spreadsheet mistakes. About one-third of these businesses reported identified spreadsheet errors as the cause of poor decision-making across the organization. Even for a gambler, those are prohibitive risks. If gambling with your bottom line is not a preferred method of business, it is unlikely that using a spreadsheet is the most efficient choice for your business.
Errors in data entry corrupt estimate calculations and financial projections. One of the most common causes for elevated estimate construction costs is manual data entry error via spreadsheet.
What to Do: Identify potential sources of data entry errors (poor data collection practices, manual takeoff calculations, or inconsistent data-warehousing quality) and take steps to streamline and secure your data management process.
Step two: put down the phone
While it may seem logical to simply pick up the phone to check on a few details while looking at an estimate, technology can amplify the reach of critical team communications and save you time. When using digital tools to communicate, nothing gets lost in translation. The data is right there in black and white, instantly.
Correct data reporting is essential for accurate cost estimation. Staying connected in real-time is key to keeping everyone aware of the data they need to evaluate costs.
A cloud-based system enables your team to have relevant information to locate any bid-related information instantly. That means that when making purchasing decisions or creating long-term cost projections, data can be instantly verified and shared with team members. Pricing comparisons and supplier bids can be evaluated easily and accurately when you have access to all of your purchasing and estimate history.
Use an internal communication system that streamlines data reporting and team interaction making organization-wide updates a matter of a few clicks.
What to Do: Save meetings and calls for interactions that require facetime. Use a cloud-based system to deliver data critical to accurate estimations and to provide easy access during the cost analysis process.
Step three: take a look in the mirror (at your profit margin)
When your cost data is accurate and communication between team members is clear, it is easier to choose the bids that make the most sense for your company. With a data-driven profit model and estimation accuracy, you can lower your construction costs intelligently while remaining competitive.
Here are five ways to lower estimate construction costs:
1. Use a system that ensures data entry accuracy with digital takeoffs. Digital takeoffs convert blueprint data to cost estimates instantly. Learn more.
2. Select a platform that offers a vast construction expenditures database, making it simple to calculate cost possibilities. Learn more.
3. Audit internal communications to ensure that your entire team has accurate, up-to-date data throughout the decision-making process.
4. Use a platform that can import critical external data and connect with leading platforms to ensure subcontractors are providing clean, accurate data to create accurate estimates.
5. Look at the big picture when calculating expenses to ensure that profit margins and long-term fiscal strategy stay in sync. Use a platform that manages automatic markups digitally to ensure profit margins are healthy at every level of the project.
Make it easy for your team to focus on profit
ProEst ensures that you can reduce construction costs and the time required to create an estimate. With digital takeoffs and simplified access to bid creation data, your employees can lower your estimate construction costs effortlessly while simply doing their jobs. ProEst improves efficiency and team productivity by eliminating the guesswork in bid creation, along with the high risk of human error during manual data entry when calculating costs. Ready to help your team profit? Schedule a demo today!