Public works facilities. Large commercial properties. Vital infrastructure builds. How can you improve your chances of winning projects like these? Your choice of cost estimating methods can help. Because of the superior amount of detail bottom-up estimating can bring to a bid, this method can greatly improve your bid confidence and so, too, your odds of winning more projects more often. Here’s the how and why.
The details matter
Consider that large-scale projects like these require an extreme level of precision to construct. So likewise, your cost estimates for the bid must be equally as precise to ensure the project is even possible from a budget standpoint.
Accurate estimates can only come from accurate details. Where do you find these details? From quantity takeoffs, which yield even more precision when you use building information modeling (BIM) for the takeoff. From solicited estimates from subcontractors and vendors who can provide their own current rates for their specific discipline or deliverable. From historical data from your recent builds that share commonalities for 1:1 estimate values. And from industry averages that you can then adjust for the going rates in your area.
No matter the source of your data, bottom-up estimating ensures you can account for every dollar expenditure for those massive-sized projects, particularly when sourced from public funds. That leads to a high degree of cost certainty — something every owner and contractor likes to see, especially when budget overruns are so common. Nothing is ever a solid guarantee, of course, but for these larger projects, increasing the likelihood of cost certainty can make a difference as missing or incorrect details have the potential to throw off an already substantial budget.
Because this method can incorporate the tiniest of tasks, and the most granular of data for labor, equipment and materials, there is more fine-tuned accuracy in the estimate. This is only possible the more fully defined and developed a project is. Of course, there will always be those projects whose scope and details aren’t as fully baked as you might like them to be. There may be more ballpark guesstimates that go into portions of the estimate, rounded out by any of the more specific numbers you can provide from the above sources, most likely your own or industry benchmarks. Naturally, bid confidence at this stage won’t be as high, but it will grow as details become known and start filling in the blanks.
Planning for the unknown
Every project is susceptible to risks that can throw off scheduling or budgets. It could be unique to the project, such as proliferating change orders or unrealistic schedules; or it could be unexpected external forces in the environment or the economy. The larger the project, the higher the odds of unknowns making an appearance. This can negate the idea of cost certainty – unless you plan ahead. After all, no bid should be considered complete without an accounting of potential risks. With bottom-up estimating you can do just that by determining the potential financial impact of these hard-to-plan-for scenarios. Creating secondary estimates using figures for specific what-if situations can give you a foundation upon which to base your plans of action. If you’ve encountered similar scenarios in prior projects, why not pull those numbers in for real-world accounting?
Unknowns don’t have to be major project-impacting risks to cause your estimates to be adjusted. Say wage rates or materials pricing change over the course of a long-term build. Simply updating the new information in your bottom-up estimate will automatically readjust the numbers throughout. While this can be done in real time, you can still plan for those to occur over the course of the project.
The goal is to show how well you can account for the details of what you don’t know yet by at least anticipating their possibility.
A boost of confidence
What you ultimately want is confidence in your estimate. When you can trust the accuracy of your data, and you’ve accounted for the budgetary impact of possible what-if scenarios, you can feel more confident in the bid you submit. This level of detail, forecasting for unknowns, transparency and accountability also can inspire the client’s confidence in your ability to meet their job requirements and complete the project successfully.
Not only does bottom-up estimating help you gain confidence in the bids you do submit, but you gain it in your decision to not bid on a project when the estimate’s numbers bear out a less-than-optimal profit margin for the amount of work required. After all, everyone wants a high return on their investment of time, effort and resources, right?
Prepare for your next bid
We know how critical the bid process is — not just for your projects, but for your company. InEight Estimate, created by construction professionals for construction professionals like you, is designed to help you gather the critical details and plan for forecasted challenges so you can submit your best competitive bid. Featuring databases, rate libraries and templates, Estimate streamlines the cost estimation process, ensuring no detail is overlooked and saving precious time and effort when producing your bottom-up estimates. You’ll be prepared to meet any time-sensitive bid submission date. Request an InEight demo today.
