Every cost estimate rests on assumptions about prices, productivity, and timing, and those assumptions age between the bid and the build. Fuel, steel, copper and other material prices can swing sharply within a single year, often faster than bid prices adjust. The defense is a complete, detailed base estimate whose assumptions are written down, tested against what-if scenarios, and easy to update when the market moves.
Why Do Estimate Assumptions Go Wrong?
Predicting cost to deliver a project is a challenge for owners and contractors alike. As an owner, the responsibility to pay for changes in estimated costs depends largely on the terms of the individual contract that was awarded. How many in our industry have prepared estimates with costs that shot up far beyond predictions without much advance notice?
For example, remember what diesel fuel cost when you prepared estimates in mid-2025? And how far off would those estimates be a year later? Chances are, pretty far.
With global supply chains, there is increased risk to project timelines and subsequent costs compared to estimates. Tariffs on steel, aluminum and copper have pushed material prices up faster than many estimates allowed for, and when vital parts arrive late, crews can sit idle and still need to be paid. Time being money, this is not acceptable.
Downstream schedule and cost impacts compound with each day of delays. Investors get anxious about delivery timelines. Indirect costs can go up as the timeline drags out, such as the need to carry insurance longer or updating extended permits. These can all add up to very large sums of money over the life of a multi-year project, creating huge impacts in each of those years.
So, how should we deal with unforeseen circumstances, and how do we mitigate the risks to the costs of our projects? Obviously contract terms specify how unforeseen costs are handled on a project in terms of responsibilities to accommodate for them. But looking beyond that, what can be done?
Coping with Unexpected Price Increases
Surprise expenses can have huge impacts on our projects and profitability. Fuel is a great example to discuss, as it’s something nearly every project will have to estimate.
Between June 2025 and June 2026, the producer price index for diesel fuel rose 65.8%, according to an AGC analysis of government price data. Over the same 12 months, aluminum mill shapes rose 52.4%, copper and brass mill shapes 26.0%, and steel mill products 16.9%. Contractors’ bid prices for new nonresidential buildings rose just 3.5%. Prices can move fast in the other direction too: diesel fell 18.4% in June alone. That’s exactly why an assumption locked in months earlier is a risk.
Now, why is all of this such a big deal? All costs change over time anyway, right? Let’s see what happens with our sample project specs.
Timeline
- Estimate is completed and bid in mid-2025.
- Contract awarded and budget approved in late 2025.
- Ground broken and project starts in early 2026.
- Fuel bought as work proceeds in 2026.
Estimate
- $500 million total for the job
- $252,000 total for diesel fuel (mid-2025 prices plus a 5% escalation allowance)
Actual diesel costs?
- At time of estimate, approximately $240,000
- With the 5% escalation allowance, approximately $252,000
- At June 2026 prices (65.8% higher), approximately $398,000
Based on rapid price increases caused by real-world events, the cost for diesel fuel alone in our sample project came in roughly $146,000 over the estimate within a year. Now, I realize there are a lot of assumptions I am making, and it is not time-phased, but that is part of the point here:
Our assumptions made for an estimate can have significant impacts on our bottom line.
Creating A Complete and Accurate Base Estimate
Getting a truly accurate base estimate is vital to deal with and overcome issues like this. The first step toward this goal is not limited to major items in the estimate. For example, something as seemingly simple and straightforward as including all floors of a vertical building in an estimate is crucial.
We also want to ensure that the maximum level of detail — practical for our process flows — is included in the estimate. This will give way to additional steps and reviews that will hopefully help us mitigate as much risk as possible at this phase of the project and set us up for long-term success.
This realistic base estimate then, including indirect and contingency costs, becomes the basis for financially planning the rest of the project. The review and refinement from here will set the table for a profitable project several years down the road when work is completed.
Some remaining important factors to consider include:
- Understanding margins at both the overall bid level and at strategic components of the bid
- Recognizing potential financial and schedule risks, then determining if they require mitigation. This could be anything from alternative suppliers to baking room into the plans for time and cost overruns.
- Mapping areas of the project where profit is slim vs. areas where it is large and ensuring that it accurately reflects the project goals. For example, in some project budgets, there may be a set dollar value associated with specific scope while other funding for the same project is more fluid.
- Using estimating methods that will help you quickly and accurately adjust as time moves on.
Helpful tech tip: Quite often, fuel costs jump rapidly and unexpectedly. If your estimating tool uses an easily adjusted resource library, then you can change your fuel cost once and it will be automatically propagated across the remaining scope of the estimate. This can save time and reduces opportunities for human error all while helping you quickly assess that change’s impact to your project.
In the end, while every project is unique, its goals are nearly always equated with the ability to deliver the work on time and on budget. The more complex the scope or the more extended the time frame, the more our assumptions can impact the bottom line of our project. This is why a thorough understanding of our costs, risks, assumptions and financial goals and limitations will help us get where we need to be on time and on budget.
How InEight Estimate Helps Keep Assumptions Current
InEight Estimate is built for this kind of estimate. Shared master libraries and templates capture your team’s rates and expertise so every estimate starts from the same standards, and flexible estimate structures let you tailor crews, activities and cost breakdowns to each project’s scope.
Built-in benchmarking compares estimate values and productivity rates against the high, low and average figures from your own past projects and flags the variances, so an assumption that has drifted from experience is caught before the bid goes out. And when pricing moves late in the process, quote management keeps subcontractor and vendor pricing in one place and lets you update it before the bid is final.
