As we all know, construction hard costs are the lion’s share of any ground-up development project, and they are often a significant share of the total costs when a property is being repositioned in the market. They are also a substantial line item when leasing space to a new tenant as tenant improvement allowances can add up to six and seven figures very quickly.
Contractors can smell a rookie developer or investor a mile away, and some of them will be more than happy to tear your face off with change orders once the job is well underway (a pleasant image). Since this is unfortunately the case, how do you get comfortable with estimates you get from general contractors?
While I am preaching to the choir to many of you, I will say that the most important human capital on your team is often your construction executive. Preferably, they are seasoned and have constructed projects similar to the ones you are considering, so they can not only bring a critical eye, but can also bring their real world experience to the table when assessing bids and schedules from GCs.
Model For Success is pleased to introduce an expert in all things related to estimating, construction and project leadership — Ravi Bhatia, PE, PMP. Ravi is one expert who you want on your side, and he blogs on topics relevant to construction and estimating at www.projectleadershipguru.com. You can read Ravi’s bio here.
Model For Success is including one of Ravi’s recent posts here as an introduction to his philosophy on estimating, a good starting point in our ongoing conversation on these topics:
- Good estimators are always in demand. Great estimators are hard to find and even harder to keep. So if your company has a great estimator, be ready to keep that person.
- Estimators are expected to wear many hats. These include but are not limited to Economist, Supply Chain Expert, Financial Analyst, Productivity Expert, Contracts Maven, Math Wizard, Engineer / Architect, Negotiator Extraordinaire, Logistics Chief, etc…you get it.
- Estimators are always on the HOT seat. It is not for the weak or thin-skinned.
- The Estimator usually cannot win. If the firm wins the bid, executives will state that “the Estimator made a mistake or left too much money on the table”. If the firm loses the bid, executives are inclined to state that “the Estimator did not submit a sharp bid or played it safe.”
- Estimators are usually expected to work very long hours, especially around bid-time.
- Estimating is the most critical job function for a construction organization. You can’t get new work if you do not submit a winning bid.
- Estimators MUST keep good notes because selective amnesia (within the executive suite) may set in later. Good notes will help keep the Estimator from being thrown under the bus.
- Organization and hard work are the key to good estimation. Note that the Estimator has to build the job in his head before it gets built in the field.
- There is NO substitute for experience in estimating.
- Murphy’s Law suggests that any shortcut taken by the Estimator will result in a significant problem and a corresponding loss on the project.
Murphy’s Law suggests that any shortcut taken by the Estimator