Estimating construction costs becomes not just a science, but an art, when one begins to address the variables that can affect those costs.
While cost databases and company records go a long way toward filling in the blanks, reliable estimates require deeper investigation and careful calculation.
The single most important variable in estimating labor costs is productivity.
Company time records from previous jobs can form the basis of a productivity data set that can then be used to assign productivity factors to future work done by the same crews. However, past work has, by nature, been performed under unique circumstances that may never be reproducible on another project. Conditions that affect labor productivity from job to job include:
- seasonal conditions and weather;
- site conditions such as changes in elevation, drainage and soil conditions, as well as the ease or difficulty in accessing the site;
- human conditions including motivation and fatigue; and
- skill and experience levels of those doing the work.
When estimating, the focus should be on identifying the factors in each project that will most likely affect productivity. Once identified, it is easier to mitigate those factors.
There are some common-sense approaches that boost productivity when they are built into the cost estimate in such a way as to become key parts of the project schedule. In his book, Choosing Project Success, J.F. McCarthy writes that construction trades are only productive about 30 percent of the time. The rest of their productivity is taken up with waiting (29 percent), traveling (13 percent), receiving instructions (8 percent), moving tools and materials (7 percent), starting late and quitting early (6 percent) and breaks (5 percent). It makes sense, then, to ensure that the necessary instructions, materials and equipment needed for a particular task are accounted for in the estimate. Otherwise, they won’t be sourced and people will be left waiting.
To reduce productivity lost to travel time, the jobsite layout should provide clear and direct access for crews and materials and equipment––even if it results in greater initial costs. Items required for human comfort, such as toilet facilities and heat, will minimize the negative effects on productivity that come with discomfort.
McCarthy also points out that it isn’t uncommon for management to be unproductive 90 percent of the time due to inefficient methods used for document management and communication. New mobile, cloud-based solutions are improving this situation on the jobsite by making information exchange and communications efficient and easy. Other factors directly affecting management productivity are excessive changes in project scope and operations, time lost while gathering information and wasted time in unnecessary meetings.
Construction has one of the biggest waste streams of all industries. Much of this waste is new material. Drywall, for example, is much cheaper than labor, so it is routinely estimated in whole sheets only, with the anticipation that 20 percent of it will be thrown away. Drywall from new installations can be recycled through many outlets, including the drywall makers themselves.
However, the cost of doing so needs to be included in the estimate. Emphasis on green building and sustainability encourages reducing, reusing and recycling, but estimates must factor in the cost of these operations as well. The same is true for salvage operations during a remodel: there are costs associated with the process, whether materials are reused in the same project, sold or given to others. Not the least of these costs is the labor involved to carefully remove materials instead of demolishing them.
A general contractor or construction manager needs to have a comprehensive and detailed view of any project. Rather than relying on subcontractors’ estimates, it is better to perform an independent estimate of each subcontractor’s input. While this may seem redundant, it can eliminate late-stage surprises. If one subcontractor miscalculates the amount of materials or labor to do the job according to specifications, there can be project-wide effects, including bottlenecks in production, wasted resources and higher costs in money and time. Additionally, reviewing subcontractors’ estimates gives project managers and general contractors an overview that allows them to streamline the workflow and ultimately improve the schedule for the entire project.