Investment in Comprehensive Construction Cost Estimating Pays Long-Term Dividends

Investment in Comprehensive Construction Cost Estimating Pays Long-Term Dividends


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Project Owners Gain Big Benefits from Early Cost Conversations

Regardless of the type or scope of a construction project, cost management is always top of mind for project managers and owners. An experienced construction cost estimating firm helps to ensure timely and on-budget delivery by providing accurate estimates customized to your unique situation and requirements.

Not all cost estimators, though, are the same. There are a few things you should look for to ensure you partner with a qualified firm capable of delivering an accurate cost estimate that goes beyond mere assumption-based approximations. Effective cost management helps owners get a comprehensive view of project costs in order to proactively identify and resolve value engineering opportunities and issues before they can take the project off-course or over-scope.

Understanding Statements of Probable Cost

What are they?

A report submitted to the project owner that estimates the likely cost of construction based on the design and other available data.

Typical Elements

  • Quantity takeoff
  • Labor hours and rates relevant to project location
  • Material prices
  • Equipment costs
  • Profits
  • Contingencies
  • Escalation
  • Bonds
  • Capital costs
  • Operations and maintenance costs
  • Variances

Common Data Sources

  • Actual costs
  • Historical costs
  • Company data
  • National databases

For architects and engineers, underbudgeting and overbudgeting are major concerns when it comes to design intent. Without an accurate forecast of how much it will cost to realize their visions, they may be required to adjust their designs later in the project lifecycle due to budget constraints. This often results in a reduction of the overall quality of the end product and potentially highlights designers as a root cause of project delays. This can erode trust in the project owner relationship and can also create tension (or possibly even legal disputes) between architects or engineers and owners.

Construction Cost Estimating Stakeholders & Roles

While there may be many players over the course of a project lifecycle, there are three key stakeholders in the cost estimating process.

  1. Project Owners: engage all parties upfront and encourage collaboration
  2. Architects/Engineers: provide accurate information and collaborate with all stakeholders
  3. Cost Estimators: ensure project feasibility and scope maintenance

In the case of complex life sciences projects, a design-builder lead, owner’s representative, or program and/or project manager should also have a seat at the table at the initial stage.

Accuracy in Construction Cost Estimating

The differentiator between long-term success or failure often involves the integration of a cost management firm early in the project’s lifecycle. With a cost estimating lens, these professionals can set an accurate foundation for design and construction, minimizing delays, change orders, and unnecessary expenses. Plus, this approach keeps project integrity top of mind. It is important to keep in mind, though, that a statement of probable cost provides an estimate not an “exactimate,” since it is rare for a design to remain the same from inception through completion.

While a strong accuracy rate is often something stakeholders look for in a cost estimating firm, perhaps a more reliable measure of competence is how estimators use data to do their due diligence and support their findings. Creating an accurate statement of probable cost can be tricky due to the sheer number of variables involved. This is where experience matters. The more experienced a cost estimator is the more prepared they will be to accurately interpret the information they are given and identify potential trouble spots that could result in delays or change orders. The process is both science and art.

Strong relationships between architects, engineers, and cost managers are often based upon upfront involvement in projects, combined with clear and consistent communication. This enables an effective team dynamic and increases the chances of an award-winning project outcome, which is more likely to be followed by years of repeat business with project owners.

Challenges of Accurate Cost Estimating

There are a number of variables that can impact an estimate’s accuracy. These include:

  • Inexperienced estimators: Cost estimators must be aware of all potential nuances of the project design and the data provided by subcontractors. In some cases, they may even need to strategically fill in missing data in a smart manner. Experience is the best indicator of competence.
  • Lack of accurate data: The best way to ensure an accurate cost estimate is to provide good, solid data and a superior understanding of design materials. Without this, estimators will be called to fill in the gaps using proven ways to back into details (not just adding in a 25% padding).
  • Insufficient time: The earlier in the process an experienced construction cost estimator is brought in, the more time they will have to get the best details and provide insights that improve early-stage designs. Early communication is important with all project stakeholders, but especially the cost estimator.
  • Unexpected scope changes: When scope changes are not communicated to all team members, it can add unexpected costs to the budget, which can create a ripple effect of change orders throughout the rest of the project. This can be disastrous for project outcomes if discovered late in the project lifecycle.
  • Supply chain issues: Long-lead times, shortages, and supply chain delays can extend the duration of a project or delay the start, both of which increase costs.
  • High inflation: Inflation and decreased skilled labor pools present unique challenges for estimators who attempt to forecast the costs of building projects months or years into the future.

How to Deliver the Most Accurate Construction Cost Estimate

Even with these challenges in mind, there are several things experienced construction cost estimators can do to ensure a more accurate statement of probable cost and, ultimately, a more positive project outcome.

A $500,000 Catch: Why Site Visits Are Important

A $500,000 Catch: Why Site Visits Are Important

  • Provide oversight or cost management throughout the project lifecycle
  • Stay up to date with market trends including national and regional labor costs, as well as global events such as the war in Ukraine
  • Conduct site visits, especially for complicated jobs involving an existing structure (click box to left to see example)
  • Provide detailed assumptions to protect design integrity
  • Deliver recommendations for efficiencies that save time and money without impacting quality
  • Use highly accurate in-house and real-world data rather than parametric values
  • Use real data (hard linear takeoffs) rather than averages
35 North’s Cost Management Approach to Market Trends

Inflation and decreased skilled labor pools present unique challenges for the construction industry as well as estimators who attempt to forecast the costs of building projects months or years into the future.

Capturing an accurate real-time base cost is essential before applying indirect costs and escalation. As we calculate the expected escalation rate based on project start dates, we apply that rate to the cost and present the best scenario based on data derived from our research. We then use models provided by professional firms and publications, in addition to researching local market conditions that contractors are experiencing, which allows us to intelligently project the escalation rates in any market location and time.

We keep our customers informed through the entire estimate and design process to collaboratively find ways of mitigating inflationary costs and supply chain issues. It is our responsibility as cost managers to project and forecast the rate of escalation in our estimates even if those rates are higher than expected or planned for — and to be ready to defend our projections with hard data.

Starting the Process Effectively

When preliminary estimates are developed without a conversation with an experienced cost estimator, they may not include all the factors a professional cost estimator would consider at the conceptual stage. This could result in an estimate that is way off, even by $1M or more. We have seen this a few times, and it has the potential to damage reputations and stress relationships with project owners. Once a seasoned cost estimator gets involved, it highlights the fact that the project may have started with an incorrect number, and nobody is happy. Disputes often occur.

The first step of effective cost estimating is to provide detailed parametric and then dimensional estimates (as the design progresses) that capture all necessary project materials and assign the appropriate labor hours.

Phases of Construction Cost Estimating

Effective cost estimating is not a one-and-done event. An experienced professional cost estimator may be called to provide five different versions of their estimate throughout the lifecycle of the construction project, each taking into account the latest information available.

In some cases, the project budget does not allow for estimates at all stages – rough order of magnitude (ROM), schematic design (SD), design development (DD), and construction design (CD) stages. In others, estimates of construction costs are delayed and only completed at SD and CD stages. However, the earlier in the project estimating starts, the more likely it is to keep the project on track and allow for cost-cutting measures down the road. For example, if a project includes conceptual or ROM estimates, it may be possible to move from SD to CD, skipping the DD stage, while remaining accurate.

Construction Phase Descriptions

New Idea/Concept

This phase occurs before the design is formulated (perhaps a design concept with a brief narrative) and provides a high-level estimate that design teams provide to the owner. This first rough idea of project cost comes from a brief discussion between the estimator and designer and is where relationships are enhanced or developed between teaming partners like designers and cost estimators.

Rough Order of Magnitude (ROM)

ROM cost estimating involves parametric takeoffs using good, experience-based assumptions. This supports budget allocations and helps determine project feasibility.

Schematic Design (SD)

At this stage, typically about 30 to 35% of the design is complete. The project may have a shape but sometimes materials have not yet been selected.

Design Development (DD)

About 60-75% of the project is designed at this stage. Materials and MEP choices have been made at this time, which improves the accuracy of estimates.

Construction Design (CD)

At this stage, the majority (95 to 100%) of the design is complete, and the bidding and permitting process begins.

Benefits of Comprehensive Cost Management and Estimating

There are several benefits of comprehensive cost management, especially when it comes to complex projects. While there is a perception that a higher level of involvement from a cost estimator is more expensive, their inclusion in the process can help to avoid major unexpected costs — which protects major investments in capital projects. Experienced project owners know to bring all critical stakeholders to the table from the start and can decide the level of risk they are willing to take on or how often to secure a statement of probable cost. Seasoned architects and engineers may also serve as major drivers of what is needed, especially for first-time project owners. After all, if this lesson is learned the hard way, it is not often made a second time.

The major benefits include better management of:


The vast majority (9/10) of construction projects go over budget. Accurate forecasting can help project managers to allocate budgets correctly from the start.


More than three-fourths of large projects are at least 40% late. Better upfront planning can help to mitigate this.


Change orders cause a 30% drop in productivity, on average. A more accurate forecast can help manage scope.


The value of global construction disputes topped $54 million in 2020. Accurate estimating can help to set realistic expectations upfront and lessen the likelihood of litigation.

Key Takeaways and Next Steps

Effective cost estimating can play a major role in a project’s success or failure. Remember these four key takeaways the next time you start planning:

  • Involve the cost estimating firm at the concept or ROM stage. This often begins in the form of a quick phone conversation and provides a major benefit to the quality of the deliverable.
  • Ensure the cost estimator has a good understanding of the project scope and project owner’s vision.
  • Vet cost estimators for deep experience with the type of project being developed.
  • Good communication and detailed, complete data lead to a more accurate estimate.

Now that you understand what is involved in accurate cost estimating, a key component of comprehensive cost management, check out our portfolio of cost estimating projects in the education, government, and healthcare sectors.

Take Your Idea to the Next Level

If you have an idea for a specific project, contact an expert at 35 North. We would be happy to discuss a conceptual estimate to better prepare you for the pitch and lay the foundation for a successful project. We will share information on current industry trends and what to watch out for as it relates to project costs and challenges for your project.

Ron Deckman, Chief MEP Cost Manager headshot

Ron Deckman is 35 North’s Chief MEP Cost Manager. He has 30 years of experience managing high-intensity projects, including cost estimating for projects from $25 thousand to over $900 million. He is skilled at providing life cycle cost analysis, advance planning, construction cost milestone estimating,

Chris Horn headshot

Chris Horn is a director at 35 North with an extensive background in construction project and contract management. He holds a general contracting certification, which enhances his cost management and estimating expertise, where he specializes in heavy civil statements of probable cost.

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