3 ESSENTIAL ESTIMATING PRACTICES FOR COMPLEX BUILDS
PRACTICES FOR COMPLEX BUILDS
3 ESSENTIAL ESTIMATING PRACTICES FOR COMPLEX BUILDS
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Estimators know: Every profitable construction project starts with an accurate bid. Estimators also know: that’s easier said than done. So it’s good news that in today’s booming but difficult construction environment, the estimating function is getting some much-needed attention. The most recent KPMG Global Construction Survey found that respondents’ biggest priorities are to improve transfer risk, innovation, and — not surprisingly — estimating accuracy.
ESTIMATING IN A CHANGING WORLD
Good news abounds in construction lately. Total construction output continues to expand globally, led primarily by infrastructure work, according to the Q3 2023 Global Construction Monitor by RICS. An influx of funds provides more good news, thanks to three pieces of legislation: the $1.2 trillion Infrastructure Investment and Jobs Act, the $50 billion CHIPS Act, and, most recently, the $369 billion Inflation Reduction Act. These initiatives are beginning to fill capital coffers as companies pursue infrastructure, clean energy, and sustainability projects. McKinsey suggests the flood of funding will lead to $130 trillion in projects for decarbonization and critical infrastructure. Given that high interest rates have hit the construction industry hard, the best news going into 2024 may be that the Federal Reserve is considering lowering rates if inflation continues to fall. And confidence is high. In KPMG’s 2023 Global Construction Survey, 66% of respondents — individuals representing project owners and engineering and construction companies — reported feeling “optimistic” about the direction of the construction market. Thirty-eight percent felt “very.” Contractors remain confident of growth and expect an increase in profit margins and staffing levels, particularly in the first half of 2024, says a report from the Associated Builders and Contractors.
3 KEY LEGISLATION FUNDS FOR INFRASTRUCTURE WORK
$1.2 Trillion
Infrastructure Investment and Jobs Act
$50 Billion
CHIPS Act
$369 Billion
Inflation Reduction Act
DESPITE GROWTH, CHALLENGES REMAIN
Yet despite all the change and opportunity on the horizon, it’s still a tough world out there. McKinsey found that 98% of megaprojects incur more than 30% overruns, and 77% are at least 40% late. KPMG’s 2023 Global Construction Survey found that only half of all owners complete projects on time. The report also says that, of all respondents, 37% missed budget and schedule targets. McKinsey also notes poor outcomes, citing cost overruns of at least 79% for 500 global projects, each with a total value of at least $100 million — 62% of the projects were megaprojects valued at $1 billion or more. The same report gave an example of an international mining company that left $500 million in net project value on the table by under-evaluating the project during pre-construction.
CHALLENGES FOR $100 MILLION MEGAPROJECTS:
Capital construction projects typically run 20% beyond their estimated timeline
Capital construction projects typically run 20% beyond their estimated timeline
ESTIMATING: WHERE PROFITABILITY BEGINS
The profitability puzzle starts with the estimating piece, so you’re wise to explore how world-class estimating can help your team tackle challenges like bidding on the wrong jobs, where you can’t be profitable, or bidding inaccurately so that your company winds up losing money. Add to that the increasing complexity of projects, and accurate bidding becomes even more difficult. Innovative estimating teams have been leading the charge for change. Instead of using old playbooks, they’re creating new standards to transform efficiency, accuracy, and win probability. You can do the same by developing estimating expertise and competence and following forward-thinking best practices, including using historical data, adopting standardized processes, and automating repetitive tasks. By embracing this change, you’ll be at the forefront of the industry’s evolution, primed to navigate the complexities of tomorrow’s projects with seasoned insights.
THE INCREASING COMPLEXITY OF PROJECTS MEANS ACCURATE BIDDING HAS BECOME EVEN MORE DIFFICULT.
SECTION #1
BEST PRACTICES FOR ESTIMATING IN CAPITAL CONSTRUCTION
As you explore the following estimating best practices, know that they arose from the collective wisdom of industry-leading estimating teams. The first practice addresses a fundamental aspect of estimation: using historical data. The following two are also critical aspects: standardization and automation, especially the automation of repetitive tasks. Once you start incorporating these practices, you’ll enjoy better accuracy, higher efficiency, and — most importantly — greater profitability.
HISTORICAL DATA
BEST PRACTICES
USE HISTORICAL DATA
Historical data is the bedrock of precise estimating. But there’s a challenge: How do you manage fragmented data spread across personal drives and digital archives? The thing is… scattered data happens. It’s the frequent result of siloed and legacy systems, team changes, evolving project scopes, and the sheer volume of data generated over the life of a project. The real difficulty in working with historical data is synthesizing all the diverse, extensive datasets to inform accurate estimates for complex, changing construction projects. Top estimating teams use technology to gather and retrieve data — and to apply advanced normalization and filtering methods. Advanced normalizing might mean aligning cost data from different countries or eras, accounting for inflation, or adjusting productivity rates for varied labor conditions. Complex filtering might mean discerning which data — for instance, historical weather patterns, local labor laws, and previous supply chain disruptions — will most accurately inform the estimate. Both techniques call for accurate historical data.
STRATEGIC ESTIMATING SAVES TIME AND LEADS TO FASTER, MORE CONFIDENT BIDS.
When expert estimators find inconsistencies and gaps in historical data — like incomplete material usage records or labor productivity variations — they view the discrepancies as opportunities for indepth exploration and pattern recognition. If tight deadlines add pressure, top estimators resist relying on intuition. Instead, they use advanced software to find and focus on the data that will lead to consistent, comparable data exactly right for new projects. Innovative estimators also update their internal databases regularly. Doing so turns historical data into an asset, ready to give reliable benchmarks at any moment for any project. Strategic estimating saves time and leads to faster, more-confident bids. And just like that, your team could earn a reputation for being trendsetters, using lessons from the past to fuel future victories. Using historical data in your estimating practice calls for four elements: Normalized internal benchmark data, filtered data dimensions, allowances based on past cost ratios, and the fedback actuals that close the data loop and keep your data current.
“The precision we get from InEight Estimate provides the confidence we need. In today’s competitive marketing, there’s no room for error in our estimates.”
- Bob Carlson, Director of Estimating, Hunter Contracting Company
NORMALIZED INTERNAL BENCHMARK DATA
In large-scale construction projects, like a new subway line, experienced estimators know that normalized internal benchmark data is not just about aligning numbers like labor productivity rates and unit costs. It’s about interpreting and applying historical data about past project successes and failures to current projects, changing market conditions, and complex urban environments. In other words, the estimating function isn’t about looking for data. It’s about seeking insights to drive innovation and efficiency in current projects. Suppose you’re normalizing data for a subway project. In that case, you might encounter historical patterns that reveal efficiency gains in tunnel excavation due to technological advances or shifts in the regulatory landscapes that affect material costs. How do you adjust for factors expected in an urban setting or forecast whether market trends will affect costs? Will the latest new materials keep expenditures down? Where could you use new construction methods to shorten schedules, minimize wasted resources, or improve safety measures? This forward thinking approach turns estimators into strategic advisors who can give genuine insights that make or break the success of a project.
THE ESTIMATING FUNCTION ISN’T ABOUT LOOKING FOR DATA. IT’S ABOUT SEEKING INSIGHTS TO DRIVE INNOVATION AND EFFICIENCY IN CURRENT PROJECTS.
“I like the accuracy of InEight Estimate, and knowing that I don’t have to worry about errors in a spreadsheet. I really like the quote management system. It’s very robust and allows us to analyze. We use it extensively.”
- Rob Trulson, CEO, T&T Construction
FILTERED DATA DIMENSIONS
Top estimating teams also use advanced analytics to filter data to guide strategic decision-making. They use sophisticated data-slicing techniques that look at basic and advanced project parameters, like predictive material usage trends and equipment performance analytics. A study published in Data in Brief shows the power of this approach and the strong effect of analyzed data on construction cost and time. Big data in construction is changing how estimators work. Research from Pepperdine University shows that you need big data and analytics technology to spot and fix potential project problems. Seasoned estimating teams integrate big data into their workflows, turning traditional practices into more predictive models. Estimates then become potent tools for strategic planning and risk management instead of existing as mere financial forecasts.
THE GOAL IS TO CREATE A FRAMEWORK THAT ACCOUNTS FOR FORESEEABLE AND UNFORESEEABLE COSTS.
When expert estimators find inconsistencies and gaps in historical data — like incomplete material usage records or labor productivity variations — they view the discrepancies as opportunities for indepth exploration and pattern recognition. If tight deadlines add pressure, top estimators resist relying on intuition. Instead, they use advanced software to find and focus on the data that will lead to consistent, comparable data exactly right for new projects. Innovative estimators also update their internal databases regularly. Doing so turns historical data into an asset, ready to give reliable benchmarks at any moment for any project. Strategic estimating saves time and leads to faster, more-confident bids. And just like that, your team could earn a reputation for being trendsetters, using lessons from the past to fuel future victories. Using historical data in your estimating practice calls for four elements: Normalized internal benchmark data, filtered data dimensions, allowances based on past cost ratios, and the fedback actuals that close the data loop and keep your data current.
“The precision we get from InEight Estimate provides the confidence we need. In today’s competitive marketing, there’s no room for error in our estimates.”
- Bob Carlson, Director of Estimating, Hunter Contracting Company
FILTERED DATA DIMENSIONS
Top estimating teams also use advanced analytics to filter data to guide strategic decision-making. They use sophisticated data-slicing techniques that look at basic and advanced project parameters, like predictive material usage trends and equipment performance analytics. A study published in Data in Brief shows the power of this approach and the strong effect of analyzed data on construction cost and time. Big data in construction is changing how estimators work. Research from Pepperdine University shows that you need big data and analytics technology to spot and fix potential project problems. Seasoned estimating teams integrate big data into their workflows, turning traditional practices into more predictive models. Estimates then become potent tools for strategic planning and risk management instead of existing as mere financial forecasts.
THE GOAL IS TO CREATE A FRAMEWORK THAT ACCOUNTS FOR FORESEEABLE AND UNFORESEEABLE COSTS.
When expert estimators find inconsistencies and gaps in historical data — like incomplete material usage records or labor productivity variations — they view the discrepancies as opportunities for indepth exploration and pattern recognition. If tight deadlines add pressure, top estimators resist relying on intuition. Instead, they use advanced software to find and focus on the data that will lead to consistent, comparable data exactly right for new projects. Innovative estimators also update their internal databases regularly. Doing so turns historical data into an asset, ready to give reliable benchmarks at any moment for any project. Strategic estimating saves time and leads to faster, more-confident bids. And just like that, your team could earn a reputation for being trendsetters, using lessons from the past to fuel future victories. Using historical data in your estimating practice calls for four elements: Normalized internal benchmark data, filtered data dimensions, allowances based on past cost ratios, and the fedback actuals that close the data loop and keep your data current.
“The precision we get from InEight Estimate provides the confidence we need. In today’s competitive marketing, there’s no room for error in our estimates.”
- Bob Carlson, Director of Estimating, Hunter Contracting Company
ALLOWANCES BASED ON PAST COST RATIOS
Applying past cost ratios is another exercise in strategic decision-making. It involves analyzing historical data with an eye on patterns and anomalies from past projects and predicting how those elements might affect the current bid. This action calls for a deep dive into historical project data to see how complexities like unexpected site conditions or design modifications have historically influenced overall costs. If you’re after precise cost estimates, set your allowances based on past ratios. According to Carnegie Mellon University’s resource on cost estimation, experienced teams tailor contingencies based on historical insight and foresight into the unique challenges of the current project. Tailoring also means accounting for factors like changing market conditions, technological advances, and regulatory changes that might influence project costs. The goal of applying ratios is to create a framework that accounts for foreseeable and unforeseeable costs. It makes estimates more precise, protects the project from financial risks, and contributes to overall success.
CONTINUALLY FEEDING ACTUALS BACK
Veteran estimators know that continually feeding actuals back into the system is like fine-tuning a high-precision instrument. It’s not about updating databases. It’s about creating an always-current baseline for future estimates. Regularly exporting actual project data into a centralized, cloud-based repository keeps historical data current and creates a more accurate estimating environment. This ongoing feedback loop leads to a level of precision that static historical data — and manual data wrangling — can’t match. This practice is essential for teams working on projects with high numbers of variables and high stakes. Take, for instance, a complex infrastructure project spanning several years. During the project, you might run into fluctuating material costs, labor productivity shifts, and unforeseen site challenges. Adding more data into the system gives you a rich, evolving dataset — a live repository with insights beyond surface trends. It allows you to spot patterns, anticipate potential issues in similar future projects, and adjust estimating parameters accordingly. A study in the Journal of Management in Engineering supports this practice, finding that “with unprecedented clarity,” performance feedback has significant, positive effects on construction process performance.
CONTINUALLY FEEDING ACTUALS BACK INTO THE SYSTEM IS LIKE FINE-TUNING A HIGH-PRECISION INSTRUMENT.
IMPROVING ESTIMATE ACCURACY: KIEWIT POWER CONSTRUCTORS’ DIGITAL LEAP
Estimators at Kiewit Power Constructors (KPC) wanted to improve productivity and efficiency. The Kansas-based team struggled with outdated methods that limited communication and estimate accuracy, leaving them less confident in their bids. They couldn’t access historical cost data quickly, which meant hunting for past cost information and manually entering it into spreadsheets. Complex close-out and bid forms were labor intensive, too. InEight Estimate transformed the team’s approach and ushered in a new standard for accuracy. The system allows estimators to query actual past costs for similar projects across the company. They can easily collaborate and share real-time data with multiple teams. With more confidence in their data, the team spends less time chasing outliers and figuring out which numbers to trust from disparate spreadsheets. Estimators use the system to examine different versions with different scenarios. Overall, InEight Estimate boosted the team’s bid confidence and gave the team more time to focus on innovative cost-control measures for clients.
STANDARDIZATION
BEST PRACTICES
STANDARDIZE THE ESTIMATING PROCESS
If historical data is the bedrock of precise estimating, then standardization is the blueprint. Standardizing isn’t just about creating uniformity, though. It’s about creating a reliable, replicable method that improves the accuracy of estimates. Using a consistent method ensures that each new project benefits from the wisdom of past projects, reducing errors and lifting the quality of estimates. Much like a blueprint provides detailed guidance for construction, standardization gives you a clear, comprehensive plan for every aspect of the estimating process. By standardizing, you know that every calculation and decision follows a time-tested route. This blueprint-like approach streamlines the estimating function and creates consistency across different projects. Applying proven strategies and insights naturally elevates the quality and precision of your work.
STANDARDIZATION GIVES YOU A CLEAR, COMPREHENSIVE PLAN FOR EVERY ASPECT OF THE ESTIMATING PROCESS.
Detailed checklists and state-of-the-art estimating software play a role in the standardized toolkit. These tools complement the intuitive judgment of your team and help you leave nothing to chance. But checklists and sophisticated estimating software are just the beginning. Your team’s estimating knowledge and expertise also come into play because tools are only as powerful as the teams that wield them. You can make standardization a practical, impactful part of estimating. With it, you can increase efficiency and accuracy, meet budgetary constraints, and set new benchmarks for precision and quality. Although many factors contribute to a blueprint for standardized estimating, three elements deserve special attention: rate tables and specifications, templates, and data access tools.
“InEight Estimate seamlessly keys off account codes in the background, so all that data that we estimate with and generate on a project is instantly available to compare against. That’s something we’ve never [before] been able to do as a company.”
- Andrew Haley, Project Estimator, KPC Estimating
STANDARDIZE THE ESTIMATING PROCESS
If historical data is the bedrock of precise estimating, then standardization is the blueprint. Standardizing isn’t just about creating uniformity, though. It’s about creating a reliable, replicable method that improves the accuracy of estimates. Using a consistent method ensures that each new project benefits from the wisdom of past projects, reducing errors and lifting the quality of estimates. Much like a blueprint provides detailed guidance for construction, standardization gives you a clear, comprehensive plan for every aspect of the estimating process. By standardizing, you know that every calculation and decision follows a time-tested route. This blueprint-like approach streamlines the estimating function and creates consistency across different projects. Applying proven strategies and insights naturally elevates the quality and precision of your work.
STANDARDIZATION GIVES YOU A CLEAR, COMPREHENSIVE PLAN FOR EVERY ASPECT OF THE ESTIMATING PROCESS.
Detailed checklists and state-of-the-art estimating software play a role in the standardized toolkit. These tools complement the intuitive judgment of your team and help you leave nothing to chance. But checklists and sophisticated estimating software are just the beginning. Your team’s estimating knowledge and expertise also come into play because tools are only as powerful as the teams that wield them. You can make standardization a practical, impactful part of estimating. With it, you can increase efficiency and accuracy, meet budgetary constraints, and set new benchmarks for precision and quality. Although many factors contribute to a blueprint for standardized estimating, three elements deserve special attention: rate tables and specifications, templates, and data access tools.
“InEight Estimate seamlessly keys off account codes in the background, so all that data that we estimate with and generate on a project is instantly available to compare against. That’s something we’ve never [before] been able to do as a company.”
- Andrew Haley, Project Estimator, KPC Estimating
AUTOMATION
BEST PRACTICES
Capital construction projects typically run 20% beyond their estimated timeline
Capital construction projects typically run 80% over budget
General Contractors average 2.4% profits with Capital construction projects
South Fork Wind is a 132 megawatt offshore electrical substation
At completion South Fork Wind produced over 4,000 checklists
At completion South Fork Wind produced over 2,100 punch lists
Infrastructure Investment and Jobs Act
Infrastructure Investment and Jobs Act
SCHEDULES FOR FUTURE PLANNING
CHIPS Act
SCHEDULES FOR FUTURE PLANNING
Inflation Reduction Act
USERS
Infrastructure Investment and Jobs Act
SCHEDULES FOR FUTURE PLANNING
DRA has tagged and loaded 1,500+ historical schedules into InEight Schedule for future estimating and benchmarking.
SCHEDULES FOR FUTURE PLANNING
DRA has tagged and loaded 1,500+ historical schedules into InEight Schedule for future estimating and benchmarking.
Capital construction projects typically run 20% beyond their estimated timeline
Capital construction projects typically run 20% beyond their estimated timeline
DESPITE GROWTH, CHALLENGES REMAIN
Yet despite all the change and opportunity on the horizon, it’s still a tough world out there. McKinsey found that 98% of megaprojects incur more than 30% overruns, and 77% are at least 40% late. KPMG’s 2023 Global Construction Survey found that only half of all owners complete projects on time. The report also says that, of all respondents, 37% missed budget and schedule targets. McKinsey also notes poor outcomes, citing cost overruns of at least 79% for 500 global projects, each with a total value of at least $100 million — 62% of the projects were megaprojects valued at $1 billion or more. The same report gave an example of an international mining company that left $500 million in net project value on the table by under-evaluating the project during pre-construction.
- It improves predictability. Organizations that connect cost, schedule, and risk—versus managing them in silos—make more confident decisions and identify issues earlier.
- It strengthens competitiveness. Owners are choosing partners who demonstrate digital capability, transparency, and the ability to deliver with certainty.
- It improves productivity, while increasing accuracy. Integrated workflows eliminate staff time spent on redundant, error-prone tasks, freeing them for more value-add focus.
- It enhances performance. With the right insights, teams can focus on optimizing work, rather than chasing information.
The research confirmed that the organizations that make the strategic decision to step back, zoom out, and define a strategy that aligns people, process, and technology are the ones that end up consistently winning work, controlling outcomes, and outperforming their peers.
Organizations that make the strategic decision to step back, zoom out, and define a strategy that aligns people, process, and technology are the ones that end up consistently winning work, controlling outcomes, and outperforming their peers.
1 USE HISTORICAL DATA
Historical data is the bedrock of precise estimating. But there’s a challenge: How do you manage fragmented data spread across personal drives and digital archives? The thing is… scattered data happens. It’s the frequent result of siloed and legacy systems, team changes, evolving project scopes, and the sheer volume of data generated over the life of a project. The real difficulty in working with historical data is synthesizing all the diverse, extensive datasets to inform accurate estimates for complex, changing construction projects. Top estimating teams use technology to gather and retrieve data — and to apply advanced normalization and filtering methods. Advanced normalizing might mean aligning cost data from different countries or eras, accounting for inflation, or adjusting productivity rates for varied labor conditions. Complex filtering might mean discerning which data — for instance, historical weather patterns, local labor laws, and previous supply chain disruptions — will most accurately inform the estimate. Both techniques call for accurate historical data.
STRATEGIC ESTIMATING SAVES TIME AND LEADS TO FASTER, MORE CONFIDENT BIDS.
When expert estimators find inconsistencies and gaps in historical data — like incomplete material usage records or labor productivity variations — they view the discrepancies as opportunities for indepth exploration and pattern recognition. If tight deadlines add pressure, top estimators resist relying on intuition. Instead, they use advanced software to find and focus on the data that will lead to consistent, comparable data exactly right for new projects. Innovative estimators also update their internal databases regularly. Doing so turns historical data into an asset, ready to give reliable benchmarks at any moment for any project. Strategic estimating saves time and leads to faster, more-confident bids. And just like that, your team could earn a reputation for being trendsetters, using lessons from the past to fuel future victories. Using historical data in your estimating practice calls for four elements: Normalized internal benchmark data, filtered data dimensions, allowances based on past cost ratios, and the fedback actuals that close the data loop and keep your data current.