Accurate Costs for Construction Managers

I was recently looking at a project for a client and noticed a nice little qualification in the Instruction to Bidders document.  It stated that the subcontractor and supplier awards will not (with “not” actually being underlined) be made from this pricing round but all bidders are strongly encouraged to participate.

Oftentimes, the construction manager will rely on subcontractors to provide budget numbers to help ensure a project is still within budget during the design phase.  This situation may cause several problems.

One issue is that the subcontractor is not going to be giving their “bid day” number to the CM in fear of their competitors finding out the number.  This can artificially inflate the cost of the project and make it appear that scope needs to be cut in order to lower the cost of construction.

A second issue that can arise is when the subcontractor does subpar work in developing the estimate.  There is a real cost associated with developing an estimate.  The time required to perform a detailed bid level estimate can come to a significant amount of time and money.  It may also prohibit the contractor from pursuing other actual bids.  Instead of spending the time and money on a budget that they know they will still have to bid, they may choose to price the project from a higher level such as a cost per gross square foot.  This can save the subcontractor many days’ worth of time. In this situation, no one knows whether they were high, low or somehow got lucky and were close to the actual cost until it’s too late (after bids have been submitted).  Having unbiased, accurate cost estimates are crucial to your decision making on a project.

A better approach maybe to utilize an unbiased, independent third party for the scope that cannot be estimated in-house by the construction manager.  A third party’s only interest in the project will be to provide accurate numbers for the budget.  Yes, this will cost money, but in the grand scheme, it will be a very small percentage. It can actually be a cost savings, if it prevents the project from having to be redesigned because it was over budget.