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A MATURE OF CONSTRUCTION PROJECT COST ESTIMATE

In current day, project owners have dealt with larger and more complex, frequently exceeding several billion, construction projects. Unfortunately, stories of overrunning cost performed on initial construction project cost estimations are frequent. But, do cost overruns often happen by bad project construction management or poorly cost estimations?

In 2015, KPMG did a Global Construction Project Owner’s Survey. The Survey had surprising findings to Projects Owners such as, “53% suffered one or more underperforming projects in the previous year”, and “for energy, natural resources and public sector respondents the figures were of 71% and 90% respectively”. Besides, “only 31% of all respondents’ projects came within 10% of budget in the past 3 years”. For one of the survey participants, the biggest concern was the accuracy of estimating costs prior to committing to the projects regarding the speed projects and limited time to develop the scope and accurately estimate costs. The Survey also found the popular percentage by project size of for contingency on the estimated costs.

Construction Project Cost Management is about to organize and estimate, analysis and control, report and predict the construction costs. It is the cornerstone for the project finances. Cost estimation is to organize and estimate part. It is a process with accuracy depending on several factors such as the project phase, construction documents availability, senior construction professionals involved in preparing an accurate WBS (Work Breakdown Structure). It also demands experienced estimators for the takeoffs, unit price structuring, market quotations and a data base selection. The data base stores and manages the pool of resources and the WBS. The process deliverable is the CBS (Cost Breakdown Structure).


Achieving good construction project cost estimation generally follows Adam Smith's principle, the more specialization of the project team, the better. This principle corresponds to the findings of the KPMG Survey, such as “44% of respondents say that they struggle to attract qualified craft labor to projects, and a lack of available planners and project management professionals”. The Survey also says “despite investment in recruitment and training, owners routinely bolster their project teams with additional, temporary personnel, particularly in the aforementioned areas of craft labor and planners and project management specialists”. And “over two-thirds of the executives in the survey note the need to hire a significant number (more than 5 percent of the total workforce) of external project or program management experts to supplement is hampering their project progress”. This is no surprise at all.


Managing complex big or mega projects requires to the internal project team skills of building a horizontal team with many outsourced organizations, design firms, CPM consultants, contractors, etc, and so the construction cost estimation.


KPMG Survey was brilliant turning the results into maturity in preparation, maturity in performance, maturity in relationships, etc. KPMG says “organizations should climb a project management maturity curve”. This maturity scale tells us the higher the maturity the better the project performance, such as the construction cost management as our focus here.


Although all maturities are important, maturity of preparation impact in all others. Owners need to train the inside staff in order to build a horizontal team through competent and specialized organizations, which will deliver a reliable construction cost estimate. That is still the best way to climb the maturity level for a successful construction project.


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