Construction projects are projects that are characterized by lots of risks and uncertainties thus making them complex undertakings. The estimator, being the one charged with the preparation of cost estimates and the establishment of the project budget, is in a good position to identify, analyze, and manage these project risks. Estimators can avoid nasty shocks and keep the project moving along by identifying the risks, assessing the probabilities, and planning the risk response strategies and contingencies. This article also highlights some of the typical risks affecting construction projects and how estimators can effectively address them.
Risk Factors Affecting Construction Projects
Several broad categories of risks may impact construction estimating companies projects:
- Design Flaws – Mistakes and oversights, unclear specifications, or changes in design could lead to modifications mid-project and time-consuming rectifications.
- Environmental conditions –These are the risks associated with site conditions; weather conditions or any other factors which might hinder the progress of the project.
- Financial Risks – Inflation is one of the main risks that can affect the cost of the project; prices of materials may fluctuate and hence affect the project cost; fluctuations in exchange rates are other factors that may affect the cost of the project.
- Business Risks – The permits may take longer than expected or the vendors or suppliers that are supplying the materials may have their schedules that conflict with the project.
- Operational Risks – A wide array of risks may undermine the safety plans, quality of work, and equipment and may cause budget and time overruns.
- Regulatory change is a risk that may require modifications to the plans; this may include changes in regulations or building codes, zoning laws, or any other related policies.
In this way, construction estimating services estimators can be able to identify the risks that are likely to be encountered in the project to assess the level of risk and amount of work that is likely to be involved in the project.
Seven Essential Strategies to Protect Estimators
There is a significant function that construction cost estimation services estimators can perform to reduce disadvantageous effects resulting from the uncertainties in a project. Here are some best practices:
Carefully Assess All Information
Every estimator must go back and review all the project information in an attempt to find out what has been left out, corrected, or changed. This enables the team to know areas that need to be filled and what requirements have to be clarified at the initial stages.
Ask Lots of Questions
Discuss their wants and needs with the clients, architects, engineers, and other stakeholders regarding the project and their tolerance towards certain decisions. Determine their risk tolerance.
Plan for All Contingencies
Create cost estimates that relate to bottom-up estimating methods that are relevant to the projects’ details. Do not use such assumptions as ‘All men are like this’ or ‘All women are like that.’ Consider all the forecasted costs that are connected with the outlined risks.
Include Appropriate Allowances
Use such cost contingencies that are authorized within the estimate to cater for risk contingencies. The contingency money must be set to cater for certain risks such as design changes, increases in costs at some point of the project, etc.
Run Sensitivity Analysis
Make it easier to understand how changes in cost, time, performance, etc. affect the overall cost of the project. Model different “what-if” scenarios.
Recommend Early Risk Mitigations
Also, 39 clients should be advised on what they can do early in the process to avoid key risks – for instance, allowing for design completion before the construction estimating service tender, obtaining permits in advance, etc.
The application of sound estimating procedures that can be adjusted for each project allows estimators to factor risks into their cost estimates and the recommendations made.
Risk Response Strategies
When specific risks have been identified, there are several options available to proactively mitigate their impacts:
- Reduce – Reduce the amount of exposure to high-risk activities during project implementation as much as possible.
- Transfer – Shift of financial risk legally to another entity via insurance, performance bonds, warranties, etc.
- Mitigation – This involves ensuring that risk occurrence or its effects are minimized.
- Accept – Go through the list and understand that though this risk exists, you need to be prepared if it does occur.
- Exploit – Arranging the project in such a way as to capture potential upside while avoiding exposure to a potential downside
This is because estimators can offer information on advisable risk response strategies when delivering the estimate.
Conclusion
During the estimating phase, organizers study and analyze the risks in a project, discuss the potential risks, estimate the amount of money that needs to be set aside for the risks, and advise on the best way of dealing with the risks that are inevitable in a project and this makes organizers help in preparing projects adequately to handle the surprises. These estimates are then composed in a way that makes the project budget and schedule targets more realistic and enables all the stakeholders involved to grasp the whole picture of the project. Estimators therefore have a pivotal role in offering a high value of adding to the construction project process and managing risk factors that may be numerous and intricate. These are very important for the cost and schedule certainty of the project and the work of their job.
