The adage, “those who do not learn from history are doomed to repeat it,” holds true in the world of construction and commercial estimation. Each completed project offers a goldmine of insights, shedding light on where estimations hit the mark and where they veered off course. Conducting a thorough review of past project estimations isn’t just a best practice—it’s an essential one. Here’s a structured approach to ensure your reviews are both efficient and effective.
1. Set clear objectives for the review
Before diving into the numbers, outline what you aim to achieve. Are you looking to improve accuracy, speed up the estimation process, or reduce contingencies? Pinpointing your objectives will guide the review process.
2. Gather all relevant data
This is the foundation of your review. Collect data on original estimates, final project costs, changes to the scope and the associated cost implications, and any unexpected costs that arose.
3. Assemble a diverse review team
Your review team should consist of various stakeholders to ensure all perspectives are considered, enriching the quality of the review. Stakeholders could include; the original estimator(s), project managers, site supervisors, finance personnel, and supply chain representatives.
4. Segment the review
Break down the project into its various components, including labour, materials, equipment, subcontractors, soft costs (permits, insurance, etc.). Reviewing segment by segment will make discrepancies easier to spot and will allow for a more granulated analysis.
5. Identify variances
For each segment, compare the estimated costs to the actual costs. Calculate the variances both in absolute terms and as a percentage. This will highlight areas needing the most attention in future estimations.
6. Understand the why
Numbers tell a story, but they often need interpretation. For each variance identified, delve into the reasons behind it, for example:
- Were there unforeseen challenges on site?
- Did material prices spike unexpectedly?
- Was there an error in the initial estimation?
- Getting to the root cause is crucial for future improvements.
7. Document lessons learned
As insights emerge, document them. Capture both the quantitative data (exact variances and their values) and the qualitative insights (reasons behind the variances, suggestions from the review team).
8. Recommend process improvements
Based on the lessons learned, suggest improvements for future estimations, such as the need for better forecasting tools for material costs, whether there should be a larger contingency for certain types of projects, or whether there is a need for ongoing training in certain areas.
9. Implement feedback loops
To ensure continuous improvement, create a feedback mechanism where the insights from the review are regularly fed back into the estimation process.
10. Regularise the review process
Don’t wait for a project to go significantly over budget to conduct a review. Make it a standard practice to review all projects, regardless of their perceived success or failure. This regularity will instill a culture of continuous learning and improvement.
While the initial goal of commercial estimation is accuracy, no estimator can predict the future with complete certainty. However, by diligently reviewing past projects and embracing a mindset of continuous improvement, estimators can come remarkably close. Remember, every project, whether it sticks to its budget or not, offers valuable lessons. The key is to harness them effectively.