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An estimator's primary goal is to correctly estimate the cost of work and to incorporate a margin of profit for his or her firm. This is the foundation of cost estimation and is of major importance if a firm plans to make a profit. However, there are usually many mistakes and errors in judgment in the cost estimation process, which occasionally cost a great deal of money, and can even result in the total failure of a construction firm. In order to avoid these estimation mistakes, the estimator must be thorough, accurate, and organized when performing the cost takeoff. To stay in business, a construction firm must successfully bid proposals, which means keeping costs low and earning a profit.
There are many reasons for the lack of research comparing cost estimates of various construction projects. First, collecting the cost information and information on related cost problems is difficult because such information is proprietary to each construction firm. Second, every construction firm uses its own unique approach to the analysis of cost estimation, and most firms do not care to share their approaches or their experience and cost data with other competing construction firms. Third, most firms believe that such information usually makes a difference in the construction bidding process 1!.
Over the last three years, I have worked with the estimating teams at one of the most successful construction firms in the United States. While there, I also conducted research on the estimators' perceptions of their common estimating mistakes and discovered how they developed their own knowledge-base by using associated lessons to prevent future similar mistakes. For this research, I selected three different construction projects to highlight common estimating mistakes. In these projects, cost estimating mistakes originally looked like minor errors, but consequently resulted in a loss of profit and disruption of the project's schedule.
The major objective of this article is to develop a knowledge framework for construction firms to use in formulating and evaluating possible combinations of cost estimating alternatives. This approach will help contractors avoid these mistakes and maintain their competitiveness in today's volatile construction industry.
EXAMPLE 1: PARKING FACILITY AND STATION
This project was a joint venture between two districts of one construction firm. One district was to build the parking...