Cost is Only One Piece of the Puzzle in Establishing the Value of the Work

  • by Jamie Christovich
  • Blog

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In the preconstruction process, cost is only one piece of the puzzle in establishing the value of the work for a project. Cost is just a number, a price tag that a trade partner or supplier submits to us for the services or goods they intend to provide. It becomes an estimator’s responsibility to discover if it is an accurate reflection of the value of the work.

Take, for example, the typical case of analyzing three prices for a particular trade or scope. The prices may range from $100,000 to $175,000 to $250,000 as submitted by distinct trade partners. The tendency is to throw out the high and low prices and assume that the middle price is likely more appropriate or accurate in terms of value. The reality is that one, all, or none of those prices might actually represent the true value of the work.

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The trade partner with the low price could have missed a key detail or omitted a portion of the work, however it is also possible that they could be utilizing alternative means, methods, or strategies that allow them to be that much more efficient in executing the work than their competitors. Likewise, the middle or high prices may have similar discrepancies or alternative approaches that need to be sussed out by the responsible estimator on our team to determine whether the price represents as true a value as possible for the work that is called for in the design documents. Understanding how the work for each particular scope is put into place is equally important because then the right questions can be asked of subcontractors.

At the end of the day, we have a responsibility to the Owner and Architect for every project to determine the appropriate value, and execute the work in alignment with the intent of the design and function of the space. We also have a responsibility to this company to mitigate risk and ensure profitability. To meet those obligations, both internal and external, it’s imperative that our estimators understand all the fine details so that each scope is properly valued, and the project is set up for success.

 

 

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