Explore how scheduling impacts cost estimates in construction projects, and how different factors, including project duration and risk, influence general conditions. Understand the importance of having a well-structured project schedule and how it can serve as a tool for building profitable projects.
Key Insights
- A project's schedule heavily influences the cost estimate. Longer projects typically have higher overheads, causing profits to shrink, while shorter ones could bring in higher profits. This schedule impacts general conditions as they're usually priced by duration.
- Guaranteed completion dates can introduce the risk of penalties for late delivery, also known as liquidated damages. This risk should be considered in the estimate, with necessary allowances built in. Accelerated schedules may require overtime work which can increase labor costs.
- The estimator is responsible for incorporating enough funds into the estimate to build the project and maintain profitability. Several factors should be considered when evaluating the project schedule, such as difficulty of tasks, potential congestion, and weather conditions, as they can all influence project duration and cost.
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We're going to talk about scheduling and its purposes. It doesn't seem like scheduling should be part of an estimate, but in essence, you have to understand what the schedule is and the duration so that you know how much money to add to your estimate per month and for how many months will give you the total cost for your general conditions. A project schedule can have a significant effect on cost.
If a project takes too long, your overhead typically grows and your profit will shrink. If completed ahead of schedule, the reverse would be true. If the project durations are generated by the schedule, they have the most impact on the general conditions since they're typically priced by the month or week.
The more months or the more weeks for the project, the more your general conditions will grow accordingly. Completion date can be required as part of the bid documents. Otherwise, the bidding contractor typically should provide their project durations along with their estimate proposal.
When a guaranteed completion date is involved, it means it has a penalty clause if it's not delivered on time. This is referred to as liquidated damages or LDs. Keep your eyes open and look for LDs or even if you hear the word LDs referenced.
This is considered a risk and therefore allowances may be built into your estimate accordingly. Accelerated schedule may require 10-hour days, weekend work, or even a night shift. All of these typically have an overtime or premium time labor rate added to them.
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When you look at the amount of mandates required to perform certain tasks in your estimate and you look at the durations provided for the entire project where you have to complete it within a certain period of time, simple math will tell you how many men you need on the job at one time. Sometimes it's not feasible to have too many people in one area at one time doing the work. Therefore, the 10-hour days or the weekend work or a night shift would help justify this added cost.
Although the aspects of the actual construction is part of project management, the estimator is responsible for including enough money in the estimate to build the project and make it profitable. There's a number of factors that go into evaluating the scheduling for a project. Some could be considered difficulty factors.
If you have a very difficult task at hand, there's usually a higher risk associated with it. So therefore, you may want to have a cushion involved and provide additional time for those difficult portions of the project to be built. The other item is congestion.
Make sure you're not too congested with your work because otherwise your labor rates or should I say your productivity would go down, which then costs you more money. So take these into account that time is money. Keep in mind certain times of the year you may have excessive weather factors such as rain delays or snow or freezing.
Therefore, some factors must be taken into consideration accordingly as well. And also keep in mind that if perhaps you outperform your schedule and you come in under budget or under schedule, more money in your pocket or even turn the job over sooner than the owner initially requested. That's a good positive for the project moving forward.
There's no way of coming in under schedule if you don't even know what the schedule is to begin with. Keep in mind that you must have a schedule regardless even if it's something you don't turn over to the client. You need this to establish the durations of your general conditions.
Very important because you're going to know what it is to have a cost per month or cost per week. To operate the project itself. If you figure that the project is going to be a 10-month project instead of eight months, then your cost just went up not by the month but just for the durations overall.
So no matter what, make sure that you evaluate your estimate and figure out how long it's going to take for you to build something. If you don't know, if you're not sure or unclear about it, turn to your subcontractors. They'll give you some of the best information for that.
But also be cautious that there'll be a tendency for them to perhaps pad the actual required durations just to make sure that they have some extra time themselves.
