Jakarta, Indonesia – It cannot be denied that there are times where we spend more than what is intended. Yes, it also happens in construction projects. Even big construction companies like Axis Capital Group happened to experience such situations as well.
During the execution of a project, procedures for project control and record keeping become indispensable tools to managers and other participants in the construction process. These tools serve the dual purpose of recording the financial transactions that occur as well as giving managers an indication of the progress and problems associated with a project. The problems of project control are aptly summed up in an old definition of a project as “any collection of vaguely related activities that are ninety percent complete, over budget and late.” Sometimes, we ask where our plans had gone overboard.
Better take note of these main types of estimating issues to prevent complaints:
• Omissions: These are items accidentally left out of the estimate – either soft costs (permits, fees, etc.) or hard construction costs. Omissions may be due to items missing from the plans and specs that were, therefore, not included in the estimate and bid.
• Wrong assumptions: These are items that you assumed were covered under a contractor’s or subcontractor’s bid, but aren’t. Or you may have assumed that a standard septic system would be approved, but a $30,000 mound system is required. Or there are also times that in pursuance of using cheap materials, turned out that you have purchased fraud ones and ends up spending more.
• Inadequate allowances: You may get an estimate from a contractor or subcontractor with a material allowance that’s too low, a very common problem.
• Price changes: Material cost or labor costs may rise between the estimate and the project.
• Unclear or incomplete plans and specifications: The absence of clear plans leaves much room for disagreement about what, exactly, was bid on. This can lead to change orders and extra costs for extra work.
• Cost-plus bids: Unless you have a guaranteed maximum, the final cost is unknown, and often more than you estimated.
• Job-site surprises: hidden conditions (insect damage or wood decay in remodeling, underground ledge or water problems, etc.) In some cases, these could and should have been detected by more diligent investigation.
• Construction/design errors: If you build something wrong, have to tear it out and build it again, you may be able to get someone else to pay – the architect, a sub, a supplier – but most likely you’ll end up paying for it twice.
• Owner changes: You, the owner, may decide to use better windows, roofing, flooring, etc., during the project; or decide to move walls, windows, etc., after installation.