Because of the COVID-19 pandemic, the industry witnessed a decline in new building and renovation projects. According to the May Architecture Billing Index (ABI), the demand for construction has dropped significantly. The pandemic has also affected the cost estimation process. Increasing labor and material costs have resulted in drastic changes in estimates. To keep up with the fluctuating prices and ensure your calculations are accurate, consider using cost estimation software.
Construction Cost Estimation 101
Construction cost estimation is the process of forecasting the cost of building physical infrastructure. These estimates need to be accurate since profit margins are generally razor-thin in the industry. Even the slightest miscalculation can result in the contractor losing money on the project.
The cost estimation process often involves a specialist trained and experienced in developing reliable cost estimates. Those costs include quantity take-off, equipment, capital, operational costs, material prices, variances, contingencies, and more. Although cost estimators must be familiar with design and construction, they don’t necessarily have to be engineers or architects.
A skilled cost estimator will provide accurate cost estimates and help offset major concerns and financial risks associated with any construction project. Estimators result in more accurate predicted costs, especially on heavy construction projects, and keep all parties happy by preventing the builders from losing money and the clients from overpaying.
What COVID-19 Has to do with Cost Estimating
For many contractors and construction firms, the pandemic has decreased demand for construction, inflation, and increasing material prices. According to the U.S. Bureau of Labor Statistics’ Producer Price Index Data, non-residential construction input prices have increased by 2.3 percent in June. Furthermore, the lumber prices have also soared 50 percent since April 2020 as per the National Association of Home Builders (NAHB).
The primary driver of the increase in prices is the lack of construction material. Most mills closed down in the spring due to social distancing and stay-at-home measures. The few mills that remained operational reduced their capacity utilization, anticipating a significant drop in demand. The disrupted global supply chains also made it grader to obtain construction materials outside of the country.
Pandemic mandates resulted in contractors adopting new hygiene breaks, buying personal protective equipment, and investing in additional cleaning measures, all of which created additional costs. Furthermore, a worker found virus-positive will result in the whole site being closed down, work suspended, and the site disinfected, which causes further delays.
Introducing Cloud Databases
As construction costs began fluctuating more rapidly, a need for cost estimators to switch from pencils and calculators to software has also increased. The latest addition to the collection of cost estimation tools is cloud databases. An invaluable tool for both contractors and construction firms of all sizes, cloud-based cost estimation software works with real-time data to provide the most accurate estimates possible.
Designed to facilitate estimates, using database programs for commercial construction estimating allows contractors to add, edit, and share your price proposals and provide you insights into the varying price trends.
Many cloud-based cost estimation tools have also incorporated another feature called COVID-19 modifiers to help contractors address the pandemic’s challenges. COVID-19 modifiers generally fall under two categories: Biohazard Remediation and Infectious Disease Precaution.
The Biohazard Remediation line items refer to installing temporary barriers for alternate traffic flow to ensure social distancing and employee/employer checks and tests. The Infectious Disease Precautions modifiers adjust labor costs and allow the estimator to choose additional charges from required precautions for any given worksite.
Together, these two categories allow cost estimators to adjust the specific precautions for each project. They also offer them a mechanism that will enable addressing the inefficiencies in their project cost estimates.
Invest In A Cloud-Based Cost Estimation Software For The Future
Cost estimation is a vital part of construction project management, especially in the coronavirus-stricken world. However, in the world of uncertainty, construction companies must invest in technology to stay productive. A project’s success depends on the estimate’s accuracy. If not done correctly, it can also put the company’s survival at risk. If your construction company isn’t already using cloud-based estimators, doing so now can help you survive the pandemic.