The Three-Step Project Life Cycle Cost
When considering rough estimates, it’s important to first understand the life cycle of a project’s cost. It has three parts: (1) rough estimate (2) final estimate (3) final cost. It’s also very important to understand that every project is unique and different. There are no standard industry averages regardless of what anybody says. No two customers have the same unique style, tastes, preferences or way of seeing and doing things.
Rough estimates are averages driven primarily by the customer and their requirements–not the contractor’s. These can be increased or decreased by the customer. The most accurate and reliable rough estimates reflect customer-driven projects actually completed over the past two years. These reflect reality and what people actually did, and are doing, especially when using high-quality and durable products, materials, and people. These types of rough estimates illustrate pricing of materials and labor across economies and include building code changes.
The final estimate is completed after the plans are finished and approved. This is very detailed and comprehensive. It includes all materials, parts, labor, installation and sales tax mid-range, not at the bottom.
The final cost of the project is known after the job is completed. This typically represents the sum of the final estimate and changes after the plans are approved. Changes include items such as things the customer adds or subtracts and unforeseen issues (e.g., the contractor opens a wall and finds wires, pipes, etc. that are in the way and must be moved; another example is damage caused by insects or water that could not be seen during a visual inspection.
Beware of Contractor Sleight of Hand
Many contractors, in order to get your business, provide unrealistic estimates employing scenarios and allowances tactics; only to use the change order process once the project is well under way to jack-up the price. Perhaps even worse, they do the job for the quoted price but the final product falls apart in a few years because of poor workmanship and substandard materials. Every year, people and their loved ones needlessly die because they wanted to save a few dollars on quality. Why?
In your search for a contractor, look for one whose track record and customer testimonials show they have a simple philosophy of always being honest and up-front with the customer, and never pretend a project can be safely and correctly performed at any budget. Trust is critical, and you must feel confident that the contractor will never comprise the health and safety of you and your family simply to make a few dollars. The contractor must have the integrity to refuse the job if it can’t be completed safely and correctly. If the budget is too low, you’ll need to scale the project down or wait until you have the funds. Remember the golden rule of construction: If it’s too good to be true, it’s not! Surround yourself with people who will tell you what you need to hear, not what you want to hear.
The three-step project life cycle cost outlined above is the most reasonable and realistic method available, resulting in a final estimate that is completely open and honest. There are no surprises, tricks, gimmicks, or hidden up-charges. You know exactly what you’re paying for and how it’s going to look. Understanding the process and being realistic results in a happier, safer, and ultimately more satisfying project for all concerned.