It is quite common for contractors to rely on spreadsheets in order to create their cost estimates. Spreadsheets like Excel’s are a familiar tool that contractors already have available and they can be adapted to a broad range of tasks.
While this makes spreadsheets seem enticing, contractors are bleeding time and money by choosing spreadsheets to build their estimates instead of specialized estimating tools. Let’s dive into how spreadsheets cost you money in construction estimating.
1. Accuracy in estimating
While spreadsheets are adaptable and calculations are relatively easy to perform, they have a major drawback: they are prone to human error.
Spreadsheets are particularly vulnerable to data entry errors, in fact, research indicates that over 88% of spreadsheets contain errors, and this vulnerability gets worse as the size and complexity of your jobs and spreadsheets increase.
Further, formulas built into a spreadsheet can easily be changed, whether on purpose or by accident. Even the smallest errors can lead to significant cost discrepancies in your final estimate. Once an error creeps in, it becomes very difficult to track where exactly in the spreadsheet it occurred.
Accuracy in construction estimating is critical: estimates determine whether a job is won as well as its profitability.
Is it really worth the risk of using a tool that is so prone to error?
2. Estimating with speed
Tying into the previous point about accuracy, contractors need to be able to price bids quickly to win more work. One of the easiest ways to increase the speed of estimating whilst not sacrificing accuracy is to make it as easy as possible to reuse data from project to project.
Now, even if you’ve created templates, spreadsheets can’t provide you with a standardized database of rate buildups that you can easily reuse. Rather, each estimator has to spend the time to customize the spreadsheet for the job at hand. This creates a cumbersome, time-consuming process with high possibility of costly errors.
The lack of uniformity and standardization not only makes reviewing estimates difficult and time-consuming but also puts you sorely at risk if an estimator decides to leave your company. Their process and reasoning behind calculations leave with them, creating a massive knowledge gap in your business.
A much better approach is to have a standardized database of unit rate buildups, which takes the knowledge out of the heads of the estimators and makes it available to use by all team members and from project to project.
3. Collaboration in estimating
When more than one member of your project team needs to work on an estimate, having multiple versions of that estimate becomes unavoidable when using a spreadsheet. Keeping track of which version is the latest and who changed what at which point soon becomes a real problem.
To avoid having version control problems, you may have several people creating portions of the estimate in separate spreadsheets that then need to be consolidated later, which creates its own difficulties.
Either way, your project team’s ability to collaborate is limited when they can’t easily work in the same spreadsheet. This affects both the speed at which work can get done as well as your team’s ability to learn from each other.
4. Generating business intelligence
Contractors need to analyze bid information in a way that is useful to them, but this is another area where spreadsheets fall short. They can’t easily generate useful reports on every facet of bids.
For informed decision making, you’ll need to easily summarize your estimate by resource cost type (ex. material, labor, subcontractor, etc.) or any level of grouping, including user-defined groups such as trade, construction phase, area or location.
You might also want to be able to report on historical data and create consolidated reports across different estimates.
Although possible, it is not easy to create reports with this level of detail with spreadsheets without considerable customization. Contrastingly, estimating software allows you to easily create detailed reports that provide you with critical data for decision-making as a construction contractor.
If you’re using Excel to build cost estimates, the above points will probably seem familiar to you. While using spreadsheets may feel like a low cost and easy option, they come with hidden costs you pay in lost bids, lost revenue, and wasted time.
It is a good idea to consider alternatives before using Excel becomes an impediment to the success and growth of your company.
Specialized estimating software like Assignar Estimating has been designed to specifically meet the needs of construction contractors and can help you to standardize and optimize your estimating processes. Take advantage of reporting on any level you require and make it possible for all project team members to easily work together on projects in real time.
About the Author
Johann Potgieter is the CEO at Lula Build. He holds a PHD in Civil Engineering and uses his skill set to bring modern solutions to the construction industry.