Historical data allows construction companies to identify potential risks and challenges before they arise, improving budget planning and streamlining resource allocation. This, in turn, reduces unnecessary costs and optimizes project outcomes.
However, the value of historical data can only be tapped when it is collected and organized effectively for future use. Below are some tips on how to do this:
Reliable Sources
The use of historical data is an essential step for construction companies looking to improve project estimations. However, the data used must be reliable. Data that is not accurate or based on outdated information can significantly impact the accuracy of cost estimates.
To avoid this, it is important to use a variety of sources and include domain experts in the analysis process. This allows them to interpret the data and identify relevant insights. It is also critical to update the database regularly to account for changes in technology, market trends, and project characteristics.
In addition, analyzing historical data can help organizations identify common costs drivers and develop strategies to mitigate them. For example, a construction company that specializes in residential projects may have found that soil conditions frequently require extra preparation or reinforcement. Using this insight, they can adjust their cost estimates to take these factors into consideration, improving their project planning.
In addition to these benefits, utilizing historical data can also save time and effort. For example, AI and ML technologies can be leveraged to automatically analyze historical data from previous building projects and identify patterns. These insights can then be used to generate cost estimates for new projects, eliminating the need for manual analysis. This can reduce the time required to prepare a new estimate and increase the accuracy of those estimates.
Easily Accessible Data
Historical data analysis provides valuable insights into real-world project costs, helping estimators identify factors that contribute to budget overruns and delays. By utilizing various sources of historical cost data, including industry databases, benchmarking, and market analysis, and adjusting for the unique aspects of each project, accurate estimations can be developed that reflect actual construction costs.
The use of historical cost information allows for better project planning, allowing teams to establish budgets and timelines that are realistic and achievable. Analyzing historical data from similar projects also allows for the identification of cost savings opportunities, such as through value engineering, contract re-negotiation, and alternative vendor considerations.
In addition, analyzing historical data from past projects helps ensure that project costs remain consistent over time. By identifying trends in material and labor costs, cost estimates can be adjusted accordingly. This prevents overestimation of project costs, ensuring that budgets are accurate and realistic.
In order to derive the most value from historical data, it is important to ensure that all data is easily accessible. Creating systems that streamline and automate the collection of historical costs will make this process more manageable for preconstruction departments, as well as subcontractor partners and construction project teams. Additionally, it is vital to regularly update existing data as new information becomes available, ensuring that the latest pricing and costs are used for project estimates.
Analyze Cost Drivers
Historical data can provide valuable insights into the factors that influence project costs. By analyzing the results of past projects, organizations can identify key drivers, adjust for future market trends, and develop reliable cost forecasts.
It’s important to find the right historical data sources and perform quality assurance before using it for cost estimation. This process involves examining the data to identify inconsistencies, missing values, and errors that could affect the accuracy of the analysis. In addition, it’s necessary to clean the data to ensure its accuracy. For example, if the data contains several outliers that are significantly higher or lower than expected, this can cause a misrepresentation of costs. It’s also important to analyze the data based on different categories to ensure that it’s applicable to the current project.
For example, if the data shows that labor was a significant driver in previous projects, this can help to determine how much to budget for future projects. By identifying the key factors that affect costs, organizations can improve their ability to estimate project costs accurately and reduce budget overruns.
However, it’s important to keep in mind that not all historical data is relevant for every project. Each project has unique aspects that can influence costs. Consequently, it’s essential to supplement the data with contextual knowledge and expertise. Additionally, it’s crucial to continuously update and refine the models based on new historical data.
Adjust for Inflation and Market Trends
When estimating construction costs, it is important to account for inflation and market trends. This is possible by analyzing historical data and using that information to create more accurate estimates. Using data from previous similar projects can help to establish labor productivity rates, material price trends and equipment rental rates. Including a contingency amount for potential risks that could impact the project’s budget is also a good practice.
Many project owners are concerned about construction cost escalation and long lead times for materials. Fortunately, accurate cost estimation can help ensure that the project goes through preconstruction, construction and operation without significant surprises.
The process begins with a detailed quantity surveyor performing a detailed estimate of all the project’s required materials, labor and equipment. This is based on architectural and engineering drawings, bills of quantities and project specifications. The resulting quantities are then used to calculate cost estimates using various methods and software tools. The Chief Estimator or Lead Estimator oversees the cost estimating process and ensures that the estimates align with industry standards and best practices.
Using historical data to analyze and forecast the costs of the various elements of the project can reduce risk, expose shortcomings, improve resource allocation, increase productivity and build a competitive advantage. This is especially important when preparing for complex projects with numerous challenges that can impact the scope, schedule and budget of the project.