Budgeting a Project
Budgeting for project work is a methodical categorizing of each of the items that total up to the whole project. The key is to get something in for everything so that the items that are estimated too high average out with the estimates that are too low. Another key is to constantly revise the estimate as more is learned about the project. Performing many revisions of the estimate over a period of time will lead to a more accurate budget.
A remodeling project can be a difficult budget to perform because there are so many little islands of work that have many hidden variables. Final costs very often run up to 150% of the original estimate. Providing contingency costs in to the estimate for each and every possibility of extra work should be included. For example, a contingency should be added to each wall that is opened up to cover the possibility of hidden wires, plumbing, or structural needs.
New construction also poses problems for budgeting due to the difficulty in coordinating all of the architectural and engineering designs together to form a complete project. The drawings are a prediction of the future, not an actual as-built condition. Therefore the spatial conflicts that inevitably occur will cause changes in the field that lead to additional costs. In addition, some of the scope of work is often left out of the design only to be discovered later in the project. And of course numerous changes occur along the way as the customer desires changes as some of these needs become apparent. This leads to change orders and schedule elongation.
The most common method of estimation is using a spreadsheet and simply listing the identifiable options. A homeowner can perform an estimate using the floors-walls-ceiling approach to look at each room of a remodeling project and come up with a fairly accurate estimate. A project manager or a contractor may have templates from previous projects to begin each estimate. And a larger company will have estimating software such as Timberline, which has a database of project experience for the estimator to use. Each of these methods depends on the accuracy of the takeoff by the estimator.
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