5 Reasons Why Validating Project Cost Estimates Early is Good Practice

Executive Summary

Only 57% of all projects finished within their initial budget last year, according to an annual survey from the Project Management Institute (PMI)’s 2019 Pulse of the Profession—the global survey of project management practitioners. The survey identified inaccurate cost estimates as one of the leading causes of failure for projects that were deemed “failures” within the period of study.

This survey reinforces the importance of accurate preliminary cost estimates and budgets in the early planning phase of a capital program. It is believed that a project’s scope determines the budget, but one could argue the alternative—early budget planning determines and shapes the scope of a project. Therefore, establishing an accurate preliminary cost estimate should be the overarching goal of planners, designers, engineers and owners of capital programs.

However, the current process used to establish preliminary cost estimates for capital programs does not lead to accurate cost estimates and budgets most of the time. Preliminary estimates are not based on results from requirement elicitations, and tend not to reflect actual site conditions, stakeholders’ requirements and end-user imputes.

Objectives

For this reason, we are recommending that architects, engineers and managers tasked with the design and execution of capital programs must first validate their project budgets. There are many other reasons to validate project cost estimates prior to design work. In this article, we will provide the top five reasons.

In addition, it is important to have insightful conversations with an owner regarding their project costs. It helps you and the owner make a good case for budget adjustments to levels commensurate with the owners’ requirements. This is a win-win situation for both the owner and the design team.

Successful Projects Require Accurate Preliminary Cost Estimates

The Solution

Architects, engineers and managers tasked with the delivery of capital programs must validate the budget prior to design or very early in the design process. Validating means seeking a third-party peer review, estimate, or performing in-house concept estimates.

The costs validation process provides assurances to both the owner and the design firm. It also gives the architects the opportunity to offer value creation ideas to the owner. There are many other reasons why design teams must validate project cost estimates early. In this article, we provide five reasons why this is important to the owner and the design firm. With these reasons, one can have an insightful conversation with an owner regarding their project costs prior to design commencement.

This helps you and the owner make a good case for budget adjustments to levels commensurate with the owners’ requirements. This is a win-win situation for both the owner and the design team.

Download the Full Article