When an organization seeks an estimate for a construction project, they want to make sure they are getting a fair and reasonable price for high quality work. But when an estimate comes in too low – when the project specifications are unattainable with the amount being delivered (be it on purpose or due to inexperience) – there can be serious ramifications for the organization and the construction project at hand.
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When a price seems too good to be true, in all likelihood it probably is. Perhaps the person behind the impractical estimate is inexperienced. On the other hand, if the low estimate was purposeful, requested materials may be swapped out for cheaper alternatives. Either way, an estimate that’s far too low will most likely result in a poorly constructed project.
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When an estimate comes in too low, it sets up the project for pricing problems down the line. This improper planning will affect nearly everyone involved in the project – at the end of the day, someone will end up paying. The low estimate may be due to miscalculations, omissions or even deliberate misrepresentation. When the initial estimate is unrealistically low, the final cost usually ends up much higher. This happens because additions and other modifications to the original scope of work must occur for the project to be completed. The change orders subsequently cause even more headaches as they are identified. Negotiating change order costs is a frustrating practice for all parties involved, often with no one feeling a fair price has been reached.
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When pricing disputes or dissatisfaction with quality arise, friction is the inevitable result. This friction will reverberate, leaving behind a negative taste capable of soiling once thriving relationships. The discord from these disputes and dissatisfactions can echo from the initial planning stages all the way through construction and even post-construction. Success is practically impossible without trust and collaboration – this is a reality that’s unavoidable.
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All of the above consequences increase the chances of delays and setbacks. Work comes to a standstill while prices are negotiated, construction quality is inspected and disagreements are resolved. As timelines fall by the wayside, the seeds of distrust are sown, opening projects up to unintended errors that cost more money that should’ve never been spent in the first place.
By using accurate and up-to-date construction cost data when creating your project estimates you can position yourself to avoid these four dangers. This will eliminate the risk of cost overruns and help keep project budgets and timelines on track.
 

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