Estimating System Modernizes Portfolio Decision Making and Funding
Outdated Estimating Practices Are Undermining Project Budgets
For years, a large organization faced significant challenges in managing the complex and often unpredictable costs of maintaining, upgrading and adding to its aging building portfolio. The organization managed a multi-billion-dollar portfolio of built environment including a wide range of building types and infrastructure. Additionally, the need to strategically plan for these projects in a highly volatile economy added to a mounting disparity between needs and the funds to address them.
Historically, the issue stemmed from an outdated method of cost estimating. Project managers used high-level spreadsheets based on asset types to calculate costs, which led to situations where proposed budgets were either too optimistic or inaccurate, resulting in projects exceeding their budgets.
This process was flawed due to the lack of a foundational cost item database where accurate prices can be maintained and included in estimates to clarify the scope of work contained within a budget. There was also no way to compare the internal budget with an estimate provided by an external source since internal budgets were high level and lacked line item costing. Estimates were frequently inaccurate, often with a margin of error that is not acceptable in the industry. This led to a culture of uncertainty, where projects consistently exceeded budget. As a result, the organization's leadership lost confidence in the estimating process.
Further complicating matters, the organization did not have a dedicated estimating department. Project managers were left to navigate the estimating process independently, with no clear guidelines or standards. This led to inconsistent results that undermined the trust of stakeholders and decision-makers. The lack of precision was problematic in planning renovations, maintenance, and new construction projects, where accurate cost projections are crucial for staying on track.
This issue manifested in two significant ways—first, insufficient budget allocation for deferred maintenance and other needs led to underfunded projects. Second, when budgets were created for renovations, additions, or new construction, they were often deemed too high, resulting in a lack of trust in the numbers. The organization consistently underestimated the cost of building needs, leading to insufficient funds for necessary repairs and renovations.
A Strategic Shift to a Data-Informed Process
In response to these challenges, the organization’s leadership recognized the need for a more strategic, data-informed approach to estimating. Rather than continue with their static approach–where estimates were based on asset types–they envisioned a more detailed, reliable system.
The organization turned to a sophisticated yet easy-to-use cost estimating software system that offered a comprehensive database of unit-based costs and project-specific data informed by industry standards, decades of estimating experience, and regularly integrated federal commodity prices and regional labor rates. The new strategy was straightforward but transformative. The multiple streams of data harnessed in this software became the backbone of their estimating system, transforming the way projects were planned, executed, and managed.
Instead of using a top-down budget, they shifted to a bottom-up approach, building estimates from a comprehensive item database organized in both MasterFormat and UniFormat that can produce estimates across all building types. This enabled users to build estimates with improved precision and transparency which yields high confidence in estimates and the ability to compare against estimates published by contractors and consultants. Project managers who traditionally do not have experience building detailed estimates are able to leverage the embedded calculator tools to generate items and quantities from small scopes of work up to entire building estimates. This is possible through sophisticated formulas, calculations and utilizing reference estimates within the dynamic software.
New Cost Estimating Software Delivers Reliable Results
The software’s main benefits include:
- Improved Accuracy – The new software builds up pricing using detailed components, reducing the margin of error compared to previous methods. Stakeholders can see exactly what is included in the budget.
- Restored Confidence – By switching to a more structured and data-driven approach, the organization regained the confidence of its stakeholders, particularly top executives, who were once wary of inflated estimates. Decision-makers can now trust that the numbers are based on solid data.
- Gained Efficiency – The software allowed project managers to generate estimates more quickly and consistently, reducing their reliance on error-prone spreadsheets and manual data entry.
- Predictability – The software’s logic and built-in calculators helped deliver estimates within an industry-standard margin of error, a massive improvement from the previous abstract high-level budget values.
After integrating the cost-estimating software, the organization started generating more reliable estimates for each project. Moreover, the software helped the organization move beyond high-level asset types, providing project managers with more granular and meaningful insights into costs. The software’s ability to break down estimates based on systems and components meant that the organization could prioritize replacements more effectively. Instead of simply addressing broad categories like ‘air conditioning’ or ‘HVAC,’ project managers could focus on specific system components—such as compressors, ductwork, or cooling towers—that required attention. This has enabled the organization to allocate its budget more efficiently and address the most urgent needs first.
One of the most significant outcomes was the shift in how project managers and stakeholders viewed the budgeting process. Estimates once seen as unreliable and prone to substantial overruns were now being accepted with a much higher degree of confidence. This new-found transparency fostered a collaborative environment where project teams could work together to adjust the contents of budgets based on actual needs.
This has allowed the organization to move forward with its strategic, priority-based asset management, knowing that the financial implications of each project are more predictable.
The importance of a detailed and transparent approach to cost estimating cannot be overstated. By building estimates from the ground up and using reliable data, project teams can improve accuracy, foster collaboration, and ultimately deliver successful projects. The organization had previously underfunded the budget required to address deferred maintenance and building needs. Deploying defendable data with new visibility and accuracy has resulted in a commitment from the organization’s leadership to increase funding by 50% annually to address these needs. This has had a net effect of injecting additional funding of more than a billion dollars for the next 10 years. Ultimately, reliable software for accurate cost estimating provided a solution to improve confidence in future budgeting efforts.
The power of dynamic cost estimating software in driving more effective decision-making and ensuring projects are completed on time and within budget is clear. For organizations managing extensive building portfolios, adopting such software can make the difference between a reactive, crisis-driven approach and a proactive, strategic plan that extends the lifespan of valuable assets and enables accuracy in budgeting and planning.
Backed by more than 30 years of experience within the CannonDesign cost estimating department, FOS of CannonDesign set out to develop a sophisticated yet simple-to-use estimating module to integrate into its FOScore® platform. Designed by estimators for estimators, the FOScore® estimating module also features toolsets for project management teams.
Scalable and customizable for everything from billion-dollar portfolios to mid-sized design and construction firms and contractors of all sizes, more information about the FOScore® estimating module can be found at www.foscd.com.
