Calculating an accurate cost estimate is the easy bit. Having the estimate accepted by either a client, or your management, or both, and then delivering your project on budget is far more difficult.
Our latest article looks at the challenges of selling a realistic and achievable cost estimate to managers and clients. It’s probably one of your most important skills: https://mosaicprojects.com.au/Mag_Articles/AA005_The_real_estimating_challenge.pdf
For more on cost management see: https://mosaicprojects.com.au/PMKI-PBK-025.php
Pat Weaver
Lynda Bourne
Aavssitedev's Blog
Speaking as a CONTRACTOR where single-digit EBITDA margins are the norm, we do it all the time. (Well, those of us who have been able to remain in business for more than 3 years have learned how to do it more or less consistently)
But the real quandary is we are caught in the classic “supply-demand” curve where IF we bid our work around 20% -25% gross margin, (which translates into roughly 10% EBITDA margins) we only win about 20% of the projects we bid.
That means at least for CONTRACTORS we cannot simply pass along all risks that the owner expects us to assume in the bid, otherwise we would never win any work. For CONTRACTORS, the focus needs to be on IDENTIFYING OPPORTUNITIES and then EXPLOITING those opportunities.
To see this explained more graphically and completely, go HERE https://build-project-management-competency.com/1-4-1-3-unit-3/ which was a topic that was NOT originally covered in the Guild of Project Controls Compendium that we ADDED when we updated that work and published as a 2nd Edition.
Agreed Paul – as per the blog, intelligent clients are a rarity.
Based on the 2015 KPMG “Climbing the Curve” research 30% of owners continue to use the Design>Bid>Build (DBB) and 34% use Design>Build or EPC so if close to 66% of owners are using “classic” or “traditional” approaches, does that mean the remaining ~34% are using non-traditional or innovative contracting methods like Lean or IPD or partnering?
Certainly not that we have seen any evidence supporting?
With Australia rolling out a huge infrastructure expansion program, it will be interesting to see if these traditional pork-laden projects will end up blowing out like most megaprojects?