Managing the fallout of estimate mistakes

Most estimators have had the dreaded experience: something goes awry with calculations and there’s a mistake on your estimate.  If you’re lucky, it doesn’t have a huge impact and is easily absorbed by the company. If you’re unlucky, it leads to a blowout of the budget. You get that terrible feeling of having to own up to a mistake that could be quite costly.  No one enjoys this part of the job - being the bearer of bad news is no fun! The best thing to do is to step up and keep things professional, then seek to prevent the same thing from happening again.  Here’s how we’d manage the fallout from estimating mistakes:  

Front up to the client

If your mistake is going to impact the client, then it’s important that you’re honest from the beginning. Own the mistake and talk to them about it as soon as possible - delaying or trying to hide it will only make things worse.  Your reputation is at stake and may take a battering, but most people appreciate transparency and would be further angered if they had to find out on their own or if you left it until the last minute. Give them the chance to examine their budgets and options early.  In many cases, you might need to meet the client somewhere on the price difference. Discuss with management early as well so that you can figure out what your company can do to ease the blow. Look for any alternative options (if they exist), for how costs might be reduced or balanced out somehow.  Taking ownership early helps to convey your professionalism and generally let people know that you are trustworthy.

Manage the issue internally

Along with being upfront with the client, you need to be considering how you’re going to manage the estimating issue internally. To begin with, a lot will come down to the company culture predominant in your workplace.  For example, does the person who made the mistake get screamed at and hauled over the coals for their error? In workplaces where there is a culture of blaming and seeking to attribute fault, it doesn’t tend to be conducive with taking a more introspective approach and improving the systems and processes of the business.  What lead to the error? Was the estimator involved given a reasonable amount of time to get the job done, or were they rushed? How much work did they have on their plate? Is work routinely double-checked, or was it sent through unchecked in a rush to meet a deadline?  From what we’ve observed, companies where the estimating manager takes responsibility and uses any mistake as an opportunity to see how they can improve tend to not only have a better workplace culture, but have better overall success with estimate accuracy. It can be tempting to lose the plot when a large project or amount of money is at stake, but this sort of visceral reaction rarely gets good results.  In companies where anger and blame are go-to reactions, team members naturally want to avoid getting that response. This means that they may try to hide mistakes, which only adds to a negative culture and reduces the likelihood of mistakes being learned from.  Where someone on the team has made the mistake, calmly talking them through what happened and taking the opportunity to give further training will tend to yield better results for the long term. This helps to encourage honesty and transparency. Allowing them to learn from their mistake is usually a good idea because it would be very rare for that mistake to ever be made again! Tender errors provide a harsh lesson to the people involved with the mistake - unless they’re truly incompetent, you can guarantee that they’ll be triple checking for that error next time.  

Adopt strategies to prevent future mistakes

Virtually every contracting firm will find that at some point, they have to manage an estimating mistake. Another important part of managing it internally is adopting strategies to try to prevent the same mistakes from happening again in the future.  Here are a few thoughts on what you might do:

Add verification steps to your process

We would always suggest that you try to avoid rush-jobs when it comes to estimating, but even if you are dealing with a short deadline, we would still use a process designed for double-checking of work.  Our preference has always been to get a fresh set of eyes on estimates where possible, to ensure nothing major is missed. If you use a software such as Countfire to automatically count take-offs, you can also take advantage of the check sheets in order to review your count. These are a great way of easily verifying that automated symbol counts are correct.  Another advantage of using a software like Countfire is that you can speed up how quickly take-offs are counted, giving you more time for verifying, checking other parts of the tender and double-checking the specification. Sometimes the error isn’t in the count from drawings, but in accounting for what the client has stated in the specification.  

Use RFIs (Requests for Information)

RFIs are a great opportunity to clarify what the client is looking for and ensure that your estimate is as accurate as possible, so allow yourself time to use them. Just be sure to follow the format that the client is expecting and present your RFI professionally.  We gave some tips for RFIs in another post here.

Use clarifications and exclusions

Clarifications and exclusions help you be clear to the client about any assumptions you’ve made or anything which hasn’t been included in your costing (perhaps due to the specification being unclear or not receiving a response to a question on an RFI).  Another tip here is to use cost ranges where you can’t yet be certain of exact costing. For example, if a spec is unclear, you might present a range based on whether they decide to go with one sort of fitting or another, or whether or not they require a process which is going to involve extra labour costs.

Compare to a “typical” project

One of the important things that estimators learn over time on the job is an instinct about what looks “right” when compared to similar, past projects. It’s important to build up that picture of a typical project, but you can also check through comparing project types and measurements.  This can be done by measuring the square meterage/footage of a project, recording the total area and then dividing the total cost by that area to get a $ or £ per square metre/foot rate. You would then record the general type of project (hospital, office, school etc), and the level of quality in the design. For example, is it just a standard office fit-out, or is it a very high spec office, for a high profile client with lots of extras and special fittings? Once you start recording this information, you can then check future projects against it to see whether the rates are roughly the same, of course making sure that it is for the same type of project with the same level of spec.

Always look for ways to improve

As an estimating manager, take responsibility for the mistake yourself and look for ways to improve the business by implementing checking processes or procedures to prevent it happening again.  Getting to the root cause of why a mistake was made can be helpful as a starting point for ideas to improve. The key is to make sure that you get to the true cause of the issue, not just a surface assessment.  A good technique for doing this is “5 Whys”, which is used in many manufacturing processes as well. “5 Whys” involves asking “why” questions until you get to the real root cause at the bottom of the issue. For example:

 
• Why was this estimate inaccurate? Bob didn’t include all 5 floors in the count.
 
• Why didn’t Bob include all 5 floors in the count? He was rushing to meet a short deadline and overlooked the other floors.
 
• Why was Bob rushing to meet the deadline? Bob was given this estimating job with only 48 hours to meet the tender deadline.
 
• Why was Bob only given 48 hours to meet the deadline? (You get the picture! An outcome of this sort of root cause analysis might be that the company adopts a policy of requiring a certain minimum notice period to bid on tenders).

Final thoughts

Almost every company will have the experience of having to manage an estimating mistake at some point, one of the keys to remember is to manage the fallout quickly and professionally.  Don’t try to hide from clients if you’re going to need to let them know, be upfront and take ownership as soon as possible, giving them time to have options and make decisions. From an internal perspective, encourage transparency and honesty in your team. Rather than a culture of blame, make it okay to admit to mistakes and work together to learn from them.  Hopefully you don’t face too many of these sorts of issues - honestly, for any estimator who has made a mistake, it would be very rare for the same sort of mistake to be made again!  Countfire can help estimators to reduce mistakes by providing a quick, accurate take-off count and allowing you more time to double-check the specs. Start a free trial with us here.