Construction cost forecasting is collecting all of the anticipated expenses for a project and mapping them out over a set cost period or by month. These costs include subcontractor quotes, building supply costs, and any other foreseeable expenses. Cost forecasts are based on analysis of past projects and current project information.

Generally, methods of construction forecasting are either quantitative or qualitative. Quantitative methods use statistical analysis, machine learning, and other scientific predictions based on historical data to come up with a forecast. Qualitative methods are based on expert experience and strategic planning.

The fluctuating prices of building materials over the past few years have made accuracy in construction cost forecasting difficult to achieve. Another major challenge to construction forecasting is the current scarcity of skilled laborers. While the shortage isn’t as severe as it was a few years ago, many subcontractors still struggle to find enough workers, often resulting in unexpected increases to a project’s labor costs.

Forecasting always carries a level of uncertainty, but here are a few best practices for a more accurate construction cost forecasting process:

• Adapt to new information
  As the project progresses, update your forecast to incorporate changing material costs and other unexpected expenses. Trimble Supplier Xchange can help with this process. 
• Stay up to date
  Make sure you are keeping track of expected industry changes. Government policy, local economic factors, and natural disasters can have a huge impact. For example, if there is a massive wildfire in Canada, expect that to raise the price of lumber—even if it hasn’t hit the market yet.
• Build a coalition
  Working closely with contractors and suppliers and building good relationships means they will be more likely to keep you in the loop about any changes happening in the industry. The people on the ground know the most about what is going on.
• Stay in constant contact
  Encourage clear and frequent communication between all stakeholders. The industry can change fast, and if you are only checking in once a quarter, someone is working from old information.