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Why document cost estimate exclusions?
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How to document cost estimate exclusions?
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What to include in cost estimate exclusions?
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How to review and update cost estimate exclusions?
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How to communicate and negotiate cost estimate exclusions?
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Here’s what else to consider
Cost estimate exclusions are items or conditions that are not included in the scope of work or the price of a construction project. They are often used to clarify the assumptions, limitations, and risks of the estimate, and to avoid misunderstandings or disputes with the client, contractor, or other stakeholders. However, documenting cost estimate exclusions can be challenging, as they require clear, concise, and consistent language and format. In this article, you will learn how to document cost estimate exclusions effectively and efficiently, following some best practices and examples.
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- Jitender Girdhar As a Bestselling Author, TEDx Speaker, Entrepreneur, and Columnist, I am dedicated to helping you reach the top 1%…
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- Anjani S M. Engineer at soul, Entrepreneur at heart, mentor, trainer, collaborator
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1 Why document cost estimate exclusions?
Documenting cost estimate exclusions is important for several reasons. First, it helps you to define the scope of work and the basis of the estimate, and to communicate it to the client and other parties involved in the project. Second, it helps you to protect yourself from potential claims, changes, or disputes that may arise from ambiguous or incomplete information. Third, it helps you to manage the expectations and risks of the project, and to identify any contingencies, allowances, or qualifications that may affect the estimate accuracy or reliability.
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- Jitender Girdhar As a Bestselling Author, TEDx Speaker, Entrepreneur, and Columnist, I am dedicated to helping you reach the top 1%. Follow for Insights on Leadership, Entrepreneurship, Critical Thinking and my journey.
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Cost estimate exclusions are must to mention properly in order to avoid any future disputes.The key is to record all the exclusions in detail so that inclusions are clear and there is no confusion on the scope.
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- Anjani S M. Engineer at soul, Entrepreneur at heart, mentor, trainer, collaborator
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Documenting cost estimate exclusions is an important aspect of creating accurate and transparent project cost estimates. Exclusions help clarify what specific items, activities, or expenses are not included in the estimated cost. This prevents misunderstandings, sets clear expectations, and provides a basis for negotiation or scope adjustments. To document cost estimate exclusions, create a clear and concise list detailing excluded items or activities. Use plain language, specify reasons, address responsibilities, and refer to relevant documents. Regularly review and update the list, ensuring consistency with other project documentation. Obtain stakeholder agreement and maintain records for transparency and clarity.
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2 How to document cost estimate exclusions?
Documenting cost estimate exclusions requires a tailored approach as different projects may have varying requirements, standards, and formats. Nevertheless, there are some general guidelines to follow to ensure that your cost estimate exclusions are clear, concise, and consistent. For instance, use a separate section or document to list the exclusions and reference it in the main estimate document or report. Additionally, utilize a standard format and structure to present the cost estimate exclusions, such as a table, a bullet list, or a numbered list. Furthermore, specify clear and precise language to describe the cost estimate exclusions and avoid vague or general terms. Moreover, employ consistent terminology and definitions to document the cost estimate exclusions that align with the scope of work and the contract documents. Lastly, use examples or references to illustrate or support the cost estimate exclusions if applicable.
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Create a separate section in your cost estimate document explicitly detailing exclusions. Use clear language and bullet points to ensure easy understanding. Ensure that this section is readily accessible and visible to all relevant stakeholders.
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3 What to include in cost estimate exclusions?
The content and level of detail of cost estimate exclusions may vary depending on the type, size, complexity, and stage of the project, as well as the purpose, audience, and format of the estimate. However, some common categories of items that are often excluded include those outside the scope of work or responsibility of the estimator (e.g., design fees, owner's costs), those that are uncertain or unknown (e.g., site conditions, geotechnical data), those dependent on client decisions (e.g., finishes, fixtures), those subject to change (e.g., design changes, scope changes), and those considered risks or contingencies (e.g., escalation, inflation).
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Be comprehensive in listing exclusions. This may encompass specific deliverables, services, or components not covered by the estimate. Clearly state any assumptions made during the estimation process, making it easier for stakeholders to comprehend the limitations of the provided estimate.
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4 How to review and update cost estimate exclusions?
Documenting cost estimate exclusions is not a one-time task, but an ongoing process that requires regular review and update throughout the project lifecycle. As the project progresses, the scope of work, the design, the contract, and the market conditions may change, impacting the validity, accuracy, and completeness of the cost estimate exclusions. Therefore, you should review and update your cost estimate exclusions when receiving new or revised information or data that may affect it, such as site surveys or geotechnical reports. Additionally, you should update your cost estimate exclusions when making changes to the scope of work or estimate, when encountering changes in project execution such as delays or claims, and when reaching milestones in the project schedule.
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Regularly review and update the document as the project progresses. Changes in scope, unforeseen circ*mstances, or new information may necessitate adjustments. Regularly revisit exclusions with stakeholders to confirm understanding and address any emerging concerns.
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5 How to communicate and negotiate cost estimate exclusions?
Documenting cost estimate exclusions is not only a technical task, but also a communication and negotiation task that involves multiple stakeholders with different interests, expectations, and perspectives. Therefore, you should communicate and negotiate your cost estimate exclusions with the client, the contractor, and other parties involved in the project. This will ensure that everyone understands and agrees with the scope of work and the basis of the estimate, as well as resolve any discrepancies or questions that may arise. Additionally, it will allow you to seek feedback or input to improve the quality of the estimate and to establish trust and collaboration among stakeholders. Ultimately, this will help to avoid misunderstandings or disputes that may affect the project performance or outcome.
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Construction contracts are a minefield.I feel particularly for the sub-contractors working for tier 1 contractors. They get roped into some very dodgy conditions through bespoke contracts. For example onerous clauses preventing them from time extension allowances that are standard in JCT contracts for things like delays due to exceptionally bad weather.Ambiguity in contracts is often where the problem lies and one party's interpretation of a variation may be another party's interpretation of an inclusion in the scope of works. This is of course where the lawyers make their money, i.e. on significant enough sized projects.It's not for the fainthearted and you need a good cost consultant on your side for this sort of thing.
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Open and transparent communication is key. Clearly communicate the reasons behind each exclusion and its potential impact. During negotiations, be prepared to discuss the rationale and, if needed, propose alternatives or adjustments to manage expectations.
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6 Here’s what else to consider
This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?
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Legal and Contractual Implications: Understand the legal and contractual aspects of your exclusions. Ensure that your documentation aligns with the project's contractual agreements and obligations.Risk Management: Evaluate potential risks associated with exclusions. Be proactive in identifying and mitigating risks that may arise due to the limitations set by exclusions.Stakeholder Education: Educate stakeholders on the importance of exclusions. Help them understand that this process is not about limiting scope arbitrarily but about setting realistic expectations for the project.
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