An AssuredPartners Company
Hall & Company
  • Home
  • Insurance Services
    • Professional Liability Insurance
    • Property Casualty Insurance
    • Cyber Liability
  • Client Services
    • Get a Quote
    • Client Portal
    • Applications
    • Testimonials
    • Certificates
    • Pay Online
    • Claims
  • Resources
    • Professional Liability Insurance Resources
    • Risk Management Library
    • Hall & Company Publications
    • Attorney Directory
    • Trade Associations Directory
    • Carrier Directory
    • Video Library
    • Webinars
  • AE Blog
  • About
  • Contact
(360) 598-3700

AE Blog - Opinion of Probable Construction Costs

Your opinion of probable construction costs is, in all likelihood, one of the most important items in connection with management of your Client’s expectations.   Many clients refer to this as a “cost estimate” and unfortunately stretch that term to believe that you will be providing a guaranteed amount on which they may rely absolutely as being one that will not be exceeded when the bids are opened.  Substituting “Opinion of Probable Construction Costs” for “Cost Estimate” in your contract is a good start at clarifying this frequently misunderstood deliverable.

The Standard Provisions should include a statement that explains what the Opinion of Probable Construction Cost (Opinion) is and what it is not.  Most of the contract templates available from professional societies contain very concise language that can be used.

Here are some thoughts about items that should be included about the Opinion:

■ The Opinion is only that; it represents the Consultant’s best judgment as a design professional

■The Opinion is supplied only for the guidance of the Client

■Consultant has no control over the cost of labor and material, competitive bidding, or market conditions

■The Opinion is based on Consultant’s recent experience and adjusted to accommodate factors known to the Consultant at the time the Opinion is prepared

■Consultant does not guarantee the accuracy of the Opinion as compared to actual bids or cost to the Client

■If the Client desires a higher level of confidence in predicting anticipated construction cost than that provided in the Opinion, the Client  should retain the services of a professional cost estimator for this purpose

The term “Cost Estimate” has been around so long that it may be beneficial to not only put the Opinion in your contract but to specifically call it to the Client’s attention.

If the Client has negotiated a construction contract rather than receiving bids, be sure to involve the contractor in preparing the Opinion.

Some Clients require that the Consultant revise its design, at no additional cost to the Client, if the bids come in above the Consultant’s estimated cost.  Read this section very carefully and take advantage of the opportunity to revise the estimate at certain stages of the design if it appears that the original budget will be exceeded.

As a last resort, you could agree to redesign certain portions of the design whose bid prices exceeded those in the Opinion by a specified amount.  If you use this approach, you should get the Client to agree that this is the Client’s only remedy to dealing with bids coming in over the Opinion.

Also be aware that some professional liability policies do not cover errors and omission in connection with cost estimating – check the exclusion section of your policy.

This information has been provided to Hall & Company by John Lowe, President of Lowe Consulting, LLC.

Previous Post | Next Post
  • Posted:July 24, 2019
  • Comments:0

Leave a Comment - Cancel reply

You must be logged in to post a comment.

Search Our Site
Recent Posts
  • We are changing our name to AssuredPartners!
  • 5 Steps to More Effective Risk Management
  • Hall & Company is headed to New Orleans!
  • Opinion of Probable Construction Costs
  • Cyber Security Notification to Office 365 (Outlook) Users
Meta
  • Log in
  • Entries feed
  • Comments feed
  • WordPress.org
Archives
  • August 2020 (1)
  • September 2019 (1)
  • August 2019 (1)
  • July 2019 (1)
  • June 2019 (1)
  • May 2018 (1)
  • April 2018 (1)
  • March 2017 (1)
  • October 2016 (1)
  • September 2016 (3)
  • August 2016 (2)
  • July 2016 (1)
  • June 2016 (1)
  • March 2016 (2)
  • December 2015 (1)
  • November 2015 (1)
  • October 2015 (1)
  • August 2015 (2)
  • June 2015 (1)
  • April 2015 (1)
  • February 2015 (2)
  • January 2015 (1)
  • November 2014 (1)
  • October 2014 (1)
  • September 2014 (8)
  • August 2014 (1)
  • July 2014 (4)
  • June 2014 (5)
  • May 2014 (4)
  • April 2014 (6)
  • March 2014 (6)
  • February 2014 (5)
  • January 2014 (4)
  • December 2013 (6)
  • November 2013 (4)
  • October 2013 (8)
  • September 2013 (3)
  • August 2013 (4)
  • July 2013 (3)
  • April 2013 (4)
  • March 2013 (2)
  • February 2013 (5)
  • January 2013 (4)
  • December 2012 (5)
  • November 2012 (5)
  • October 2012 (5)
  • September 2012 (3)
  • August 2012 (1)
  • July 2012 (5)
  • June 2012 (1)
  • May 2012 (5)
  • April 2012 (3)
  • March 2012 (3)
  • February 2012 (5)
  • January 2012 (3)
  • December 2011 (10)
  • November 2011 (13)
  • October 2011 (6)
  • September 2011 (12)
  • August 2011 (10)
  • July 2011 (7)
  • June 2011 (8)
  • May 2011 (12)
  • April 2011 (10)
  • March 2011 (15)
  • February 2011 (5)
  • January 2011 (4)
  • January 2010 (1)
  • Copyright © 2014 Hall and Company. All Rights Reserved.

Download an Application

–NGWA Program EZApp –

CONTACT US

For information and to submit applications contact:

Linda Colasurdo
Lcolasurdo@hallandcompany.com
(360) 598-3700