How Should Opinion of Probable Construction Cost Be Used?

by | May 17, 2022 | Topics | 0 comments

General Terms and Conditions, frequently referred to as “Boilerplate,” defines how the Client and Consultant will relate to each other in a business relationship without regard to a specific project. The following is a critical “Boilerplate” item that if not clearly and equitably stated will likely result in misunderstandings and confrontational situations:

Opinion of Probable Construction Costs is a key element of expectation management.  The factors affecting the level of accuracy and predictability of costs provided to the Client compared with that which will be received from bidders must be clearly explained in the contract.  Otherwise, a Client may believe that the Consultant’s opinion of probable construction costs, sometimes referred to as a “cost estimate”, is an amount that absolutely will not be exceeded when the bids are received.  Language suitable for explaining this provision is readily available from contract templates prepared by various professional societies.  Some contracts require that if bids exceed a predetermined Client budget the Consultant must redesign the project at no additional cost to the Client to bring the costs within the budget.  In this case, it is imperative that the Consultant avail itself of the opportunities during the design to notify the Client of concerns that the budget may not be adequate to obtain the project as scoped.  This type of contract usually contains milestones at which the Consultant must provide an opinion of probable construction cost for consideration by the Client.  If the opinion of probable construction cost exceeds the Client’s budget, the Client may then either revise the scope or the budget to reconcile the difference.

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Lowe Consulting, LLC
John M. Lowe, Jr., P.E.
Happy Valley, OR