dispatches from the new world of work

On The Other Hand: No Dreamers, No Progress

If inconsistency is a virtue, then here goes. I've come to a conclusion, probably as unsurprising as it gets, but perhaps worth a moment's thought.

Namely: Realism is the death of progress.

We've got a summer building project in progress. We did our levelheaded best to budget it correctly, getting contractors to rework estimates—and redesigning accordingly. (And, hey, I was trained as a construction engineer.) All that said, it looks like the $40K ($40,000—sorry, Admiral) project will come in at about $70,000.

What's new?

The Big Dig in Boston came in about 4 times over budget, as I recall. For the Chunnel, I think it was about 3 times. Etc. Etc. (I won't even mention that the Iraq war, budgeted by Mr Rumsfeld at $50,000,000,000 is apparently at about $1,500,000,000,000—hey, what's a "B" vs "T" in pursuit of ...)

I decided to do a little careless research at a dinner party, asking several people about their homebrew projects. Three questions: How did you do vs. budget for projects completed a couple of years ago? If you'd known the real pricetag when you started, would you have gone ahead? And, in hindsight, was the eventual pricetag worth it?

To Q1, the answer ranged from about 25% over (if you can believe it) to 5 times (which I do believe). As to Q2, 3 of the 6 I queried said "no way" if they'd known what they were getting into—2 others were on the fence. As to after-the-fact satisfaction, 5 said, in effect, "Yes! We'd do it again"—and one said "Maybe, maybe not."

It's obviously dangerous to generalize from such a sample, but my reading of history, business, and in general, says this phenomenon is as ordinary as it gets. Furthermore, in the back of one's mind, one damn well knows that the pricetag will be far in excess of what's planned.

And my point? You'd better have a great number-crunching CFO, but if you let him-her rule the roost, there won't be much left to roost on. Of course I know it's "Damned if you do, damned if you don't." On the other hand, progress hinges on illusion and delusion. As for me, the Cornell master's degree holder in construction engineering, I'd vote yes in hindsight for every one of my major home projects—even if, as is true, they added to my speechifying "nights on the road" tally.

Cherish your dreamers!

Tom Peters posted this on 07/06/07.

Comments

There's a new show on HGTV that helps couples see that they can afford houses in their target neighborhood if they buy homes that need drastic renovation to meet their requirements. The costs always come in within $5,000 of their target goal.

And I always sit there thinking "But what about cost overruns"? "What about that wall that's just hiding the rot from the termites?" What are these people getting themselves into budgeting so tightly and will HGTV come to the resuce when the plans don't work out.

And lunch is over and it's time to get back to work!

Posted by Cathy at July 6, 2007 12:11 PM

So a contractor puts in a price and if it goes over just because they say it cost more I say bunk... and only pay that set amount, if on the other hand they can show me along the way there are problems I will err.

Working to a quote is different than working to an estimate.

My in laws got two quotes for re stumping their house. One was $3k the other 10k... They went with the cheaper one then with cost overruns they ended up paying 10k...

I hear that successful contractors looking at renovation jobs double the price and add 10%, then they say its worth it, otherwise the hassle is greater.

Posted by Steve Gray at July 6, 2007 6:36 PM

The question would be: how come you thought a project would cost $40,000.00 in the first place? And herein lies the rub: so many projects are started on the basis of, "We reckon it would cost about $x so we'll budget $x + y% contingency." Then - having created the expectation - they go and get firm quotes from the pro's and - lo! It's going to cost a whole lot more. Or the pro's say, "But have you thought about this, this and that" or "For a little bit more you could also do that, that and this." Or worse: some corporate twerp says, "You can do the project but you'll have to bring it in for 80% of your budget."

Moral: keep it real.

Steve - if it looks too good to be true, it probably is...

Posted by Mark JF at July 9, 2007 2:55 AM

The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore, all progress depends on the unreasonable man.
â€” George Bernard Shaw

viagra black

Posted by Shakespeare's Fool at July 9, 2007 4:41 PM