The art of estimating construction cost is a process or procedure of accurately forecasting the cost of completing a building project from start to finish. As we all know, erecting a building is capital intensive, so concerned parties want to be sure that they do the costing right so that the project doesn’t run aground due to funding issues. For this reason, project managers and investors dedicate a lot of resources towards assessing the cost of labor, materials, and other connected expenses.
Investors rely on estimates to determine whether a project is feasible or not. They also use it do make budget allocations. On the part of contractors, estimates are used to assess projects in order to determine whether to bid for it or not. So generally speaking, estimates serve a dual purpose both to project owners and project engineers.
Stages of Construction Cost Estimation
There are stages of estimating construction costs. They are as follows:
- Estimation Procedure: This is the general approach to evaluating the project in the first place. It involves roughly estimating project costs for further consideration.
- Schematic Design Allocation: At this stage, estimators do their calculations using a schematic design to ensure accuracy of cost. In essence, the structural design of the project influences cost.
- Development Design evaluation: This is an estimate based on approved provisional design.
- Estimated Construction Document: This is costing based on the complete project. It factors in the whole cost with clear cost specifications for every phase.
- Real Estimation: At this stage, accuracy down to the last detail is paramount. This is an estimate provided by contractors who will handle the project.
How to estimate the cost of a project
#1. Prepare a budget
An estimate starts with a detailed plan as a foundation. Preparing a plan and a budget will bring to your client’s knowledge about the financial implications of funding the project. Evaluating the general cost of man, machine and material is important.
#2. Decide on an approach
When deciding an approach, consider using one of these two popular approaches.
Stick Estimation: This approach is the most accurate but very tedious to pull off. Under the stick approach, the estimator will list all individual costs one after the other, including the hours required to complete each task, the number of materials required as well the tools. The subcontractors handling each phase of the project or tasks will be listed. The same goes for permits and other related costs. This may take several weeks or months, depending on the size of the project, but it guarantees accuracy.
Unit Estimation: This approach is faster than the stick approach but not as detailed. Here, the estimator associates unit costs to each phase as part of the entire process. Unit costing works well if the software is used. To do unit costing, you compile all items required, attach a cost to each item, and then total the figures. After the figure is reviewed, you attach a final markup price to come up with a total value for the project cost.
Pitfalls to avoid when doing a construction cost estimate
- Failure to read documents carefully.
- Forgetting to factor in every single cost associated with the project
- Failure to visit the site to do a proper evaluation
- Refusal to seek professional advice where it is needed
- Failure to evaluate the experience and skill set of the work crew
No estimate is 100%, but with proper planning and careful evaluation, the shortfall may be quite minimal. To plan for cost shortfalls, consider preparing a contingency budget as a percentage of the whole value of the project cost. Should your forecast fall short of the total cost of the project due to changes in the price of materials and other costs, your contingency budget will cover for the shortfall.
In addition, use actual data to aid you in estimating costs. The difference from estimation to actual cost will help you understand how exceptions align with reality.
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