Construction cost estimating is an important part of the planning process for any building project. Accurate construction cost estimates ensure that a project stays within budget and on schedule and provide contractors and developers with the necessary information to make informed decisions that result in a successful outcome.
It requires knowledge of materials, labor, market conditions, and other considerations associated with constructing a project. This article will talk about different ways to estimate construction costs accurately so that projects can be finished quickly and easily.
Cost estimate classifications
Cost estimates can be classified in two different ways: by function and by level. When it comes to function, cost estimates are typically divided into three categories: preliminary, budget, and final.
Order of Magnitude Estimate
It is often used when preliminary budgeting for a project and does not require detailed itemization or exact measurements. This estimating method involves making educated guesses based on prior experience in the field and comparing similar projects.
Order of magnitude estimates can be broken down into five separate categories: very roughly, roughly, accurately, quite accurately and extremely accurately. Higher accuracy levels produce more reliable estimations but take more time to calculate due to the need for detailed specifications and measurements.
To get an accurate order of magnitude estimate, it’s best to consult with an experienced professional who has worked on similar projects before.
Intermediate/ Construction Feasibility Estimate
It involves looking at detailed design plans and specifications to determine the materials, labor and equipment that will be needed for a project. The estimates are typically based on similar projects from experience or current market prices of commodities used in construction.
The goal of this method is to provide a more accurate prediction of what it will cost to build the project than a conceptual or rough order of magnitude estimate can provide. It generally takes more time, resources, and expertise to complete an intermediate construction feasibility estimate compared with other estimation methods, but it can also help reduce potential overruns due to unexpected surprises during construction.
Preliminary Construction Estimate
They provide an early indication of the potential costs associated with a project and help inform decisions related to budgeting, scheduling, and overall risk management.
When creating a preliminary construction estimate, it is important to consider factors such as scope definition, site conditions, material pricing and availability, labor rates, and any applicable taxes or fees.
The more detailed information that is included in the initial estimate will provide greater accuracy when later refining the cost estimates. It is also important to understand that preliminary estimates are just that preliminary and should be monitored throughout the duration of the project since cost elements can change over time.
Substantive Construction Estimation
This approach requires that all aspects and components of the project be accounted for, from materials to labor to overhead costs. It is one of the most accurate methods of determining the overall cost of a construction project as it considers any potential hidden costs or issues that may arise during construction.
Substantive construction estimation begins with an initial evaluation which includes making sure all necessary permits have been obtained, researching materials and labor costs, and examining local conditions such as weather factors or access to resources like water or electricity.
During this phase, contractors can also identify potential risks that could affect the total cost estimate. Once this phase has been completed and approved by stakeholders, it’s time to move on to creating an itemized list detailing every aspect included in the project plan as well as associated costs.
Cost Estimating Method
To stay on budget and make sure a project can be finished on time, it’s important to figure out the costs of the project accurately. There are several different methods used to estimate the cost of construction projects, which vary depending on the size and complexity of the project.
Parametric Estimating Method
This method is based on historical data and requires minimal input from estimators. It relies on established relationships between variables such as material type, size, and labor hours to create accurate estimates. By using this kind of data-driven approach, estimators can quickly generate reliable cost projections before the actual design process even begins.
The advantage of parametric estimating is that it eliminates much of the guesswork associated with traditional methods of cost estimation and enables estimators to make more reliable predictions about how much a project will cost.
Additionally, since all inputs are based on past performance and quantifiable data points, estimators can be confident that their estimates are backed up by empirical evidence rather than relying solely on subjective opinions or assumptions about future outcomes.
Bottom-up Estimating
It also known as the “grassroots” method, is a type of construction cost estimating that starts at the lowest level of detail and works its way up. This method usually begins with an assessment of individual tasks such as carpentry, plumbing, and electrical work. After each task is estimated for time and resources needed to complete it, these estimates are then combined to give an estimate of the total project costs.
The main advantage of this approach is that it gives contractors a better idea of how much time and money will be required for each task which in turn allows them to plan more accurately for their projects.
It also provides a greater sense of control since the contractor can identify any problem areas or potential issues before they arise. However, this approach requires significant upfront investment in terms of research, data gathering on materials prices, labor rates etc.
Three-point Estimate
This type of estimate is often used for complex projects and those with high uncertainty. The three points, or estimates, are made up of the most optimistic value, the pessimistic value and the most likely value. These values are then combined to provide a range within which the costs can be expected to fall.
For example, if the optimistic cost is estimated at $10 million, the pessimistic cost is estimated at $15 million and the most likely cost is estimated at $12 million, then it could be assumed that the true cost will lie somewhere between $10 and $15 million.
It is more precise than single point estimations since it takes into account varying levels of risk associated with each individual component in a project’s budget.
Data Analysis Method
It is a powerful tool for construction cost estimators. It provides an efficient way to identify and analyze trends, patterns, and relationships within the data. This method can be used to identify potential sources of inefficiencies, or risks associated with certain construction activities.
It involves analyzing quantitative data collected on past projects and utilizing descriptive statistics such as mean and standard deviation to understand the data set in more detail. Correlation analysis can also be used to determine whether there are any correlations between variables which can influence project costs or outcomes.
Trend analysis can also be employed to help anticipate future costs by understanding past trends in different areas of construction work. Finally, time-series analysis is another valuable technique which allows estimators to recognize patterns over time in order to predict costs for future projects based on previous data sets.
Cost Of Quality Estimating Method
Lang Method
It is a widely used estimation technique that focuses on the total cost associated with a project. Through this method, estimators can analyze direct costs, indirect costs, and contingency funds related to the project. With this information, they can create an accurate estimate of the overall cost for a given project.
It incorporates four steps: firstly, it requires an estimator to identify all components of the project’s scope by breaking down each activity into distinct tasks and materials needed; secondly, the estimated cost of labor and material is calculated through various sources such as suppliers and subcontractors; thirdly, overhead costs are determined.
Finally, all elements are added together to give an estimate of the final cost. This approach allows for flexibility when changes occur during the life cycle of a project or when dealing with multiple projects simultaneously.
Hand Method
It is a straightforward method used to estimate the total costs associated with any given construction project. This approach requires little more than a calculator and an experienced estimator, who can take into account the material costs, labor expenses, overhead fees, and other factors that may influence the final cost.
To begin, the estimator will determine how many hours of labor are required for each task within the project. The number of hours needed for each job is then multiplied by an established rate to arrive at a rough estimate of labor costs. Material costs are then estimated based on
quantity and quality requirements.
Overhead expenses such as insurance premiums or equipment rental fees should also be included in this estimation process. Once all these values have been totaled up, they provide a good indication of what it will likely cost to complete a project using the Hand Method.
Equipment Factored Estimating
It is a construction cost estimation method that accounts for the estimated costs of equipment used in a project. This method uses an “equipment factor” to make an educated guess on the total
cost of the machinery necessary to complete a job. This number considers labor, rental costs, and other associated expenses such as fuel and repairs. It also can include data on operating efficiency and performance ratings of certain pieces of machinery to help inform estimators’ decisions.
Common Cost Estimation Problems
Estimating the cost of a construction project accurately is essential for staying on budget and avoiding delays. Unfortunately, due to the complex nature of many projects, there are some common cost estimation problems that can arise.
One such problem is inaccurate data in the estimator’s calculations. This can be caused by incorrect or outdated material costs or labor rates, or incomplete information about the project itself. Additionally, an inexperienced estimator may not be able to accurately account for factors like overhead and labor productivity which lead to an underestimation of overall costs.
Another frequent issue is failing to consider changes that might occur throughout the course of a project, such as increase in material costs due to inflation or additional work required due to unforeseen circumstances. Without accounting for these potential changes during estimation, it’s possible that estimates will not match actual expenses once a project has begun.
Quantifying Cost Impacts
Quantifying cost impacts is an important step in the construction cost estimating process. This helps to identify areas of potential savings and allows for a more precise estimate of project costs.
When quantifying cost impacts, it is important to consider all aspects of the project, including materials, labor, equipment rentals and other associated costs. It is also important to factor in any expected fluctuations in market prices.
By considering these factors early on in the estimating process, potential problems can be identified and addressed before they become costly surprises during the actual construction phase. Additionally, examining different scenarios or “what-if” scenarios can also help quantify any changes that may occur throughout the life of a project.
Cost estimation software programs can be used to make this process easier by allowing estimators to quickly compare various scenarios based on their inputs such as material prices or labor rates.
Resource Constraints
Due to limited supplies or a lack of skilled workers, certain materials may be more expensive than originally estimated or take longer to acquire. In addition, delays in procuring necessary resources can lead to extended timelines and higher labor costs due to overtime fees or penalties incurred by late completion.
To minimize resource constraints during construction cost estimating processes, contractors must carefully plan ahead and analyze potential risks associated with material procurement and workforce availability. It is also important for contractors to identify alternative sources for materials that may be less costly or easier to acquire than originally planned.
Many Organizations Involved
When it comes to construction cost estimating, there are many organizations involved in the process. An estimator is typically employed by a contractor or consulting firm to provide estimates for projects. The estimator will consult with clients and evaluate the scope of work to generate an accurate estimate. The general contractor may also be involved in the estimating process, as they are often responsible for managing the project budget and timeline.
In addition, architects may be consulted during the estimation process to help determine design elements that could affect costs. They may also provide input about materials needed for certain aspects of the job, such as structural steel or masonry components. Suppliers can also provide valuable insight into project costs since they usually have access to current market prices of building materials and labor rates.
Bottom Line
In conclusion, it is a crucial aspect of any construction project, as it allows project stakeholders to accurately budget for and allocate resources. There are various methods that can be used to estimate construction costs, including the unit price method, the labor and material method, and the project cost database method. Each of these methods has its own strengths and weaknesses, and the most appropriate method will depend on the specific needs and goals of the project.
Regardless of the method chosen, it is important to continuously monitor and update the cost estimate throughout the project to ensure that it remains accurate and reflective of the current project conditions. By using effective cost estimating methods and staying vigilant in monitoring and adjusting their estimates, construction professionals can help ensure that their projects are completed on time and within budget.