An Overview of Cost Estimation of Construction Projects
In the modern construction niche, Building Estimation and Costing are defined as "the summation of individual cost elements, using established methods and valid data, to estimate the future costs of a program, based on what is known today" according to the US Government Accountability Office.
Essentially it is all about projecting the complete possible monetary cost of building a particular structure, including the planning, the resource supplies and the actual physical building up of the structure, and supplementary costs if any. This is crucially important to a builder since it forecasts the financial impact of a construction project on his/her pocket. A good cost estimate would help the constructor to not lose money and the customer to pay fairly; on the other hand, a bad cost estimate can even render a construction company bankrupt.
Even before starting any agreements on a building, a tentative cost estimation would help both the builder and the customer to realize the feasibility of a construction project and to realize if the full scope of requirements can be met. Then architects and engineers know what are their limits in planning the details and how to bid for the project.
This very important task can fall upon an individual employee of the building company, a team or even get outsourced to another professional firm, depending upon the scope and size of the project. Also, the construction cost estimation can be done in one go or it may be done in phases as required. Building contractors and subcontractors may be doing their own cost estimation which then they would use in the bidding. Depending upon the project type and complexity, multiple building cost estimation can be done and then the most feasible one can be selected depending upon the present scenario and the client's needs.
The American Society of Professional Estimators describe construction estimation and costing in the five following levels in increasing precision and dependability:
Order of Magnitude Estimate: Even before planning and designing starts, this vague estimate is done to know the economic feasibility of the project.
Schematic Design Estimate: Precision costs as implied by the building plan requirements.
Design Development Estimate: upgrade on above, this is the projection of costs done through actually doing the architectural design.
Construction Document Estimate: The understanding of the project cost as analyzed by the constructor.
Bid estimate: Price offered to the customer which includes all the economic needs of the building company.
The Building Cost Estimations can be categorized in the following three areas, depending upon when and how the company uses them. They are:
Design Estimates: Prepared during a project's pre-design and design phases start with magnitude estimates and end with the engineer's estimates of the costs.
Bidding Estimates: Drawing from a number of data points, constructors can provide a construction document estimate which would include direct costs, supervision costs, and subcontractor expenses.
Control Estimates: created as a guideline by which the actual costs are controlled, the control estimates are done after signing of a building contract but before the actual construction starts, assuming the full and precise plans are available. This allows the builder to forecast the costs ahead depending upon shifting scenarios and allows certain leeways for unforeseen circumstances.
To estimate the cost of building a structure, a professional cost estimator will look at a possible building by means of the following sections: Substructure, Shell, Interiors, Services, Equipment and Furnishing, Special Construction, Building Site Work. Then they will estimate the costs of all these facets and integrate those to present the building cost estimate.
A professional cost estimator as an individual or team might go about predicting the cost estimate of a building following the below steps:
Prepare a chart or schedule of work till full completion of the project including stages and time vs workflow.
Plans provided, figure out the quantities of materials required up to the completion of work, directly needed or indirectly. Do not forget to provide for wastages. Get quotes for the monetary costs of the same.
Estimate the cost of labors required and their management, and any other supplementary personnel.
Realize the total of all the above and prepare cash flow statements about when how much needs to be spent in order to achieve what.
Add contingency consideration and provide for ancillaries.
The total of the above would be the professional cost estimation of a given building.
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