All About Construction Cost Estimation

A detailed construction cost estimation is necessary for predicting the cost of any facility or structure under construction. It is an important part of the overall cost management for the builder, as well as necessary for budget adherence. Several important variables are considered while estimating construction costs, such as -

• Materials to be used, and their quality
• Design guidelines and features
• Size and shape of the facility
• Heating/cooling features to be provided
• Geographical area

Different Types of Construction Cost Estimates

Historically, most construction cost estimates were either prepared by architects, or by contractors or other specialist estimating firms. Although several different factors are considered while forming an exhaustive construction cost estimate, they generally are of the following three types -

• Design Estimates
  • Detailed cost estimates
  • Screening estimates
  • Engineer's estimates (based on specifications and architectural plans)
  • Preliminary cost estimates
• Control Estimates
  • Budget cost estimate for financing purposes
  • Budgeted cost after assigning to contractor but before construction
  • Estimated cost of completion during ongoing construction
• Bid Estimates
  • Generally submitted by the contractor/builder/owner for bidding or negotiation

The Requirement for Construction Cost Estimation Services

As new project delivery methods for constructions continue to evolve, many independent and highly respected firms have got into the foray of construction cost estimation services. These firms have the capability and the experience to provide the following services, amongst others

• Building Cost Estimation
• Residential Construction Cost Estimation
• Electrical Construction Cost Estimation

Such services are especially important to builders, since it reduces any perceived conflict of interest between their project teams and future bidders. Also, a client may need such services under the following circumstances

• To estimate project construction budgets
• To establish financing requirements
• To establish benchmarks for a construction bid
• Establish whether a proposed new construction plan is profitable or not

General Outlay of Construction Cost Estimation Services

Accurate and properly outlined cost estimates are critical to the success of a construction project. Cost estimation service providers focus on time-tested and well-defined procedures, so as to ensure highly accurate estimates. A clear and concise construction cost estimate should account for the following factors -

• Production Engineering Estimation
• Material Costs Estimation
• Labor Allowance Estimation
• Estimating all Establishment and Construction Processes
• Estimation of all Testing Processes
• Estimating Engineering Processes
• Estimating Manufacturing Processes

The Process of Construction Cost Estimation

Virtually, cost estimation for different stages of the construction development follows a properly defined procedure consisting of the following steps -

1. Defining the Scope of Cost Estimation Services

Before preparing an estimate, it is necessary that corresponding expectations are set for the estimate, as well as ensuring that everyone involved follow the same general outline, which is decided according to the scope of the project. This involves certain factors such as -

• Clearly defining the basis of pricing, and all inclusions within unit pricing
• Defining scope of the estimate, identifying all factors which are to be included or excluded
• Clearly establish the procurement schedule
• Clearly establish the construction schedule
• Establish a format for the estimate and level of detail to be incorporated
• Establish the duration for each cost estimate review

2. Preparing the Cost Estimate

A carefully guided cost estimate is prepared according to the following steps -

• Preparing a Quantitative Survey which defines the actual items to be constructed in detail, as well as defining the methods of measurement of estimate components according to regulations
• Deciding the pricing for several variables such as labor, etc.
• Estimating construction conditions and profit overhead
• Assessing current market conditions and making predictions about market changes which can affect project cost
• Estimating price escalation during the course of the project, along with project related risks and other contingencies

3. Cross-checking and Reconciling Cost Estimates

Validating all cost estimates before finally compiling them is an important procedure in the cost estimation process. Independent estimates can be used to verify critical components or can be tallied against information retrieved from past projects under the same project guidelines.

An exhaustive initial cross-checking should ensure proper reconciliation of the following factors -

• Scope
• Initially defined inclusions and exclusions
• Pricing assumptions (profit, overhead etc.)
• Risks involved during all construction stages

4. Properly Documenting and Presenting Results

In order to provide a detailed construction estimate, the contents need to be clear, consistent and in-line with the initial project scope definition. A well drafted estimation of costs should also be presented either in written or tabular form, or as a graphical output, depending on customer requirements. The cost estimate document should also present all results accurately, and stand the scrutiny of professionals during the bidding process.

The Future of Construction Cost Estimation

Construction cost estimation services are gaining importance in today's world, especially owing to the amount of time that is saved by contractors, sub-contractors and even builders, while planning small or large scale projects. By outsourcing construction cost estimation, additional flexibility can be offered to contractors especially during the bidding process, and removing excess backlog. As the outsourcing destination of the world, India is one of the topmost choices for global builders and contractors for outsourcing construction cost estimation services, and other engineering services.

At Outsource2india, we offer a wide range of engineering services, including; Mechanical Engineering, Architectural Services, Civil Engineering and Structural Engineering Design. Read more about how Construction cost estimation can save you money.

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