What Is Construction Cost Estimating?

In construction, the term “estimate” is normally used in relation to the approximate costs associated with a construction project. For instance, a conceptual cost estimate in may be used to evaluate the financial viability of a certain construction project or its aspects.

Since construction is a business that carries considerable risks for both clients and builders, the importance of reliable construction cost estimates can’t be overstated. An accurate cost estimate will not only keep the contractor from losing money, but also prevent the client from overpaying.

Since it’s in all parties’ interest to thoroughly research and estimate expenditures prior to setting the project into motion, we’ve asked the expert construction consultants from VERTEX to provide a brief explanation of what construction cost estimating is and what role it plays in a construction project. Keep reading to learn more.

What is an estimate in construction?

A construction estimate is a study to accurately forecast the costs & expenditures associated with building a structure. When considering large construction projects, clients often get multiple cost estimates during the project’s lifetime. These include both the ones provided by independent estimators and potential contractors in their bids.

Since construction cost estimates rely on available data, they typically get more accurate and detailed the further the project progresses. The truly accurate estimates review and make use of contractor & supplier bids along with a detailed project schedule & material list. Ultimately you find out how accurate the estimate is after the project has been completed and all actual costs have been incurred.

Failure to produce a dependable construction estimate can result in serious cost overruns that impact the project’s pro forma (which demonstrates whether the project financially succeeds or not). On the other hand, a skilled and experienced estimator is able to account for a multitude of factors in order to provide a correct estimate that will minimize the chances of project failure.

What is the purpose of estimating in construction?

By providing clients and builders with a reasonably accurate idea of the cost of a proposed or ongoing construction project, a construction cost estimate helps parties decide whether the project can be feasibly undertaken or if it should be changed or abandoned. They also give clients the info they need to manage the project’s financing.

The cost estimate helps determine:

  • Which kind and quantity of materials will be needed for the project, and how the arrangements to obtain them can be made;
  • How many and which type of workers of different categories need to be hired to finish the work in the allotted time;
  • The amount and type of equipment necessary to bring the work to completion;

At the project outset, the above estimates can be used to set a budget and determine whether a design option falls within the available budget. This is particularly important in government work due to the need to allocate public funds. 

How do you estimate construction projects?

Construction cost estimating progresses over multiple stages. While providing an in-depth analysis of all of these stages is beyond the scope of this article, they all fall within three broad categories: control estimates, bid estimates, and design estimates.

The titles of these categories reflect how each estimate is used:

  • Design estimates are made during the pre-design/design phases of a project and are used to create an early assessment of project expenditures.
  • Bid estimates are performed by contractors in order to determine whether a project should be undertaken and to prepare competitive bids.
  • Control estimates enable contractors to determine a project’s cost to completion and plan ahead for upcoming costs.

 

 

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