Accurate construction cost estimates are crucial to the success of a construction project? They are the cornerstone of every construction project.
With the construction cost estimate decisions are made on the feasibility of the project—whether it Is a “go” or a “no- go.”
Getting an accurate cost estimation from a professional construction estimator is critical to developing and maintaining a realistic budget of project costs. Producing an accurate construction cost estimate can be tricky. The consequences of an underestimate or an overestimate can affect construction project to a great extent.
What is Construction Cost Estimating?
Construction cost estimating is a process for forecasting the cost of building a physical structure. These estimates should be created by professional estimators who have extensive experience in the type of building being constructed and who are up to date on the latest costs associated with the construction such as materials and labor.
Why is Construction Cost Estimating Important?
Due to the financial risks involved, a significant concern for both owners and developers is the financial impact of cost overruns and failing to complete a project.
With construction cost estimates developers make important decisions about:
- The project’s profitability and feasibility
- The procurement of financing
- Budgets, timelines, and the construction team
Accurate cost estimates also keep all the involved parties focused on delivering the project on time and within the budget. Construction cost estimates hold teams accountable for increased costs or overrun.
Main Types of Construction Cost Estimates
The American Society of Professional Estimators classifies estimates according to a five-level system that becomes increasingly more detailed and reliable as a project goes from concept stages, through the various design phases and into procurement and actual construction phases.
- Level 1: Order of Magnitude Estimate: Made when project design has not yet gotten under way, you only use an order of magnitude estimate to determine the overall feasibility of a construction.
- Level 2: Schematic Design Estimate: An estimate produced in line with schematic design
- Level 3: Design Development Estimate: An estimate made during the design development phase
- Level 4: Construction Document Estimate: An estimate based on the construction drawings and specifications
- Level 5: Bid Estimate: An estimate prepared by the contractor, based on construction documents. The bid estimate is the basis of the bid price offered.
Elements of Construction Cost Estimating
Below are the basic elements that are taken into consideration during construction cost estimating:
- Quantity Takeoffs – the required materials for the project
- Labor hours and labor rates – labor hours required to complete the project and the cost of the various types of labor
- Costs of Materials – total costs to buy, transport and store materials if needed
- Costs of Equipment – equipment needed to construct the facility
- Subcontractor quotes – from the various subcontractors
- Indirect Costs
Accuracy in Construction Cost Estimating
The estimated construction costs during the earlier stages of a project have less accuracy, and those expected later have higher certainty. The ranges will be higher at the beginning of the project and will narrow down as the project advances. Project cost estimates are characterized by how precisely defined the scope is at the time of estimation.
Construction cost estimating is a very important and complex process. That is why it is essential to have an experienced and up to date owner’s representative to bring together the various estimates in a timely and accurate way.
Owner’s Representatives, like DAE Group, help ensure precise estimates that accurately reflect the quality and design objectives of the project which are critical for bringing the project in on-time and on-budget.