Brief information on Project Cost System
If the design is modified at the design stage of a construction project, the project costs are constantly estimated and evaluated to keep the project costs within the budget of the owners. This working budget is normally known as the engineers or architects estimate. As soon as the design is completed, the field cost-control system is prepared with a final, detailed cost estimate of the total work.
This type of cost estimate is generally created by the construction contractor or another party who will be directly associated with the field operations. The contractor estimate is then abridged to a working construction budget and develop the foundation of the construction cost control system.
While the construction process is going on, cost accounting methods are utilized to recover actual construction expenses from current construction operations. This information is then applied for the purpose of controlling the cost on the current project and for working out the cost of future projects. Besides, the cost system offers significant information related to project financial control.
Preliminary Cost Estimates: Preliminary estimates of future construction expenses, are prepared throughout the project planning and design stages on the basis of approximation because these are accumulated prior to define the project entirely. This type of conceptual estimates differs from ascertaining the final detailed estimate of construction costs.
Basically, all conceptual price estimates are prepared on the basis of some system of gross unit costs which are acquired from earlier construction work. These unit costs are guessed forward in due course to focus on present market conditions, project location as well as the specific character of the job currently being considered. The following methods are followed to make preliminary estimates.
Cost per Function Estimate: This analysis is produced on the basis of the estimated expense per unit of use, like cost per patient, student, seat, or car space.
Construction expense may also be guessed like the average outlay per unit of a plants manufacturing or production capacity. These factors are normally applied as a method of instantly characterizing facilities costs at the setting up of a project when there is only raw marketing information, like the number of patients retained by a planned hospital. This extensive method of producing costs can also provide a powerful control on more detailed estimates as soon as they are created.
Index Number Estimate: This method is applicable for working out the price of a projected structure by upgrading the construction cost of the same type of current facility. It is performed by multiplying the original construction cost of the current structure with a national price index that is modified as per local conditions, like weather, labor expense, materials costs, transportation, and site location. A price index refers to the ratio of current construction cost to the original construction outlay for the type of structure concerned. Various types of price indexes are available in different trade publications.
Unit Area Cost Estimate: Under this type of method an approximate cost is selected with an estimated price for each unit of gross floor area. The method is found extensively in building and residential home construction. It offers a perfect rough calculation of costs for structures which are standardized or contain a large sampling of historical cost information from equivalent structures. This type of estimate is frequently applied in the industry to tally the relative value of different facilities.
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