Estimating Construction Costs and its Benefits and Procedure
Construction Cost Estimating - Definition?
Estimating Construction cost is a fundamental principle that helps in determining the cost of building a particular structure. Project owners usually use this principle to determine the usefulness of this project and it also helps in budget allocation. The proper estimation process helps to set up a fixed budget so that it prevents contractors and clients from overpaying.
Benefits of Construction Cost Estimation
Project owners before investing in a project always have a cost estimation process to forecast the project's usefulness and its valuation. Contractors usually use this estimation process to decide whether to bid on the project or not.
The cost of construction always depends on the input of architects and engineers so that the structure meets all the required resources and proper funding.
A proper and brief cost estimation procedure will surely help the owner and contractor from overpaying. Estimating Cost is a vital component of Earned value management, a management approach that helps in tracking the project's overall performance against the estimated cost.
It is advised, to regularly do cost estimation for all kinds of construction activities from building a new structure to remodeling of structures. Estimating the cost of construction is a good practice for anyone with a sense of how much cost the project will value.
More accuracy is required to construct a particular structure that has both timelines and budget closely depending on paying back loans and generating revenue as early as possible. This fundamental cost estimation is very much essential in big construction projects where public money is involved.
Usually in mega projects where public funding is involved the accurate Cost estimation increase trust, provides a transparent overview, and increases self- morale in handling the project efficiently.
Defects while preparing the Cost Estimation of a particular project cannot be entertained. One example of invalid cost estimation was Marble Hill nuclear power plant in Indiana. Its construction started in 1984 after seven years of construction, the Public Service Company had completed the project halfway and spent around $2.5 billion due to cost overrun.
In this competitive era contractors with nice and arranged cost estimates are usually hired. Clients usually choose the lowest bid possible that meets their standards and according to their requirements. Contractors' efficiency and speed take to prepare Cost estimation now-a-day becomes the main factor to get opportunities.
Cost Estimating Procedure
There are a few procedures in preparing the cost estimation charts, they are as follows:-
1. Mutual agreement on the estimated cost: The investors or the client involved in a particular project should mutually agree on this estimation process and costs. This process involves obtaining proper project information and comparing it with previous projects’ scopes and timelines to provide more accurate cost estimation. The level of scope in the project and its valuation always depends on the design, criteria of that project.
2. Base Estimate Preparation: A basic estimation involves the basic valuation of the project ignoring its future escalations. This kind of estimation involves calculation depending on aspects like scopes, size, and complexity of the project. More details and comprehensive cost estimation are usually prepared while construction progress.
3. Evaluating Base Estimation: Evaluating the base estimate is vital as it requires the contractor to ensure whether all the important aspects relating to the projects are properly added before submitting. This base estimation is also used to finalize the scope and timelines of the project.
4. Reviewing Risky Factors: An important part of planning a project is to review and develop a less risky plan. The risk management factors are an ongoing procedure to make a project with less risky elements and high possibilities chances.
To learn more, watch the following video tutorial.
Video Source: Civil Engineering Forum
5. Transparent Communication approach: The proper and healthy way of communications and distribution of cost estimates between the stakeholders and investors is important. A good communication process could lead to a much more efficient and faster estimation process. This approach also helps in determining the information medium with which the information is to be shared.
6. Peer Review: The other cost estimators must be hired to give a review of the cost estimations for more effective results. They perform thorough checking in order to verify, qualities, cost management, and scopes involved in the project. Peer checking is very much important to fill up any gap found, to reduce costs.