Construction cost estimating is one of the most time-consuming yet essential elements to consider before starting any construction project.
An accurate and precise construction cost estimate is vital information to judge the project’s financial feasibility. Further, cost estimates guarantee that the project will progress most cost-effectively and efficiently for both the property owner and the contractor.
To help you run your construction projects smoothly, here’s an in-depth look at the basics of construction cost estimating.
What is Construction Cost Estimating?
Construction cost estimating is the safest way to study the financial viability of a specific construction project. It is the systematic process of forecasting all the possible costs associated with completing a project. By having comprehensive and accurate costing, builders and clients can anticipate the expenses of building a physical structure.
Construction cost estimators need to provide accurate and truthful estimates for clients to allocate the necessary budget required to complete the project. That is why construction cost estimating is a foundational principle of project management because it thwarts the possibility of contractors losing money and project owners from overpaying.
Aside from having the cost estimate of materials, machinery, labor, and location, construction cost estimators also factor in other variables in their report. Estimators also include possible economic movements such as market fluctuations affecting real estate prices and material cost.
Why is Construction Cost Estimating Important?
Cost estimate enables the project team to make crucial decisions on materials and design that can significantly affect the project’s cost.
Estimating helps clients know the suitability and viability of a project. On the other hand, builders and contractors can decide and work on the project’s profit potential. Vendors and procurement can also work per the allocated amount.
Accurate budgeting is the best way for project owners to determine the venture’s closest actual cost, therefore, improving risk mitigation. Once you have an unbiased and accurate financial view of the project, you can price-check quotes and compare project proposals to ensure you have the most reasonable bid.
What Goes into Your Cost Estimate?
Reliant to the size and type of the project, an individual or a team of construction cost estimators do the job. The construction industry works on several models of determining what goes into the project’s cost estimate.
At the most basic level, cost estimates are divided into three categories. These are labor, materials, and overheads—professional builders group costs into direct, indirect, and markups.
Direct costs are the accountable expenses on product, facility, or function. Examples are labor, materials, and equipment. Indirect costs are accountable costs that are not directly linked with the project. Travel, administration, security, and overhead costs are some examples of indirect costs. Meanwhile, markups are the projected profits of the project.
Who Creates Cost Estimates?
A construction cost estimator produces and revises a project’s cost estimates. He is the central person in the cost estimation process. He is also responsible for estimating the different aspects and phases of a project. Though quantity surveyors and many other companies and professionals can benefit form using construction cost estimating software.
Although one of the most crucial elements in the construction process, construction cost estimators are often the least recognized. Their job includes compiling the list of materials and other expenses needed to determine the project’s cost.
Estimating is a tedious and time-consuming responsibility that requires a high level of accuracy and attention to detail. An estimator’s primary responsibility is the detailed and precise measurement of labor, materials, and overhead expenses needed to complete a construction project.
Aside from providing a line-by-line cost of the amount and type of materials needed to complete a project, cost estimators must also be familiar with the market fluctuation trends and the local market for materials needed.
Once all direct costs are accounted for to build the building, the cost estimator will adjust the cost to accommodate overhead, indirect costs, and profit before handing the final report to the builder or client.
What are the Challenges Faced by a Construction Cost Estimator?
A construction cost estimator’s job is not easy. Creating accurate cost estimates requires the ability to foresee the future regarding prices and availability of materials and equipment, labor shifting, and market trends. Unforeseen factors could be detrimental to the accuracy of the project cost even if the estimate were accurate enough during the time it was completed.
Aside from that, here are the other common challenges faced by a construction cost estimator:
- Fixed Budget
Another challenge is when estimators work with a fixed budget. Still, the owner or contractor has unlikely expectations for how much they can work on. The estimator may be pressured to report inaccurate costs to accommodate their demands. False cost reporting often leads to excess cost for the owner, negatively affecting the project’s accomplishment.
- Accuracy
Accuracy is at the heart of the cost estimator’s work. Erroneous estimates will affect the trust and working relationship of the client and builders. They can also harm the reputation and professionalism of the estimator.
- Time Constraints
Most cost estimator’s biggest concern is the lack of ample time to work on their estimates. Good estimators make it a point to visit the construction site and study all the factors affecting the project’s cost. When rushed to complete their reports, estimators are prone to commit mistakes.
Some builders and project owners opt to work with more than one construction cost estimator to delegate tasks.
Conclusion
Accurate and true estimation is vital in any construction project. Understanding how it works and finding the best construction cost estimator helps ensure the success of any construction project.
