The ABCs of Construction Estimating

Construction estimating is the process of forecasting the direct and indirect costs of building a physical structure. Building estimating is key to the creation of a project budget.

Every construction project should therefore start with a precise and accurate cost estimate.

Here’s everything you need to know about construction estimating:

Benefits of Construction Estimating

As stated above, accurate estimation of building costs is important for both the contractor and the customer. Both parties should be concerned about the costs of a project since inaccurate estimates can result in cost overrun and failure of project completion.

Both parties need to take their time to prepare an accurate estimation of a building to shield themselves from possible financial trouble – and loss of money.

Construction Estimating Methods

Construction estimating is usually done by a project estimator. It can also be done by a site manager or other worker depending on the size and scope of the project.

While every project is different from another, an estimator will generally look at the take-off to measure materials, time, and labour.

There are many ways to classify the total expenses of a project but most estimators usually classify expenses into direct and indirect costs.

Direct expenses are costs that are accountable directly for a specific activity in construction work. They include building materials, equipment, and labour.

Indirect costs are expenses of items that are not assigned for construction work. These include security costs, utilities, quality control, and administrative costs.

Accuracy in Construction Estimating

Accuracy is key to effective building estimating. However, the level of accuracy varies depending on the stage of a project.

Earlier stages of a project have less accuracy compared to the later stages.

RELATED: The 5 Stages of Construction

The American Society of Professional Estimators outlines five accuracy levels:

Level 1: Order of Magnitude

This is an extremely rough estimation of building costs created before a project is well-defined. It is based on the judgement of an estimator and the actual costs of similar projects.

The typical range of the order of magnitude is usually from -25% – 75%.

Level 2: Intermediate Estimate

The intermediate estimate is mainly used to determine whether or not a project is feasible.

Large-scale commercial projects such as malls and office parks develop intermediate estimates to decide whether to carry on with development or abandon it altogether.

Level 3: Preliminary Estimate

This estimate uses some detailed scope of the project to consolidate unit costs. A preliminary estimate is accurate enough for consideration as a basis for project financing.

In some instances, project budgets are approved on the preliminary estimate.

Level 4: Substantive Estimate

Based on estimated unit costs, the substantive estimate is created by examining reasonably finalised project designs, objectives, and deliverables established by the estimator.

A substantive estimate is used to control project expenses to avoid cost overruns.

Level 5: Definitive Estimate

The definitive estimate is the most accurate and reliable estimation of a building project since it arises when all the expenses have been identified.

It is used in the creation of bids, tenders, and cost baselines.

It is important to note that all cost estimates are calculated on assumptions and are prone to changes when costs are updated as new issues arise.

Conclusion

Construction estimating can make or break a project and builders must therefore invest in technologies that make it easier and more accurate to calculate cost estimates.

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