What you need to know about Construction Estimates
Construction cost estimates provide a framework for developing budgets and bids for construction projects. It is important for owners to obtain rough and detailed estimates in order to assess the feasibility of their projects and determine how much financing they will need.
Your project management and estimate techniques can significantly affect the accuracy of your construction budget. By gathering a budget early on, you can determine whether the project will provide the homeowner with a satisfying result and if you will be able to make money from it.
If you have a lot of information and data about a project, there are many ways to estimate costs. A construction bid document can provide detailed line item estimates, as well as preliminary estimates based on past projects. Estimates range from ballpark figures to well develop proposals used to create formal bid estimates and contracts with customers.
Different Materials of Construction Estimates
It is important to make sure the design documents contain sufficient information to ensure the accuracy of the construction estimate. Various levels of document completion contribute to contractor estimates.
The accuracy of the estimates increases as the project develops. There are several types of estimates based on the level of accuracy required, including magnitude estimates, feasibility estimates, preliminary estimates, and definitive estimates.
Data on cost estimates can be gathered from three different sources. An estimate based on unit costs provided by a third party or a contractor's internal data is a parametric estimate.
By calculating the unit cost based on the direct construction cost, including materials and the quantity of work required, the project's overall cost can be estimated.
Secondly, expert judgment is provided when a building expert determines the project's cost.
The third type is an analogous estimate, where the current project is compared with a similar project and the information from the similar project is used to generate the current estimate.
A project estimate can be created in two ways: top-down and bottom-up. According to a top-down estimate, the project's estimated cost is determined and costs are distributed based on that estimate to each task.
An overall project cost is determined by summing the costs of each specific task down to the total. Using takeoff software, you can complete a bottom-up estimate that is the most detailed and accurate.
Construction Cost Estimates Types
Construction cost estimates can be classified into five types: preliminary, detailed, quantity, bid, and control. During the lifecycle of a project, each is used for a different purpose.
Preliminary Cost Estimate
Preliminary estimates are often used in the early stages of a project, usually before design documents have been developed.
Preliminary estimates help project owners determine whether a project is financially feasible by providing a rough estimate. A preliminary estimate can help them determine how much financing they will need or whether they can afford the project on their own. When a project involves too much of your time, a preliminary estimate can help determine whether it should be undertaken.
You usually develop a preliminary estimate by analyzing the costs you have experienced on similar projects in the past. General contractors, for example, may provide preliminary estimates for new office buildings based on similar sized buildings in the past. A revised estimate with more specific cost details must be prepared before construction can begin with this type of estimate.
Detail estimates involve breaking down the project scope into smaller, individual unit prices. A project's cost includes a variety of materials, equipment, and labor. A total project cost can be calculated by adding these costs together.
You or your estimator will need a finished design before you can provide a detailed estimate. The detailed estimate will be provided after the contractor provides all design documents and has determined how much labor will cost. It is usually based on the contractor's initial budget for the construction of a building. A masonry contractor estimates the cost of masonry materials, labor, and foundation for a brick wall.
Quantity Cost Estimate
Quantity estimates are based on the amount of units needed or the amount of work that needs to be provided. In order to arrive at the overall project estimate, all costs for each quantifiable piece of the project are added together.
In a takeoff, all of these costs are typically calculated based on a standard cost for each unit of work and the materials purchased.
The concrete contractor estimates the foundation for a project on the basis of the slab's square footage. In addition to forms, materials, and labor, he determined the cost per square foot for foundations. This means it is best to use a digital takeoff tool that can be customized according to your needs.
Bid Cost Estimate
Bid estimates are cost estimates submitted to potential clients in the hope of winning the job. Costs for the project will include all the contractor's costs, as well as overhead costs and profit margins.
Bid cost estimates often serve as the basis for construction contracts, so it is imperative to factor those two items into the mix. It consists of the contractor's breakdown of the building costs, plus margins for profit, overhead, and contingencies. Software that allows digital takeoffs commonly allows for the addition of line items for markups and other expenses.
Control Cost Estimate
The control estimate consists of three estimates: the budget estimate for financing, the budgeted cost after contracting but before construction, and the project estimate after construction are completed. As a result of accepted customer change orders and actual costs incurred, these budgets are revised regularly.
Typically, parametric estimates are based on third-party standard rates or a contractor's historical data to provide a cost estimate.
It is the most accurate way to estimate a project's cost when each activity is priced separately, and then rolled up.
Equipment Factored Estimate
For projects in which equipment will be furnished and installed, an equipment factored estimate is used. A factor called an installation factor is added to the equipment cost in order to calculate its total cost. Materials, subcontractors, and direct labor costs are included in the installation factor.
Historical estimates are based on project budgets of similar size and scope from the past. Often, inflation or other pricing factors are taken into account when calculating the cost.
Plinth Area Estimate
As with the parametric estimate, the plinth area estimate is determined by a standard rate. Building plinths are covered by the external dimensions when they are constructed.
To get more details, watch the following video tutorial.
Video Source: ConstructIQ
Three Point Estimate
In three point estimates, expected costs are averaged across three scenarios: optimistic or best case, probably or likely, and pessimistic or worst case scenarios. In order to determine the average, the three values are added up and divided by three.