Cost estimation is one of the most important processes that is carried out in the planning phase of a project. In the very early stages of the project, you get to know how much money the project will require in total. It can be beneficial in so many ways because knowing the final estimate means you do not have to worry about any extra expense. Sudden expenses can be stressful for clients, which is why clients prefer getting an estimation done. In many cases, contractors present estimates in the form of a bid. But in other cases, the client gets them personally, too, for transparency. 

Cost Estimation Explained:

Cost estimation is an extensive process that includes so many steps. The process starts with understanding the design through the blueprints. And using the design, the material takeoff is done. The process moves forward and covers many other steps till it gets to the final estimate. Estimation is a well-structured process.  And accuracy of this process depends on 

1. The levels of detail regarding project is available

2. The method used for estimation

3. The experience of the estimator 

Cost Estimation Importance:

Cost estimation is important for financial control. The report of cost estimation is very detailed. It includes a section where it is mentioned what part of the project requires how much money. It basically solves so many problems because the distribution of funds, which is a difficult task, is already done here. 

The other important reason is transparency among the shareholders. Large projects have many shareholders. To avoid any dispute due to misunderstanding regarding finance, it is better to get an estimation done by a neutral company. 

Cost Estimation Types:

1. Conceptual Cost Estimation:

• This is done when proper plans and designs for the project are not ready.

• It is done to get an idea of the feasibility of the design. You need to make a proper design that goes with your budget, also. 

• This estimation is done on the basis of either area or past similar projects.

• The accuracy of these estimates is low. Without proper plans, estimation cannot be accurate. 

2. Detailed Cost Estimation:

• This is the type where each step of estimation is followed to find the final estimate.

• Proper drawings are used to find material and quantity takeoff, and then estimates are calculated.

• This method breaks down every part of the project and ensures that no expense is left out of the list.

• The accuracy of this method is high because it is done in detail.

3. Quantity-Based Cost Estimation:

• In this method, material takeoff is done first. 

• The quantities of material are multiplied by the costs of materials to find the final estimate.

• Quantity-based itself is not a replacement for detailed cost estimation. It is a part of it. 

• Quantity-based estimation only tells how much material is required and what it will cost. It does not talk about the rest of the expenses in construction, like labor. 

Bid Estimation in Construction:

Bid estimation is done by contractors when they are competing for a project. If a small project is happening, the client finds a contractor for it. This gives the contractors a chance to compete for the same project through their bids. In large projects, many big construction companies take part in the bidding process. This means that the bidding process is very important in construction. And the entire bid relies on the accuracy of estimates and the amount of services offered.  A good bid includes

• Direct costs such as labor and material 

• Indirect costs such as supervision and administration

• Market competition and risk factors 

Contractors hire a reputable construction estimating company to get accurate estimates. Depending on this estimate, they prepare the entire bid. This means that there is no chance to mess it up. 

Common Mistakes in Cost Estimation:

Some common mistakes that lead to inaccurate estimates are 

1. Ignoring indirect costs

2. Using outdated price data

3. Not considering labor productivity because, due to many reasons, productivity increases or decreases. Timelines can change due to it leading to an increase in the total budget.

4. After any change in plan, not revising the estimation process

Construction takeoff is something that needs to be done again whenever a change in design happens. Even a small change means that the requirement of material will change. But if you keep using the old estimates, then how can the estimates be accurate?

Conclusion:

Understanding cost estimation methods helps you understand the reason why it has become so common in the construction industry. People do not start the construction process without getting cost estimates. The reason is that people have awareness now. People now understand that the project can still happen if estimation is not done, but its efficiency decreases. A sudden budget increase or demand for money can be very disturbing for the client. This article has discussed the types of estimations that are carried out at different points in construction.