The process of forecasting costs of material, labor and other resources and operations during the project lifecycle of construction is known as Cost Estimation. Predicting costs with accuracy and judgment is a complex task. A Cost Estimator needs to be highly skilled and experienced having field knowledge and analytical and critical thinking attitude.
A Cost Estimator must also be well versed with the technical and engineering functions to be carried out in the construction domain. As a lot of financial decisions are involved in building infrastructure, there are possibilities of cost overruns, frauds, and budget deficit. To avoid these concerns, cost estimation plays an integral part in the construction project management. It helps the decision-makers to check the feasibility of the project and allocate the budgets accordingly. An inaccurate cost forecasting can lead to huge losses and the project may suffer in both quality and quantity.
Being a very critical component of any small to large or mega construction projects, the task of forecasting the costs must be precise, accurate and monitored continuously.
The construction management suggests techniques and methodologies that forecast the costs efficiently. Cost Estimation can be based on tried and tested methods mentioned
- Expert Judgement Method
Expert judgment can be grounded in previous experiences, facts, and data.
- Analogous Estimating Method
This method uses variables such as time, scope, price, complexity and measurements like weight and size to estimate a cost for the construction. Analogous Estimating Cost considers the actual costs of past projects to compare with current and similar projects.
- Parametric Estimating Method Parametric Estimating method utilizes statistics and algorithmic relation of previous data and values in terms of quantities for the current cost estimation.
- Bottom-Up Estimating Method Bottom-Up Estimating method considers the work allocation per individual and their detailed functions.
- Three-Point Estimating Method This method considers the risks and uncertainties involved in a construction project and based on the assumptions, considers the best-case, worst-case and idealistic scenario to predict the costs.
- Data Analysis Method
In this method, the cost estimation is based on alternative analysis. Within the scope of definition and functions involved, costs are allocated with specific statistics in the Data Analysis Method.
- Project Management Information System Method
This method is based on the use of resource management tools and structure to execute the cost estimation.
- Decision Making Method Decision Making Method is basically dependent on the management level. The agreements are either made unanimously or with the majority. The above-mentioned methods can be reliable and effective to predict the costs for the construction project lifecycle (Dashore, n.d.). At each step of the construction, the complexity of the functions increases. As the cost estimation is an on-going process, at each level, the cost estimation becomes more detailed.
- The American Society of
Professional Estimators have defined a five-level system for cost estimation for more accuracy.
- Level 1- Order of Magnitude Estimate
This estimate is produced to understand the feasibility of the project before it is launched.
- Level 2- Schematic Design Estimate
This estimate is based on the schematic designs used during the project lifecycle.
- Level 3- Design Development Estimate
As the construction design is developed, this estimate is produced simultaneously.
- Level 4- Construction Document Estimate
As per the scope of definition, specifications and drawings, construction documents an estimate is prepared.
- Level 5- Bid Estimate
As the name suggests, the bid estimate is produced based on the construction document forbidding and pricing (Proest, 2018).
Cost Estimation, being a preliminary and significant component of the project lifecycle, needs to be accurate and detailed as the feasibility of the project depends on the estimated costs and budget allocation. A good cost estimation leads to the successful completion of the construction adhering to the quality of the work.
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