An accurate construction cost estimation is crucial as both overestimation and underestimation have negative consequences. The time and resources put through towards estimation of construction costs save loads of business money and prevent the construction process from being halted. Hence, accurate architectural cost estimations are needed for the building construction to be successful.
Cost Estimation Basics
There is a basic two-step process to estimate every construction project:
- Determine all your expenses and costs.
- Apply a markup that will yield profits after expenses.
Estimating the cost of a project is not exactly a science, most of it comes from applying systematic technique and process which in term produce a better-predicted outcome. There is no universal process that is applicable to estimate for all the construction projects. Experience and methodical process help to identify the costs accurately and eventually increase profits. Each construction project needs to have a skilled team of project managers and engineers to plan and deliver the project by meeting the expectations of project stakeholders.
Major Cost Estimating Techniques: Best Usage of Each
Analogous estimating is achieved from a purpose-built archive of all previous projects data, often specific to an organization. If a construction firm repeatedly performs similar projects, it is easier to connect parallels between project deliverables and their costs/expenses. Estimators also adjust these costs according to the scale and complexity of the on-going project. Analogous estimations are accurate only if it is used to estimate similar kind of projects and have a precise assessment of the factors that will affect the costing.
It is also called analytical estimating and it is the most accurate estimation technique only if a complete work breakdown structure is available. A work breakdown structure divides the work deliverables into work packages. The project team estimates the architectural cost of completing each task in the work package. This eventually results in architectural cost estimation for the entire project by calculating the total cost of all constituent work packages involved in building construction. This total estimation process is called bottom-up estimation and is accurate when it’s carried out by experienced and well-equipped project management teams.
Estimators use the parametric estimation of unit cost technique only for the projects that have higher degrees of repeatability and involves similar project tasks. To use parametric estimation, you must first divide the project into stages of the construction process. Within each stage, the process is divided into small units of work. Once the dividends are created, you must determine the overall cost that each unit of work needs and then multiply this with other units within the stage. The addition of the estimated cost of each stage results in the total architectural cost estimation of the entire construction process. To get accurate results, the cost per unit at the first stage needs to be most precise.
There are many other cost estimation techniques that project managers use like three-point estimating, resource costing, vendor bid analysis, etc. For all kinds of project front-end cost estimations, bid preparations and project execution schedules, get in touch with our project consultants and engineers.