5 Accurate Methods in Estimating Construction Costs
Most times, people do a preliminary estimate before the construction phase of the building begins. This estimate shows how much it will cost to do the project, and it also projects how successful it will be.
The owners of these building projects often use different methods of estimation to complete their estimates. However, it requires a lot of knowledge to do a construction estimate. That’s why many companies choose to use the best construction estimating software to complete their estimates.
Classification of Cost Estimates
There’s a five-tiered system that is used when doing estimates. Each level has its own purpose and you will find them below.
• The Order-of-Magnitude Construction Estimate
Before designing your project, you should do an order-of-magnitude estimate. At this point, the project will only be approximately 0 to 2 percent, which gives you an accuracy margin of 20 to 30 percent.
This estimate shows the breakdown of the amount of material you will need for your project. It allows the owner to decide which route they’ll go when purchasing materials.
These estimates are generally completed in the pre-construction phase, because at that point, there’s no available information regarding the project. The skills required to complete this estimate are judgement, experience, historical values, and charts.
Another name for this type of estimate is ballpark because it’s generally guesswork, rough estimate, or concession. They often use it for the initial part of the evaluation.
• A Construction/Intermediate Feasibility Estimate
Owners often use this estimate to determine the feasibility and preliminary budget for their project. This estimate will show them the information they require, knowing whether or not they should continue with their project.
Within the industry of construction, they associate this estimate as a screening schematic or conceptual design estimate.
• Preliminary Construction Estimate
This estimate is computed accurately. The owner gets the chance to choose the configuration and design of their project. The estimate is then presented to the lenders for them to authorize it.
The definition ranges from 10 to 40 percent and has an accuracy margin of 10 to 15 percent.
• Substantive Construction Estimate
This estimate is prepared based on the productiveness of the project. It’s also monitored against the progress of the construction and cost incurred. There is a breakdown of quantity takeoff attached.
After this is done, they calculate all the areas, including profit margin and other contingencies. The accuracy margin of this project is 5 to 10 percent, with a definition of 90 percent.
At this point, materials and labor cost are well defined. This estimate is used by contractors to determine the actual value of the project, and assess bid.
• Definitive Construction Estimate
They prepared this estimate by using a construction contract and the agreed cost of the project. However, it’s no longer classified as an estimate because the team would’ve already known the ultimate cost.
Of all the estimates, this is the most accurate. The variance of the estimate is only 2 percent and the project definition is 100 percent. This estimate is used to evaluate the baseline, check vendor negotiation and claims evaluations.
Conclusion
You can keep all interested parties in the loop by using these estimation methods. Cost estimates help you make informed decisions, especially when doing a renovation. When you have clarity with your estimations, your team will be able to accomplish a lot more work.
