Some useful methods for construction cost estimation

Cost estimation can be termed as a well-devised forecast of the possible construction cost of a specific building project. A detailed cost estimate presents information to owners, architects, and builders about the facility and the project budget throughout the design phase.

A cost estimate should incorporate all the items to be included in the general contractor’s
bid. A standard format is applied to break down the items for preparing the cost estimate. The cost of each item is established from a database of up to date construction cost information.

Accurate cost estimation plays a key role in construction projects that leads to better decision making. There are several methods available to prepare the estimate of a project. These methods are based on the project’s scope, estimating purpose and estimating resources.

Parametric cost models
Under this method a parametric model is applied in which costs are forecasted based on project characteristics (parameters) in a mathematical model. Here models are developed from historical cost data based or from building a model scenario on similar systems or subsystems. Models can be simple (for instance, with the cost per square foot to estimate the total cost of building a home) or they can be complex (for instance, applying several factors to estimate the total cost of home construction, for example the number of floors, windows, and doors).

Statistical analysis is performed on the data to discover connections between cost drivers and other system parameters, for example design or performance parameters. The analysis creates cost equations or cost estimating relationships to be utilized independently or grouped into more complex models.

Bottoms-Up method
This method is applied at the time of progression of level of detail with the advancement of project. Under this method a work statement and set of drawings or specifications are utilized to “takeoff” material quantities necessary for executing each separate task achieved in completing a prearranged operation or generating an equipment component. From these quantities, direct labor, equipment, and overhead costs are derived and added. The contractors always organize this type of estimate to support their proposal bid process. This entails with a detailed WBS and pricing out each work package making up the project.

Top-down estimate
It is subsidiary technique that starts with work breakdown structure (WBS). To get a top down estimated schedule the estimator has to break down the activity and set up linkage between activities. It is applied once a good overall estimate is ascertained for the project and the method is sub-divided down through the layers of the work breakdown structure.

A top-down estimate facilitates a project manager to obtain a very similar project’s budget, work some financial math magic and get a rational budget for the current project.

Top down estimating is primarily applied in construction projects to provide a quick estimate where the prerequisites are more or less static, and there aren't too much unknowns. This method can also be applied for small software projects.

Top-down estimates employ rules of thumb, parametric models, analogies, or cost estimating relationships (CERs). CERs based on historical experience that can present data involving the cost to build up a source line of software or the cost per square foot for a building construction project.

This method estimate the size (duration and cost) and risk of a project (or phase) by looking at the project as a whole and matching it with the similar projects executed in the past.

Specific Analogy Technique
This method is useful for early life cycle macro-estimation. Analogous estimating relies on historical information to forecast the cost of the current project. Under this method one has to select one or two completed projects that most intimately match the characteristics of your launching project concerning the scope of the current project, its size, and other known variables.

The process of analogous estimating considers the known cost of an item used in previous estimating systems as the basis for the cost of a similar item in a new estimating system. If any similarity is found, observe how many effort hours that project took, and utilize the information for your estimate. (If the organization don’t have any tracking for actual effort hours, detect how many people worked on the project for how long, and then regulate the hours as required.) Adjustments are made to known costs to make up differences in relative complexities of performance, design, and operational characteristics.

Watch the following power point presentation for demo.
http://www.nps.navy.mil/orfacpag/resumePages/OA4702/Chapter%2011%20Analogy.ppt

Cost Review and Update Technique
Under this method an estimate is created by investigating previous estimates of the same project for internal logic, completeness of scope, assumptions, and estimating methodology and bring up to date with any alterations.

Trend Analysis Technique
This method compares originally estimated contract costs against actual costs on work performed up till now to obtain a contractor efficiency index. The index is very useful for regulating the cost estimate of work not completed so far.

"Design-to-Cost"
Under this method all cost goals for development, acquisition, or operations and maintenance are utilized like design parameters together with technical performance, in the systems design trade-off process. In some situation where the absolute value of a dollar threshold required to be enclosed, the project definition, conceptual design, and development can deal with performance trade-offs to arrange the project in a predetermined cost envelope.

"Cost as the Independent Variable"
This method is an affordability based method ideal for planning project scope. The method begins with a fixed budget and performs toward the back in the course of a repetitive procedure of prioritizing and choosing constraints to appear at a project scope attainable within budget constrictions.

Posted by Rajib Dey
Business Development
Global Associates
A pioneer company in construction estimating
Join our estimating forum 

Vico Software presents Vico Office R3

Vico Software launches Vico Office R3 that generates a Construction-Oriented 5D BIM Environment for owners and contractors.

By utilizing this latest software the contractor get the ability to produce several types of BIM model with cost and schedule information.

The general contractors can computerize the task of generating location-based quantities both for estimates and for the powerful Flowline™ schedules.

This integrated construction management software is very useful for large complex building projects and can be utilized for coordination, budgeting, and project control alongwith modeling, scheduling and estimating.

Vico Office R3 converts 3D BIMs by integrating construction-caliber quantities with location, 4D scheduling data, and 5D cost estimating data to evaluate the schedule and cost impact of changes throughout preconstruction planning or throughout the project's build phase.

Posted by Rajib Dey
Senior Executive
Global Associates (The pioneer company in construction estimating)
Please join our estimating forum

The Technique of Construction Estimating

The construction estimating is the calculated amount of various required items of work, and the expenses likely to be incurred there on. The total of the probable expenses to be incurred on the work is known as estimated cost of the work. This cost is a close approximation of its actual cost. The agreement of the estimated cost with the actual cost will depend on accurate use of estimating methods and correct visualization of the work, as it will be done. Doing accurate estimating is very important as the success of the project largely depends on estimating methods. Under estimating may result in the client getting an unpleasant shock when tenders are opened and drastically modifying or abandoning the work at that stage. Over- estimating may loose the engineer or estimator his client or his job, or in any case his confidence.

Estimating is the most important of the practical aspects of construction management, and the subject deserves the closest attention of one aspiring to a career in the profession. It is a comparatively simple subject to understand; however, as it brings one up against practical work, methods and procedure, knowledge of it cannot be acquired without close application.

Data Required for Preparing an Estimate:

In order to prepare a detailed estimate the estimator must have with him the following data:

1. Plans, sections and other relevant details of the work.

2. Specifications indicating the exact nature and class of materials to be used.

3. The rates at which the different items of work are carried out.

To enable an estimator to take out the quantities accurately, the drawings must themselves be clear, true to the fact and scale, complete, and fully dimensioned. The estimator has also to bear in mind certain principles of taking out quantities.

Steps in Preparation of an Estimate:

There are three clearly defined steps in the preparation of an estimate.

1. Taking out quantities

In the first step of taking out quantities, the measurements are taken off from the drawings and entered on measurement sheet or dimension paper. The measurements to be taken out would depend upon the unit of measurement. For example, in the case of stone masonry in superstructure, length, thickness and height of the walls above plinth level would be taken out from the drawings and entered on the measurement sheet, whereas, in the case of plastering only the lengths and heights of the walls would be entered. Obviously, the unit of measurement in the first case is cubic meter and that in the second case is square meter.

2. Squaring out

The second step consists of working out volumes, areas, etc. and casting up their total in recognized units.

3. Abstracting

In the third step all the items along with the net results obtained in the second step are transferred from measurement sheets to specially ruled sheets having rate column ready for pricing.

The second and third steps above are known as working up. All calculations in these stages and every entry transferred should be checked by another person to ensure that no mathematical or copying error occurs.

Steps of a proper Estimation

A proper estimation is integrity of some sequential processes or steps. An accurate estimation gives you the chance to complete the project in schedule time and under budget. The basic understanding of the project estimation gives you some advantage which will be surely beneficial for you. That’s why it is very important to follow the steps of the project estimation properly. Here we will discuss the steps of a proper estimation.

The Design: First of all you have to study the design accurately. Only a clear understanding will give you a better idea about how the project is going to be after completion. The drawing and supporting electronic files are included to illustrate the general scope of improvements. You will take care of the essential factor of the construction like safety, traffic operations, durability, desired appearance, maintainability, environmental protection, drainage and other permitted constraints. The design review process is much more important because the success of the project is on the design.

The Required Software: Selecting the proper software required for the estimating a project is another important step for the project estimation. To find out the perfect software for the type of estimation is very important.

Taking out quantities: In the next step of taking out quantities, the measurements are taken off from the drawings and entered on measurement sheet or dimension paper. The measurements to be taken out would depend upon the unit of measurement. For example, in the case of stone masonry in superstructure, length, thickness and height of the walls above plinth level would be taken out from the drawings and entered on the measurement sheet, whereas, in the case of plastering only the lengths and heights of the walls would be entered. Obviously, the unit of measurement in the first case is cubic meter and that in the second case is square meter.

Squaring out: The fourth step consists of working out volumes, areas, etc. and casting up their total in recognized units.

Abstracting: In the last step all the items along with the net results obtained in the second step are transferred from measurement sheets to specially ruled sheets having rate column ready for pricing.

The last two steps above are known as working up. All calculations in these stages and every entry transferred should be checked by another person to ensure that no mathematical or copying error occurs

Tips for a perfect estimation

Always just before to start a project some questions crawling in the minds of every member of the Architects, Engineers and Construction industry. How much will it cost? How many days will it take to finish? What will be the profit margin of the project? To get answers of all these questions you should seek the help of project estimation.

Any construction projects typically involve many dynamic aspects, yet they're often constrained by finite conditions. These contradictory forces make it very difficult to determine with pinpoint accuracy the time and effort required. By using a set of proactive estimating techniques to scope, plan, and constrain your project conditions, you can dramatically improve your estimating practices, reduce and mitigate risks, and increase your project success rate.

Do you excel at predicting the time, funding, and resources your projects will require? Whether your company aims to develop a new product or service, update an existing system, or launch a new Web site, these undertakings will require people, schedules, funding, resources, requirements, testing, revising, implementation, evaluation, and many other elements. Sometimes we forget the hidden or unknown variables that are difficult or impossible to anticipate and sometime even more difficult to resolve.

That’s why you need to be more careful when estimating for a construction project. Here we are discussing about some important tips for perfect project estimation.

1. Maintain an ongoing "actual hours" database of the recorded time spent on each aspect of your construction projects. Use the data to help estimate future projects and identify the historically accurate buffer time needed to realistically perform the work.

2. Create and use planning documents, such as specifications and project plans.

3. Perform a detailed task analysis of the work to be performed.

4. Use a "complexity factor" as a multiplier to determine whether a pending project is more or less complex than a previous one.

5. Use more than one method to arrive at an estimate, and look for a midpoint among all of them.

6. Identify a set of caveats, constraints, and assumptions to accompany your calculations, which would bind the conditions under which your estimates would be meaningful. (Anything that occurs outside of those constraints would be considered out of scope).

7. If the proposed budget or schedule seems inadequate to do the work, propose adjusting upward or downward one or more of the four project scoping criteria: cost, schedule, quality, and features.

8. Consider simpler or more efficient ways to organize and perform the work.

9. Plan and estimate the project rollout from the very beginning so that the rollout won't become a chaotic scramble at the end. For instance, you could propose using a minimally disruptive approach, such as a pilot program or a phased implementation.

10. In really nebulous situations, consider a phase-based approach, where the first phase focuses primarily on requirements gathering and estimating.

11. Develop contingency plans by prioritizing the deliverables right from the start into "must-have" and "nice-to-have" categories.

12. Refer to your lessons-learned database for "20:20 foresight" on new projects, and incorporate your best practices into future estimates.

In conclusion, by using a set of proactive estimating techniques to scope, plan, and constrain your project conditions, you can dramatically improve your estimating practices, reduce and mitigate risks, and greatly increase your project success rate!

Construction Scheduling is the most effective method to streamline a construction process

Planning, scheduling and control of the functions, operations, and resources related with a construction project can bring great benefits to the construction ranging from conception to post-construction analysis.

A construction schedule consists of a sequence of work tasks that are linked to each other in a logical manner. With a well-planned and realistic schedule that includes as many variables as possible the construction managers get updated with the new information. They are able to make adjustments instantly by rearranging the schedules and reduce hindrances and streamline a construction process.

The schedule is also utilized to track bids from original invitation or analysis during the hand over of the final bid.

Scheduling is needed in the following cases of a construction project :-
a) hierarchical breakdown of the project
b) integration of risk and improbability during activity time and cost estimate
c) modeling of dynamically allocated resources.

There are many factors like size and degree of difficulty of the structure, site and weather conditions, material and contractor accessibility, crew sizes, effective scheduling and communication, the number, timeliness, and complexity of the changes to the original contract etc. which may affect the actual scheduling of completion for a specific project.

The construction scheduling can bring so many benefits to contractors - find out critical paths and their dependencies for completion of a project on schedule, set up a comprehensible storage area of requirements, a workflow to attain it and follow any alterations to the set path, help track supply orders and control construction personnel as well as sub contractors.

With over ten years of experience in construction & scheduling and by applying state of the art technologies & cost estimating software, we will provide you a scheduling solution with which you can organize, schedule and control a single or multiple construction projects, take control of the scheduling process, reduce liability by saving Time and $ Money on your communication overhead.

We will help to complete every project on time and ensure you meet those project deadlines, pass your inspection.

In brief, our service can bring you the following benefits:-
• Control Time
• Reduce Liability
• Generate accountability and increased Profits
• Automate the projects control deliveries
• Capability to know your cash flow
• Increase Communication and manage the workload
• Adjust Profit Margins Resource Management
• Reach Purchasing Power Satisfied Customers

Rajib Dey
The construction estimating

Construction budgeting process

Cost Control and Budgeting is the most vital factor for owners to maintain control of costs during the construction process. With construction budgeting, the owner can get a view of what the realistic final cost will be.

A capital improvement budget will help owner to raise fund early in the process and that will affect the final design and construction cost.

Besides, construction budgeting also plays a vital role in the selection of a designer for the project success. The owner can fix up the project design criteria once it gets an idea about the budget. The owner then approves the design and sent it to the designers for transforming the design into plans and specifications appropriate for construction.

If any project comes in over budget then it will create a great monetary loss and hamper the productivity.

We at global associates come up with some good cost estimating & takeoff softwares which can provide transparent and best possible cost reliability via forecasting, monitoring and controlling of costs. All project data are accessible at any time and are up-to-date all through the phases of evaluating economic efficiency, budgeting, tendering and invoicing.

Rajib Dey
The construction estimating