Business Project Basics – Why You Need a Construction Cost Estimate
Updated on February 16, 2022 | by Alex Jones
The backbone of a successful construction project is, of course, an accurate estimate. Before you kick start your project, you need to invest your time and effort in forming and calculating an estimate.
You need to work with your company’s financial department to come up with a budget to judge the feasibility of the proposed project. Let’s look at why a construction estimate is important and what are steps you need to follow before undertaking a construction project.
Why do You Need a Construction Estimate?
Whether it is building construction, commercial construction, or simple renovation of a home, construction estimates are used to provide the client with a detailed summary of the costs they must anticipate throughout the journey. Construction estimates are also used to provide the client with an estimated value of the total cost paid to complete the project.
You must gather information regarding the type and quantity of materials required for the project, such as material, machinery, technology, and labor force. Other factors such as soil condition, location, and duration should also be kept in mind while calculating the construction estimate. For example, some locations might experience severe climates, impacting or even delaying the construction process.
While calculating the construction estimate, the project manager should keep in mind other factors, such as availability of electricity, gas, water, drainage system, sewage system, and topography. Also, some materials have to be ordered beforehand as they aren’t available immediately.
Construction Cost Estimate Techniques
There are different types of estimation techniques, which differ in their accuracy and effectiveness. The following are the main approaches to calculating construction estimates.
1) Allocation of Joint Costs
In this technique, mathematical formulas are used to calculate the costs that are difficult to assign.
2) Empirical Cost Inference
In this technique, a regression analysis is used to link the cost of construction to the model. The accuracy of this technique depends upon the model of predictors.
3) Production Function
In this technique, the output amount is related to different input factors such as materials and labor force. To correctly determine the output, you should know the accurate value of the input. You must do a lot of research before your draw the final value.
4) Stick Estimates
This type of estimation is highly accurate but very time-consuming. It involves determining the total cost and budget by calculating every single material and factor of the project. The stick estimation process is very time-consuming and may include human error due to the lack of attention, focus, and concentration due to the prolonged time it takes.
5) Unit Cost Estimation
This technique links unit costs with each department in a construction process. The estimation is accurate and not that time-consuming.
The Bottom Line
Project managers must know that construction costs are a major factor that determines the final profit and capital. But other factors and elements are important too. A business owner must also consider the operation and maintenance costs. Construction management software can help you achieve your goals and succeed. Such software helps you calculate an estimate and budget, monitor its spending, keep a check on the workers and keep track of the project’s progress.