Cost Estimating Process - Essay Example

An estimate is the calculation of quantities of materials, work, and costs that will occur during the completion of the project. Moreover, a good estimate should also incorporate some of the costs which are not evident during the estimation phase but are likely to occur during the execution of the project. Such predictive expertise requires a lot of experience in the field of estimation. The total of this predicted expenditure in each category is the total estimate of the project. The estimated cost of a work is a close approximation of its actual cost. The agreement of the estimated cost with the actual cost of the project depends on two factors; the correct estimate of the project cost and following the correct procedures according to the designs and specifications during the execution of the project. For the correct estimation of the project, site investigation along with a detailed study of the project drawings and technical specifications is essential.

The estimation process does not only depend on the design and specifications as certain aspects of the cost can only be calculated through thorough site investigation by visiting the site. During site investigation, an estimator has to take and record certain on-field observations for which handheld estimation and recording devices are very useful. The data thus collected can easily be transferred to desktop computers for carrying out extensive calculations.

Estimates in construction have been divided into various types according to the extent of details in the estimate. These types are:
- Conceptual Estimate: It is prepared to realize the concept and idea of the owner which allows the owner/investor to have an idea about the required investment for the project and he sets a budget for the project.
- Preliminary Estimate: These estimates are prepared at the very start of the project by the designer for the owner of the project to judge whether the architect’s/engineer’s design is by his budget or not.
- Engineer’s Estimate: After the preliminary estimate which is based on the preliminary designs the design engineers and architects complete the detailed design of the project and the engineer’s estimate is based on these detailed designs and specifications. This helps the owner to set a criterion for the bids.
- Bid Estimate: The bid estimate is also a detailed estimate which is prepared by the contractor and his bid is based on this estimate after adding a profit factor to it.

Cost Centers are the various heads into which the project is divided to facilitate the estimating process i.e. foundations, columns, beams, slabs, partition walls, etc. These are further subdivided into categories like excavation, formwork, masonry work, etc. This approach helps to organize the estimation data as well as carry out the estimate accurately. Estimating accounts and cost accounts are two types of cost centers which are the cost of these heads and subheads. Estimating accounts are based on the estimating process before the start of the project while cost accounts are based on the actual costs during the execution of the project. Work packages are cost centers that help in evaluating the position of the project based on cost (vs. estimates) and elapsed time (vs. schedule).

For the preparation of a detailed estimate, there are four mandatory steps:
- Breaking down the project into cost centers.
- Estimation of quantity for each cost center.
- Pricing of various cost centers based on experience, historical data, vendor quotations, supplier catalogs, and market surveys.
- Calculating the total price of the project by using the data in steps 2 and 3.

The estimation of quantity for each cost center is known as quantity take-off, this is the most important step in the estimation and errors should be avoided. The various errors which can take place are arithmetic, transposition, omission, referencing errors, and unrealistic use of loss factors. These errors can be avoided by taking care and with experience.

Various techniques of estimation are available but the estimator must select the best methodology according to the type of project and organization. Lump-sum and fixed-rate approaches should not be adopted. The use of Resource enumeration, and work package estimation which breakdown the whole project into various categories and apply specific factors according to the work package is encouraged.