Cost Estimation Practice in Construction Companies - Research Proposal Example

Cost Estimation Practice in Construction Companies Introduction: The fundamental importance of cost estimation practice in construction is inevitable if any construction company is to survive. This process of cost estimates preparation and new jobs bidding is often a complex and costly. Over the years, there haven’t been any substitutes to this practice until recently. Building costs’ estimation therefore is a representation of the state-of-the-art practices, techniques and experiences for expenditure assessment that must be applied irrespective of equipment, labor and materials costs changes. This proposal therefore aims at scrutinizing the major direct and indirect costs components: material-related cost trends, estimating procedures, unskilled and skilled labor, and construction equipment. These costs will be collected from a variety of existing real construction companies. There is inherent risk involved in all construction companies and the rate of bankruptcy in construction industry is relatively higher than in any other type of business endeavor. For any construction company to succeed or fail, the role played by quality estimation and results reliability cannot be underestimated. The final project will therefore give a description of the estimating as well as the tendering process. This process is divided into various stages that begin with acquisition of tender documents and ends with the tender submission. This project will significantly make use of computerized calculations due to the complexity of a number of formulations involved. Furthermore, this will help in data condensation and minimal use of paper work to reduce on time, human error and financial costs. Lack of proper cost estimation in construction industry is probably one of the most contentious business issues in Kuwait than in many other countries in the world. This is putting into consideration that this sector supports a very large portion of the Kuwaiti economy being among the largest industries in Kuwait, and its negligence therefore would result into a major drawback in the country’s economic growth. Provision of coherent and cogent cost estimation is vital since the larger an industry gets, the more likely chances are that cost fatalities will be incurred. Research Objectives To gather reliable data concerning the cost estimation process in construction companies and associated problems in Kuwait. To make informed and appropriate recommendations to various stakeholders in this industry with the intention of raising the level of cost estimation awareness in the construction industry. In order to follow the most appropriate approach in this study, a number of questions will be reviewed as they relate to cost estimation. These include but are not limited to: Research Questions: a) What are the most prevalent kinds of costs that are involved in construction industry? b) How can a construction company minimize the construction costs? c) What are the most limiting factors in the process of estimation in construction business? d) What are the benefits of an efficient cost estimation process in the construction industry? e) Who are the key players in cost estimation in construction companies? f) What possible construction process sections require a more intensive cost estimation intervention than others? Scope and Expected Limitations This project will give a description of the estimation process within the construction companies in Kuwait and the associated problems, beginning with acquisition of tendering documents to the actual submission of the tender. It will also give and explain some examples of indirect as well as direct estimation problems. A variety of the difficulties and problems that face estimators as they prepare their estimations will also be highlighted. This will be done through the use of a questionnaire that will be designed in a way that the existence and persistence of such difficulties will be enumerated. Literature Review: According to KHALED, AL-RESHAID et el, (2005), approximately 62% of the cost estimators’ work force in Kuwait is under the umbrella of the construction as compared to 15% who are in the manufacturing sector, an indicator that there is need for concerted efforts to ratify the process of cost estimation. Cost information is developed by cost estimators, after which managers or owners of businesses use it to bid for contracts or to postulate on the proposed project’s profitability. Additionally, cost estimation helps in determining the most profitable endeavors and deciding which ones to discard. Regardless of the specific industry, compilation and analysis of data from all facets that influence costs (like labor, materials, project duration, location, special machinery, insurance, and technological requirements) should be done depending on the size and category or type of the project to be undertaken (KHALED, AL-RESHAID et el, 2005). Cost estimation methods greatly differ from one industry to another. For example, the estimation process in a construction company will often initiate from submitting the bid for the work. In Kuwait, the process of cost estimation has not been fully systematized even with the realization that costs can be highly influenced during the early stages of any construction process and particularly the estimation and designing phases. It is due to this reason that cost estimation needs further investigation in order to make estimations converge costs for feasibility of the construction projects to be realized. In essence this means that there should be realistic material costs estimates before any construction process is embarked on. The theoretical framework of this study will be to enhance cost estimation in construction companies on the basis of available materials’ cost and not merely on material availability. The importance of undertaking this study arises from the significance of cost-effectiveness to ensure reduction of unnecessary internal and external costs in the construction industry. From this research, better informed decisions aimed at construction management decision making. Moreover, it will contribute to the larger context of construction literature because relatively less information is available so far concerning cost estimation in construction companies in Kuwait. Methodology: Regularly, in Kuwait, most construction projects have ended incurring cost overruns and delays, as opposed to the need for cost estimation and in-planned duration at the end of the project as the criteria of successful project management and consequently successful project. Cost estimation in construction companies can rely both on records from past completed buildings or they can alternatively be accumulated from computation, design, and analysis from first principles of quantities (KHALED, AL-RESHAID et el, 2005). This study will restrict itself within the second method where raw data will be invariably collected from a number of sources and computerized for concise and succinct results. A questionnaire survey will be designed to incorporate the paradigm of positivism in order to adhere to objectivity of the study and reduction of bias in the process. A computerized cost estimation program will be utilized and after data analysis and testing, the functionality of cost estimation will hopefully give a detailed insight into cost estimation professionals and stakeholders. Conclusion: It is common knowledge that construction industry in Kuwait like in many other countries in the world are always subjected to two major distinctive difficulties during any construction process: project schedule slippages vis a viz project costs overruns (budget), and time frame. However, there has been persistent limited literature that has been postulated as a possible solution to alleviate the problems. Provision of proper mitigation can dilute the two incapacitations if adequate attention is addressed to the pre-construction stages particularly through cost estimation, which this study aims to evaluate. Overall, cost estimation should cater for contingency planning, organizational conflicts, inflation, and control systems as construction projects get executed in deadline-driven, cost-conscious, and fast-paced environments. References: KHALED AL-RESHAID, NABIL KARTAM, NARENDRA TEWARI, HAYA AL-BADER (2005). “A project control process in pre-construction phases: Focus on effective methodology”, Engineering, Construction and Architectural Management, Vol. 12(4), pp. 348-376 Read More