8 Types of Cost Estimation Done in a Project Management

Not aware of the cost estimation types? For your information, there are different types of cost estimates involved in project management. But before discussing them, first, have a precise idea of what is a construction estimate? and why it is needed?

What’s an Estimate?

A construction cost estimate is a calculation of quantities for different items that are included in the work and their expenses involved during the project work.

The total cost of all quantity of work provides us a good idea about total construction cost or the estimated cost of project work. The calculated cost is a close approximation of the actual cost. The accuracy regarding the estimated cost is dependent on the accuracy of estimating the method used and visualization of work done by the estimator. A correct estimate is very important for a project to be cost-effective and it should be made by a competent cost estimator.

Furthermore, the underestimated cost of the project will lead to many revisions during the work. This happens due to a shortage of financial support that comes into the picture due to the underestimation. This might result in the delay of the project and it can be a reason for the dispute between the contractor and owner. Moving on, if the project cost is overestimated, then the owner or builder has to face the financial losses because more quantity of material is needed on the construction site than the required amount. Read these 11 steps to keep in mind when designing and building your house.

Why Estimating is Important?

The purpose of the cost estimating is to provide an idea of the cost that is needed for the project. The estimated accurate cost is essential to give the owner a precise idea of the cost that will help him decide whether they are having sufficient finance or they have to arrange more money for the project. Furthermore, the owner will get an idea, how much the overall project will cost him, and what return he will get after the project is completed?

Furthermore, in the case of government work or a project, the estimate is needed to get financial sanctions. Sometimes it happens that the small non-priority work is provided on a lump-sum basis. In this, the estimator should be in a position to exactly know how much expense is required for the work.

Below are the four types of estimating done during the project:

1- Materials Estimating

The construction cost estimate of the material will be giving an idea about the type of material and its quantity that is needed for the completion of the project. This will make it for the concerned person to arrange the material in advance and order it.

2- Labor Estimating

Labor estimates will be telling about the quality and quantity of manpower needed for the work. Sufficient and skilled labor is essential for the timely completion of the project.

3- Plant Estimating

This estimate will be providing you an idea about the different types of equipment and plant needed for the completion of the project.

4- Time Estimating

This involves the estimation of the time that is needed to complete a project. The correct estimation of project duration is very important because if the time of completion increases, then the cost of the project also increases.

8 Types of Cost Estimates Used

Now, we are going to discuss the eight types of estimates that are used:

1- Detailed Cost Estimate

A detailed estimate is prepared after the approval of a preliminary estimate done by a competent dedicated construction estimator. In this estimate, every item of work is measured properly and the cost is calculated individually. This is the most accurate estimate in comparison to the other method of estimation.

The cost of an item of work is calculated by using the current market rates and then the total estimated cost is calculated. For the miscellaneous expenditure, an amount of 3 to 5 % of the estimated cost is added to the total estimated cost. A detailed estimate is a major estimate that is needed to get final financial sanction from a competent authority.

The detailed estimate will be including the following details and documents:

• Drawings/plans — layout plans, sectional views, elevation, detailed drawings, etc.
• Designs and calculations — In the case of buildings design of foundations, slab, beams, etc.
• General Specifications
• Detailed Specifications

2- Preliminary Cost Estimate

This cost estimate is also called an abstract cost estimate or budget estimate. Generally, it is prepared during the preliminary phase of the project planning to get an idea about the approximate cost of the project. With the help of this estimate, the concerned authority can know about the financial position and policy needed for the administration section.

Practically, the preliminary cost estimate for the project is calculated from a similar type of project cost. The cost is calculated individually for knowing the necessity and utility of every item of work. In this estimate, the important item of work involved is the cost of lands, cost of roads, water supply costs, electrification, cost of each building, and more.

3- Plinth Area Cost Estimate

This cost estimate is prepared by considering cost per plinth area of a similar type of construction present within the locality. This is an area covered by external dimensions of building at the floor level. Whereas, the plinth area rate of the building that is the cost of similar building with the specifications in the same locality. The plinth area estimate of a proposed building is prepared by multiplying the plinth area of building with the plinth area rate.

For instance, if the plinth area of a building is about 100 sq.m in a specific locality and plinth area rate of a building within the same area is 2000 per sq.m then,

The cost of the building by the plinth area estimate will be 200000.

The open areas, courtyards, and other areas will not be included in the plinth area. Note that, if there is a multi-storied construction, then the cost of each floor will be calculated separately.

4- Revised Cost Estimate

The revised estimate is calculated when the original sanctioned cost of the project exceeds by 5% or more. It is a detailed estimate but it is improper estimating or underestimating the cost of the project that needs to be revised.

The primary reason behind the preparation of the revised estimate might increase in the cost of transportation, cost of materials, etc. The major reason behind this estimate needed to be mentioned on the last page of the revised estimate.

5- Cube Rate Cost Estimate

You can get the cubical content of the building by multiplying the plinth area with the height of a building. The height of the building will be from floor level to the top of the roof level. This method is best for high-rise buildings. This cube rate cost estimate is more accurate as compared to the plinth area estimate. To get the cubical rate of construction, divide the total construction cost by its cubical content.

The cost for the proposed project is evaluated by multiplying the cubic rate of a similar building located in the same area with a cubic content of future work. Let’s assume that the cubic rate within an area is Rs. 5000/m3 and the area of the proposed construction is 1000m3

The approximate cost of construction will be Rs. 50, 00,000

6- Approximate Quantity Method Cost Estimate

In this method, the total length of the wall present in the complete construction is calculated. After this, the length is multiplied by the rate per running meter to get the cost of the building. For the foundation and superstructure rate per running, there is a separate calculation for a meter. For the proper quantity takeoff estimate, it is best to connect with the professionals.

For the cost estimation of the foundation rate per running, the meter is evaluated by considering quantities like brickwork cost up to plinth and excavation cost. Furthermore, the superstructure quantities include woodworks, brickwork for the wall, floor finishing, etc. are considered for calculating the rate per running meter. Moving on, if you only want to get an excavation cost estimate, then get in touch with a professional estimating company in your area.

7- Supplementary Cost Estimate

This cost estimate act as a supplement to the detailed estimate. This estimate is prepared freshly if there is any additional work required during the progress of the original work. After the approval of the supplementary estimate, the total estimated cost should include a detailed estimate cost along with the cost of supplementary work for which sanction is needed.

8- Annual Repair Cost Estimate

This cost estimate is also called the annual maintenance estimate that is prepared for understanding the cost of maintenance of the building that will keep the structure in a safe condition. It will be including the cost of whitewashing, minor repairs, painting, etc. when preparing an annual repair estimate for a building.

This was a brief about the cost estimate and its different types that are used while working. If you are still in search of an accurate construction estimate, then get in touch with a professional estimating company. Hire the skilled estimator and they will be using the latest software to provide you a detailed and precise cost estimate for a project.

Final Words

I have completed my graduation the B.E in Civil Engineering from Georgia Tech University. Then I’ve started a job as the business development manager in a company that provides construction estimating services in Bronx, New York City.