Construction cost estimating is the process of forecasting the cost of building a physical structure. In order to minimize the stresses of potential cost overruns and failing to complete a project, the builder and owner devote time to estimating how much a project will cost before deciding to move forward with it. Owners considering large projects often seek multiple cost estimates, including those prepared by contractors.
Project owners use cost estimates to determine a project’s scope and feasibility and to allocate budgets. Contractors use them when deciding whether to bid on a project. The estimate is prepared with the input of architects and engineers to ensure that a project meets financial feasibility and scope requirements.
Creating a construction cost estimate is good practice for anyone who cares about how much their project will cost.
Since a cost estimate can only be accurate with a well-defined project plan, it is standard practice to create multiple estimates during the pre-design and design phases. These become more accurate as the project’s level of definition increases.
There are three primary categories for cost estimates: design estimates, bid estimates and control estimates.
Design estimates are prepared during a project’s pre-design and design phases. They start with an order of magnitude estimate, which determines which construction methods and types are most feasible. Next, comes the preliminary estimate, or conceptual estimate, which is based on the schematic design. Then the detailed estimate, or definitive estimate, which is based on design development. The last of the design estimates is the engineer’s estimate, which is based on the construction documents.
Contractors prepare bid estimates when bidding to construct the project. Contractors will draw from a number of data points to prepare their estimates, including direct costs, supervision costs, subcontractor quotes, and quantity take-offs.
Prepared after one signs a contractor agreement and before construction gets under way, the control estimate functions as a baseline to assess and control actual construction costs. The control estimate also allows contractors to plan ahead to meet upcoming costs and determine the project’s cost to completion, and support the preparation of final schedule of values for payment applications.