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Construction cost estimation is done to know in advance the expected cost in varying

degree of accuracy, at different phases of the project.


Owners Purpose of Estimate
1. Making investment decision in the conceptual stage.
2. Negotiate and finalize the contract at the implementation phase.
3. To implement cost control measures.
Contractors Purpose of Estimate
1. Determine project cost and profit.
2. To Implement cost control measure.
3. To develop data base for that can be used for future project.

Engineers Purpose of Estimate


1. Provide the owner with probable estimate.
2. Evaluate alternatives.

Comparison of Contractors and Engineers Estimator


Contractors Estimator Engineers Estimator
Determines actual cost of project for bidding Determines expected cost.
purposes. Does not know who will receive award, therefore
Has detailed company cost data for labour does not know contractors exact resource costs. Does
and equipment. not know actual labour rates.
Knows which construction methods are to be Must assume probable construction methods to
used. be used.
Has knowledge of actual materials suppliers Does not know who project supplier will be. Must
to be used and quantity discount prices. use local list prices.

Fig: Construction cost Estimation


TYPES OF ESTIMATES
1. Preliminary
2. Unit price
3. Assembly or Conceptual Cost
4. Detailed estimate
Each phase of a project life cycle requires a different type of estimate
each estimate requires different types of information.

1. Preliminary Estimate- Order of Magnitude


A cost prediction based solely on size and/or capacity of a proposed
project.
Before any engineering or design is completed.
Rely on broad data from already executed similar project
relate cost in rupees to the main capacity/size parameter
number of beds in hospital
square feet of office space
number of students in school

Advantageous
Allows a quick determination of the feasibility of a project
A quick screening on alternatives, etc. (e.g., should it be a concrete
building or a steel building !).

Purpose:
1. Ranking alternatives
2. Evaluate economics and financial feasibility
3. As a check on more detailed estimates

2. Unit Price Estimate


Unit prices are obtained from data on projects already performed.

Cost of labor, material, and equipment for all units of work are
added together and divided by the number of units involved.

3. Assembly or Conceptual Estimate


Performed when conceptual design decisions are being made.
Work package concept can be used to determine the element or
assembly to be studied
We need a breakdown of cost of a completed project into its
functional elements to:
Find the relationship between element cost and project cost
Distribution of cost between constituent elements (sq. feet of
_____)

4. Detailed (Definitive )Estimate


Prepared after drawings and specification are completed.
Requires a complete quantity takeoff based on drawing and the
complete set of contract documents
Need information on labor rate productivity, material cost, cost of
renting or purchasing equipment

Variation Factors in Estimating


1. Time
We base our estimate on the cost of existing projects that were
built in the past
Price-level changes over time
We need to project costs of future projects
Many organizations publish construction cost data on regular basis.

Cost Indices
Used to update old cost information

Uses
1. To update known historical costs for new estimates
2. To estimate replacement cost for specific assets
3. To provide for contract escalation

Limitations
1. They represent composite data, average of many projects.
2. They fail to recognize technological changes.
3. There is a reporting time log.

To update old cost information to current date

Cost of new facility = cost of old facility x (new cost index/old cost index)

To predict future cost

F = P (1 + i)n
F = future cost

P = present cost

i = predicted rate of cost escalation per period

n = number of periods (years)


2. Location
Some factors affecting cost in different locations are:
1. Transport cost
2. Taxes
3. Labor supply and local productivity
4. Codes and local inspection
Construction costs also vary in different regions of the USA.
ENR and Means publishes periodically the indices of local
construction costs in the major cities.

3. Size
As the quantity built increases, the unit cost decreases,

Size Factor = (Proposed Size/Comparison Size)


UCM = Unit Cost Multiplier

UCM = SF-1

4. Shape
5. Other Factors
Hard to quantify but should be evaluated

Quality
Soil condition
Weather Condition
Competition
Productivity