Unit Method of Estimating

The unit method of estimating is the simplest and quickest method of estimating the cost of a
proposed construction project. In this method, the quantity surveyor counts the number of
units which are going to be accommodated in a building, for example the number of occupants
or main furniture objects used by an individual. The number is then multiplied by the cost per
unit to get the total estimated cost of the project:

Number of Units x Cost per Unit = Total Estimated Cost of Building Project.

As you can see, this method of cost calculation is a rough approximation with a huge margin of
error and the quantity surveyor has to account for this margin by giving a cost range rather
than a specific figure. In this case, the lowest and highest values are given, including the
average.

When to Use the Unit Method?

The Estimator uses this rough estimate in the planning/consultation stage when there are no
sketch designs or drawings. On the client’s first visit to an Estimator’s office, the initial
discussions are around basic proposals such as the number of people who will occupy the
building, the number of rooms/ bedrooms etc. The consultant will then use these numbers to
find a rough cost.

A consultant with many years of experience in estimating different types of buildings will be in
a better position to give a cost guide of the proposed project. However, the consulting quantity
surveyor can also refer to annual building cost data compiled by municipalities and property
developers.

In a situation where modular houses are being built, the unit method can come in handy
because like a new iphone or gadget that has not yet been released, the cost of a prefabricated
home is a factory price that is known in advance. The cost may not include installation but you
can easily add an allowance for that.

The unit cost method is best used in buildings where a large percentage of room space is
occupied by identical units of furniture or units used by individuals, for example:
 Beds in a hospital – cost per bed
 Seats in a stadium – cost per seat

 Desks in a classroom – cost per desk

 Seats in a movie theatre – cost per seat

 Beds in a hostel – cost per bed

 Beds in a military camp – cost per bed

 Beds in a prison or  Cells in a prison – cost per bed

 Computers or cubicles in an internet cafe – cost per cubicle

 Cubicles in a call centre – cost per cubicle

 Workstations in an office – cost per workstation

 Stalls in a market – cost per stall

 Parking Bays in a low-rise or basement park – cost per bay or car

 Seats in a community hall – cost per seat

 Shelves in a supermarket – cost per metre of shelving

Each of these units is measured in cost per unit. The cost per unit is obtained from past
projects which were done by the quantity surveyor. If the past project was done more than a
year back, the value of the building should be updated.

When the project has progressed to sketch designs, the QS can take off measurements from
the plan and prepare an estimate based on the cost per m2 of floor area.

Advantages of Unit Method of Estimating

1. It can be done quickly where a ballpark figure is required instantly

2. The estimate can be done even if there are no drawings or specifications

3. No take-off or measurements needed

4. Useful for buildings where standard-sized units occupy most of the space

5. A consultant will not charge a fee for this type of estimate.

6. Little information is required from client (i.e. number of units), but getting a lot of
information from the client will be helpful for the estimator.

Disadvantages of Unit Method of Estimating

1. It’s not a reliable method
2. Large deviation from the accurate value

3. It is not based on drawings or specifications

CUBIC METHOD OF ESTIMATING

The cube method estimating is a single rate method of estimating based on the cubic content of
a building Cost per cubic metre method is specific for building projects and aims to overcome
the current criticism floor area method that does not take into account possible variations of
the storey height. The building volume method became very popular in some European
countries like in Germany and Switzerland, where building costs are often expressed in cubic
meter prices. The total cost of the project will be given by:

Estimate=Volum x unit cost (cost/m3)

Volume = External plan area X height X Cost (cost/ m3)}

In order to use the method, the building volume must be first assessed and explicit rules exist
in some countries for that purpose. Buildings with distinct types of occupation should have
corresponding volumes assessed separately, for example, car park areas, shopping areas and
office areas in a commercial building. Specific works like excavations, foundations and external
works ought to be assessed separately by using cost comparisons or approximate quantities,
for example.

CUBE METHOD ESTIMATING ADVANTAGES

1, quick method

2, Simple math process

3, Easy to understand

DISADVANTAGE OF CUBE METHOD

1, Need higher levels of skill to assess unit rate

2, do not express actual cost of different parts of the building

3,due to large number of variables, difficult to adjust unit cost

Superficial floor area method of estimating

Superficial area method is the most popular preliminary estimating facilities costs is frequently
used in building and residential home construction. This method is an approximate cost
obtained by using an estimated price for each unit of gross floor area. The main reason for the
popularity of the area method is its simplicity.

FIXED RATE CONTRACT:

Contract that provides for a price which normally is not subject to any adjustment unless
certain provisions (such as contract change, economic pricing, or defective pricing) are included
in the agreement. These contracts are negotiated usually where reasonably definite
specifications are available, and costs can be estimated with reasonable accuracy. A fixed price
contract places minimum administrative burden on the contracting parties, but subjects the
contractor to the maximum risk arising from full responsibility for all cost escalations. Also
called firm price contract.

COST REIMBURSABLE :

A cost reimbursable contract (sometimes called a cost plus contract) is one in which

the contractor is reimbursed the actual costs they incur in carrying out the works, plus an
additional fee. Option E of the NEC3 Engineering and Construction Contract (ECC) is an
example of a cost reimbursable contract.

A cost reimbursable contract might be used where the nature or scope of the work to be carried
out cannot be properly defined at the outset, and the risks associated with the works are high,
such as, emergency work (for example urgent alteration or repair work, or if there has been a
building failure or a fire requiring immediate reconstruction or replacement of a building so
that the client can continue to operate their business). Tendering may proceed based on
an outline specification, any drawings and an estimate of costs.

This is a high risk form of contracting for the client as the final cost is not known when

the contract is entered into (ie there is no contract sum).

The costs for which the contractor is entitled to be reimbursed must be set out very clearly in
the contract. This is a complex procedure that needs to be carefully considered, as whilst some
 direct costs may be relatively straight forward to determine, whilst other ‘shared’ costs, might
not.

Direct costs that are clearly attributable to a single project could include:

 Labour.
 Materials.
 Hired plant.
 Sub-contractors.

Other costs that might be spread across more than one project could include:

 Head office costs.

 Staff costs.
 Manufacturing facilities.
 Owned plant.

TARGET COST:

Definition: The target cost of a product is the expected selling price of the product minus the
desired profit from selling it. In other words, target cost is really a measure of how low costs
need to be to make a certain profit.

What Does Target Cost Mean?

In a job order production system or job order manufacturing, a company manufacturers

custom products on a limited basis. This process starts when a customer or client brings a
custom order to a manufacturer.

Example

Take guitar manufacturing for example. A guitarist comes into Gibson Guitar Company and
wants Gibson to make him a completely custom guitar. Gibson will look at the order and first
determine if they can produce it. If Gibson decides they can make the custom guitar, they then
have to set a selling price. To determine the right selling price, Gibson has to look at the target
cost.
Gibson has to look at how much it will cost to produce this guitar and how much it can sell the
guitar for. Then Gibson can figure out how much profit it will make on the sale. Here’s the
simple target cost formula.

If this profit isn’t enough, Gibson has two options. It can either raise the selling price or figure
out how to make the guitar cheaper. As with most retail sales, raising the price is not always
an option. Some customers might decide to buy a guitar from some other company. In that
case, Gibson has to reengineer its custom guitar and see how it can lower the production costs
in order to raise the profit to an adequate level.

TURNKEY :

Turnkey construction contract. A type of construction contract under which

theconstruction firm is obligated to complete a project according to prespecified criteria for a
price that is fixed at the time the contract is signed.

PACKAGE DEAL:

an agreement in which the buyer pays a stipulated price for a group of related products or
services: a package deal from a book club. 2. the products or services included in such an
agreement: We got a package deal of room, meals, automobile, and guide at the resort hotel.

MANAGEMENT CONTRACT:

Management contracting is a procurement route in which the works are constructed by a

number of different works contractors who are contracted to a management contractor.
The management contractor is generally appointed by the client early in the design process so
that their experience can be used to improve the cost and build ability of proposals as they
develop, as well as to advise on packaging (and the risks of interfaces).
It also enables some works contracts to be tendered earlier than others, and sometimes, even
before the design is completed (for example, piling might commence whilst the detailed designof
above ground works continues). This can shorten the time taken to complete the project, but
does mean that there will be price uncertainty until the design is complete and all contracts
have been let.

Management contracting differs from construction management in that management

contractors contract works contractors direct, whereas construction managers only manage
the trade contracts, the contracts are placed by the client.

In legal terms, the management contractor is acting as a principal whereas the construction

manager is acting as an agent. This means that on a management contract, the client only has
one contract to administer (whereas with construction management there can be
many contracts for the client to administer), but they might want warranties from the works
contractors so that they can make a direct claim against them, for example, if the management
contractor becomes insolvent.

The agreement between client and management contractor is likely to cover both pre-

construction and construction activities, with a notice to proceed between the two, before
which works contracts cannot be let. Collateral warranties are also likely to be required (for
example, for purchasers, tenants or funders). In addition the client is likely to define the
works contract terms and any requirement for works contract warranties.

STOREY ENCLUSURE:

Storey enclosure method is a single rate method estimating, this method has largely unused in
practice. It measures the area of external walls, floors and roof areas (effectively enclosing the
building) and multiplying them by an appropriate weighting factor.

Take into account of the difference in plan shape total floor area, the vertical position of the
floors, overall height, storey height, extra costs of providing usable floor areas below ground.

Areas of the various floors, roof and external walls are calculated, and each is weighted by a
different factor to provide a total number of storey enclosure units. For total estimate amount.
Calculated storey enclosure units are multiplied by a storey enclosure rate obtained from
previously analysed projects.
APPROXIMATE METHOD:

Methods of preparation of preliminary or approximate construction cost estimation for

studies of various aspects of work of project and its administrative approval is discussed. This
estimate can decide, in case of commercial projects, whether the net income earned justifies
the amount invested or not.

The approximate estimate is prepared from the practical knowledge and cost of similar works.
The estimate is accompanied by a report duly explaining necessity and utility of the project and
with a site or layout plan. A percentage 5 to 10% is allowed for contingencies.