The Importance of Accurate Estimates In Construction Projects

Before you undertake a project, having an aggregate estimation of the costs is essential to determine your approximate revenue from the project.

01:09 22 February 2022

Before you undertake a project, having an aggregate estimation of the costs is essential to determine your approximate revenue from the project. A construction project involves differential costs. Thus, an accurate estimate works as a path breaker while advancing for a construction project.

 

An accurate project estimate is an expenditure outline that you can present to your client, which is not necessarily unchangeable. Several factors might affect the stability of the estimate. Still, having an accurate estimate clarifies you and your client about the results you intend to achieve. It ultimately works as a direction for you.

 

However, a project cost often overruns the construction estimation due to various reasons. You can visit https://gobridgit.com/blog/10-reasons-for-cost-overruns-in-construction-projects/ to understand why it happens.

 

What Is The Cost Estimate In Construction Projects?

Cost estimation in a construction project is a thorough and aggregate evaluation of all the prospective costs and expenditures per category. It also includes information like timing, schedule, expiry date, etc., that are crucial to getting a construction project done correctly.

 

A cost estimate is a prospective body structured based on logical and analytical predictions made based on previous work.

 

Why Are Accurate Estimates Important In A Construction Project?

Since you make an estimate well in advance before you start working on your construction project, it has to be a wise and calculated prediction as it dramatically impacts the project.

 

The following analysis will make you comprehend the significance of accurate construction cost estimating.

 

• An accurate estimate works like a blueprint of your complete project since it presents you with a precise structure of the project and associated costs. As you get everything in detail, you can plan and execute your strategies with the project.

 

• Unlike an inaccurate estimate, an accurate estimate saves you from the risk of overrunning the cost of completing the project. Since a precise estimate accounts for each potential expenditure along with the unforeseen contingencies, your profitability rate is not affected by them. 

 

• Your business gets influenced by your estimates. Providing your clients with an accurate estimate increases your reputation. Your client also needs a precise idea about the total cost and expenditure of the project. 

 

• An accurate estimate provides you with insight into the required resources for completing a particular project. With that, you can plan how to get those resources and outsource labour if needed. 

 

• Along with saving you extra costs, accurate estimates also protect your client's money. Thus, they are helpful to securing an engaging and satisfied client. 

 

Besides, the client gets a clear vision about everything, like the potential time the project is supposed to take. Thus, you can establish a good relationship with your client, thereby getting their recommendations too. It's a win-win for both of you.

 

• An accurate estimate provides you with all the crucial information about every facet involved with the project, including the cost and expenditures, required materials, machinery, resources, the soil type and condition, availability of materials, etc.

 

So, given that any kind of adversities come your way during the project-time, an accurate estimate will enable you to get prepared beforehand for them.

 

What Is Involved In A Cost Estimate?

Cost estimates take into account all of the variables that influence a construction project. When you estimate construction cost, you must include the following items:

 

• All kinds of costs, broken down individually
• Labour or human resources
• Required materials, equipment, and machinery
• Risks involved and contingency costs
• The deadline for the completion of the project

 

Sometimes, one may submit a cost estimate hastily for getting one's bid approved. Such an estimate might underestimate certain hidden costs.

 

For example, sometimes harsh weather conditions may drag a project for longer than estimated. Sometimes the soil condition of the site becomes an issue, resulting in a higher cost than mentioned in the estimate.

 

Thus, as things are unpredictable with a construction project, all the seen and unforeseen factors should be considered while making a cost estimate.

 

How Do You Estimate Costs In A Construction Project?

There are specific methods and approaches for construction cost estimating, some of them being:

 

1. Allocation of Joint Costs

Although a construction project essentially involves considering all the differential costs related to distinguished aspects, the price is not altogether distinguishable.

 

Therefore, estimators implement the allocation of joint costs by applying different mathematical formulas. Thus, the costs and expenses to other individual elements are measured, allocating joint expenses based on the total aggregate cost. 

 

2. Empirical Cost Inference

Empirical cost inference is a statistical method where the estimator relies upon any previous model. It is done through regression analysis to assign parameter values to assumed cost functions. Thus, the estimator needs to know about the project's potential costs and statistical expertise.

 

3. Production Function

The estimator uses the production function method to predict the cost estimate depending on construction projects' input-output relationship. The technique views production as a correlation between the total volume of construction and one of the different factors of production, like labour or capital. The theory is that if you intend to get a specific output level, you need to put a certain amount of input.

 

4. Stick Estimating

Stick estimating is considered an exact but time-consuming method. In this approach, the predictor lists the costs of all project components in the correct order. Even after being one of the simplest methods of construction cost estimating, human errors can disrupt the estimate here since it takes too long.

 

5. Unit Cost Estimating

Being another effective method, unit cost estimating involves estimating the prices of different components individually. Every project scope needs to be measured and then associated in this process. This method is relatively fast.

 

Endnote

Considering that a lack of accuracy in the cost estimate might whittle down a business to a great extent, an accurate estimate is a must in the construction industry.

 

Your estimate for a project is like a blueprint for your vision related to that particular project, which you intend to achieve eventually. Also, your estimate is the concrete form of your vision. So its accuracy will impact your pursuit of that vision. Thus, an accurate estimate is always profitable for both you and your client.