Building Construction Cost Estimation
In this article, you will learn the reasons of construction cost estimation. There are two reasons why Construction Cost Estimation is major for construction managers. First, it's extremely hard to estimate project costs well. And second, poor cost estimates are often the biggest reason for a project budget over-run.
How to Estimate Construction Cost?
Estimating is one of the greatest challengesanybody faces in any project environment.Before I start looking how to make our estimate, I want to highlight one of the real problem we face as construction managers and leaders. And that's what we call an "Estimating Knife Edge".
Estimating Knife Edge.
The knife edge separates the two competing pressure we have to deal with wherever we are making estimating cost or dealing with time. On one side of the knife is the pressure comes from our bosses, our clients or our sponsors to minimise cost or indeed to minimise the duration of the project as quickly as cheaply as possible. On the other side of the knife is the pressure of opposite direction, to include as much cost as much contingency as much time as we possibly can to reduce the risk of cost or schedule over runs, to give us as a construction managers the best possible chances, delivering what we promised it , when we promised it and to the budget we committed.You are always going to walk on the knife edge, trying to balance to competing both sides.
Process of Construction Cost Estimation.
Process of construction cost estimation needs to start to understand the scope of work we need to do and tool for that is "work write down structure". Once you have the work write down structure , you can estimate the time to take to deliver each components of work. And from that you can allocate people into the role to do the work. When you combine the time it will take with cost of each of the work resources that starts to build up a cost estimate for the work it will take. There are other resources as well. And for each pieces of work also over lay the materials, the equipment , the assets you need to do that piece of work and to put in place the cost estimate from those. The fundamental process to build a construction cost estimation is work break down structure which you convert into a cost break down structure.
The Sources of Cost Estimation in Construction.
The main components in sources of cost estimation are as follows:
- People
- Real Estate
- Assets
- Material and Components
- Licenses
- Finance
For many projects, the single largest cost is people. These people are your staffs, your contractor, your labour, your consultant. Each will come with a different methodology of calculating it and bearing it in mode that some organisation do not count for the cost of their own staffs. As a construction manager, even if a organisation doesn't wish to court for the cost of their own staffs, we should always calculate it to give a true picture of how much the project is costing them.
Next is our real estate assets. Property, facilities, offices, warehousing all of these costs are larger. There are other assets beside property and to estimate these you may need to keep them as capital cost or you may be able to treat them to as revenue cost if you are going to lease or hire them in some way. Then we have known capital costs and revenue costs. Things like material and components , licenses should also considered in estimating cost. Now a days , a large part of many construction projects now involves softwares which needs to be licensed, weather it's a project management software a part of things you are creating as a project. And finally there are the financing cost. Things like interest , insurances should also be considered in estimating.