Last edited 09 Mar 2018


The term ‘estimate’ is a very broad one that refers to any activity that attempts to quantify something. In the construction industry, it is typically used in relation to the approximate costs associated with a construction project, used, for example to assess the viability or affordability of the project or aspects of it.

An estimate is an attempt to predict the likely expenditures associated with a project as accurately as possible. The degree of detail and the accuracy of estimates will typically increase as the project progresses, more decisions have been made, and more information it available, however, their true accuracy only becomes apparent once the project is complete and the actual costs incurred.

At the outset, estimates may be made to help determine whether a project is affordable and to set a budget. They will then be used to test design options to ensure they are in line with the budget.

A pre-tender estimate (PTE) is a final estimate of the likely cost of the works that are described in completed tender documents prepared to seek tenders (offers) from prospective suppliers.

Contractors, subcontractors and suppliers will then prepare definitive cost estimates to submit tenders in the construction bidding process to compete for the award of contracts.

The are a number of methods available for estimating, depending on the stage of the project and the information available:

  • Benchmarking, which is a process by which other similar projects are used as comparisons.
  • Breaking down an overall estimated construction cost into percentages for different elements, based on the experience of the cost consultant.
  • Measuring defined quantities from drawings.

Initial cost estimates might include wider project costs that the client might incur, such as; fees, equipment costs, furniture, the cost of moving staff, contracts outside of the main works, and so on. Later in the project, estimates are likely to focus on the construction cost of the project. It is important to be clear therefore what costs are being included in estimates, and estimates might be accompanied by a schedule of the assumptions that have been made.

Estimates will generally include contingencies, which are downside risk estimates that make allowance for unknown risks associated with a project. At the preliminary business plan stage, estimates might include a 15% contingency, but this may then be reduced as the project progresses and risks pass.

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