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Last edited 22 May 2020
The Essential Elements in Construction Cost Estimation
Construction projects are expensive because there is a lot involved, from supplies to labour, equipment, change orders and more. A proper estimation right from the start is crucial to ensure adherence and enable effective project cost control management. After all, a project manager cannot expect to stay within budget and minimize wastage unless he knows exactly where he is spending. Here are the essential elements that should be considered during construction cost estimation.
Quantity take-off: As the name implies, this is the cost of the materials required for starting the project. The importance of this step can be understood from the fact that even minor deviations in take-off can result in major inaccuracies in the entire project.
Price of materials: Correct estimation of material cost is often complicated because it fluctuates depending on factors such as the demand and supply in the market, quantities required and cost of transportation to the site.
Labour hours: After estimating the material cost, the project manager has to nail the labour hours needed to complete the project. Here, they have to bear in mind the varying levels of productivity based on the complexity of each stage and task.
Labour rates: Once the number of labour hours is decided, it is time to calculate the labour rates. This refers to a basic rate, which may again vary for each job. Factors like overtime work and increase in rates are to be taken into account while estimating labour rates.
Cost of equipment: Another major cost that is a part of construction projects is the cost of equipment. It depends significantly on the fact whether the equipment is self-owned or availed on a rental basis.
Subcontractor costs: Most of the construction projects involve using subcontractor services for certain portions. While estimating costs, the project manager has to bear in mind the costs around the materials, labour and equipment used by the contractor and their fee as well.
A complete and detailed estimate of these costs is required before initiating a project so that you are sure about being on track with the project cost control management. Additionally, it is an opportunity to curb the expenses that are wasteful and irrelevant.
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