Cost Estimation of Construction Projects

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Cost estimation of a project is the process of forecasting the probable cost for the due fulfillment of the project objectives, to the prescribed workmanship covered by specifications for various items of works and to the stipulated time schedule. For a given project fully described by drawings and specifications, estimating involves quantity take off for various items of work, rate analysis and costing.

Features of Construction Cost Estimates

Construction cost estimates are the forecast of the cost of construction of a project. Estimating the cost of construction projects is the first step for any project management. In any construction activity, two basic things are involved, namely, the quantity aspect and the quality aspect.

The quantity aspect is governed by the study and analysis of drawings which are prepared with respect to the design of the project. The quantity aspect covers the quantum of works involved in and estimation of the materials and labors required for construction. The quality aspect is governed by the specifications for the materials and workmanship.

These two aspects lead to an estimate for a work or a project. Thus an estimate is a tool for planning and controlling the construction activities of any project with regard to quality, quantity, time and costs.

Preliminary and Detailed Construction Cost Estimates

In general, construction cost estimates can be broadly divided into two categories- detailed and approximate or preliminary. Strictly speaking, all estimates are more or less approximate as the very name implies, and the actual cost of construction would only be known when a work has been completed in all respects and all costs allocated.

1. Detailed Construction Cost Estimate

Detailed construction cost estimates are prepared on the basis of detailed drawings supported by specifications in accordance with established norms of measurements using unit of costs for the different items of work arrived at by rate analysis.

Thus, a detailed cost estimate gives a realistic estimate of final cost and is generally required for obtaining sanction/approval of sponsor of the project or competent authority in respect of public bodies like govt. organizations. It is also used in the course of the execution of the work to control progress and costs.The detailed Cost Estimates Comprises

1. The direct cost of various items of work
2. Provision for contingencies
3. Direct supervision charges
4. Miscellaneous costs such as service charges for water supply connection, sanitary arrangements, and electric supply
5. Labour hutments and camps, field office, etc.

2. Preliminary Construction Cost Estimates

An approximate or preliminary estimate, or an abstract estimate as it is sometimes referred to, is prepared before a detailed estimate is taken in hands for one of the following reasons:

1. To obtain a rough idea of the cost as part of a preliminary study for feasibility.
2. To rank competing projects for allocation of funds, cost-wise, as part of an investment decision exercise.
3. To make advance arrangements for public utility projects.
4. To fix premia for insurance against risks etc.

In such cases, the cost involved in preparing a detailed estimate may not be justified or the time involved would be substantial or data may not be available or preparation of a detailed estimate may not be otherwise justified.

The approximate costs are prepared based on unit costs of major sub-works established by a survey of costs of similar completed sub-works. The unit costs are updated using cost indices published by government bodies or reputed bureaus. For instance, the Central Public Works Department has prescribed cost indices for various cities based on 100 for a particular base year for buildings. The actual costs are known for a particular year from records, then the current costs would be determined using the appropriate indices.

Some normal practices employed for preliminary cost estimates are given below are explained through examples.

a) Project Cost Estimation based on Unit Costs

Example - 1:

Cost of construction of a classroom – US $2000

Total number of classroom planned - 12

Therefore, Cost of primary school building -$24000/-

Example - 2:

Cost of one furnished room in a 3-star hotel- Rs. 3 Lakhs

Total number of rooms - 100

Cost of hotel - Rs.3 crore

b) Cost Estimate for Buildings based on Area of Construction

Example:

Cost of hospital, fully equipped per square feet of floor area- US $100

Total floor area - 30000 square feet

Cost of hospital - $100 x 30000 = $3000000 = USD 3 Millions

c) Cost Estimates of Bridges based on Estimated Quantities

Example:

Cost of a 30m railway B.G. girder bridge (2 panels)- steel work

Steel work weight= 60x2= 120 tonnes

Cost of supply, fabrication and erection per tonne- US $300

Cost of steel work - $300 x 120 = $36000.

Also Read: Design , build and control cost estimates in construction

Construction Quantity takeoff 

Different countries follow different procedures for taking out quantities.
The processes generally involved in construction quantity takeoffs are:

• Taking-off quantities
• Grouping, and
• Billing

The takeoff and grouping are carried out on the quantity sheet. The measurements are recorded item wise and the items are arranged in the sequence of execution.

S.No.	Description of item of work	Unit of measurement	Number	L	B	H	Quantity	Total

Billing is done in an abstract form known as Bill of Quantities (BOQ) where costing is done.

S.No.	Description of item work	Measurement unit	Quantities	Rate	Amount

Units of Measurements of Various Construction Works

The unit of measurement of a particular work of construction activity depends upon its nature, size and shape. The general principles for selection of measurement unit of construction works are as follows:

1. Massive, voluminous, bulky items measured in volumes as cubical contents.Example- foundation concrete, brickwork masonry.
2. Thin, surface-oriented items with large superficial areas measured in terms of area.Example: tile roofing, mosaic tile flooring.
3. Items that are long, narrow and thin, having dimensions in other perpendicular directions difficult of measurement, measured in linear units (i.e. per unit length).Example: hand railing
4. Items which are difficult of measurement and which are distinct units, measured in units (i.e. per number)Example: supply and fixing washbasin. Items that are heavy and are generally difficult of measurement in terms of linear dimensions, measured by weight.Example: Steelwork

Rules for Measurement of Construction Works

1. The description of items should be self-contained and self-explanatory and should include all materials, labor, transport, cost of tools and plant, formwork, etc.
2. The dimensions should be entered in the order of length, breadth, and depth or height or thickness.
3. The measurement for the same item of works under differing conditions should be entered separately, bringing out clearly the differences in the descriptions.
4. The measurement should be for finished items of work.
5. The method of measurement should be consistent and should reflect the special provisions, if any, in the specifications.
6. The nomenclature of an item of work should be such as to bring out any special features involved in the execution of work and establish a link with the specifications.
7. The degree of accuracy of measurements would depend on the unit of measurement and rate for a particular item.

Rate Analysis of Construction Works

The process of determining the rate of an item is termed as rate analysis. A rate analysis should take into account:

1. Materials incorporated in the works
2. Direct labor required for the output
3. Incidence of costs of tools, plant, machinery, ancillary requirements such as formwork, etc.
4. Direct overhead such as contractor’s site supervision
5. Costs arising out of site conditions
6. Costs arising out of requirements of specifications (example- curing of concrete)
7. Contractor’s profile and overheads.

Also Read: Rate Analysis of Construction Works