Professional Construction Cost Estimation Services

Your Essential First Step

Construction cost estimates are an integral part of any construction project.  Without this, construction costs can become a liability at a later stage of the project.  A construction cost estimator is normally part of the budgetary planning process, making it one of the initial phases.  Your Essential First Step.

The Difference Between an Estimate and Budget - Construction Cost

A construction estimate is prepared in the initial stages of a project before work on site begins. The process leading to a cost estimate begins with client consultation. As soon as the client lays down their building plans with an architect, he or she must take the blueprints to a quantity surveyor or professional estimator. The quantity surveyor will take off measurements from the drawings and calculate the cost of construction. The construction cost is the estimate that a client should budget for if they intend to go ahead with the project.

Most of the time, the client has no idea of the costs until they are furnished with an estimate. In this case, according to the client's financial standing, the cost might be too high or within their budget. When dealing with a client, the quantity surveyor's role is producing accurate cost estimates based on the designs, and not on the client's feelings. However, if the initial design is too expensive for the client, the quantity surveyor can advise the client to make alterations or produce an alternative design altogether. The client will be required to go back to the architect to suggest changes. Collaborating with the client, the architect will revise the plans or produce alternative designs, but this time a lot of consideration will be placed on the cost elements rather than aesthetics. 

In designing a new plan, the architect must refer to the quantity surveyor's cost estimate with the goal of identifying building elements which are taking too much cost. For example, expensive marble floor tiles may need to be replaced with low-priced ceramic tiles. 

One or two rooms may need to be removed, and the plan configuration might need to be re-arranged or re-sized to reduce the costs. If the slate roof tiles are taking a substantial proportion of the cost, they might need to be replaced with a much cheaper variety or version, for example, asphalt fibreglass, clay, concrete tiles or corrugated iron/asbestos sheets. 

The procedure whereby the architect designs with cost in mind is called "designing to a cost" or "designing to a budget". This is usually done when the client has a specific sum of money in their bank account set aside for the project. Designing to a cost will reduce the number of revisions which need to be made. To make it easier for the client, the architect may suggest building models which have been built in the past or which exist in the market. The cost of such models is known and if ever there is a fluctuation of price (building index) due to market conditions, an adjustment for price increase can be added to the known cost. 

An estimate represents the actual cost of the proposed project, and a budget represents the client's financial standing, capability or spending power. A new residential building might be estimated to be $200,000, and the client may only have $100,000 in their bank account. In this case, $200,000 or more is the required budget. A budget cannot be an estimate, but an estimate can be used for budgeting purposes and securing building finance from a lender. 

Building a House - Get a Construction Cost Estimate

After the Architect or Building Designer has produced drawings of your proposed house, you must calculate the cost of construction. One of the mistakes that clients make is leaving building cost estimating in the hands of the contractor or an engineer who is working on the project. Let us be honest, a building contractor or structural engineer are not the best estimators or cost managers. These two professionals might have done costing as part of the Construction Management and Structural Engineering curriculum respectively, but this does not make them specialists in estimating or quantity surveying courses also include basic subjects in Engineering, but this does not qualify a QS to be a Structural Engineer.

To get a high-quality estimate that is accurate, complete, and valuable, you should consult a Quantity Surveyor or certified Construction Estimator. There are a lot of essential details that contractors and engineers will miss when quantifying a plan and pricing the quantities. The type of estimate produced in this case does not follow the Standard System of Measurement used by Quantity Surveyors. Most of the time, it is not clear if the rates are inclusive of labour, subcontractors, and mark up. Items and trades are not organised or defined properly.

More often, the estimate is based on construction activities, but there is no composite rate build up to take account of all constituent components in the activity. Since the engineer is not guided by standard QS guidelines, the estimate is more likely to be subjective, prepared according to the engineer's view of costing elements. A lot of items that you would find in a BOQ would be missing including preliminaries, contingencies, escalation, and provisional sums. Above all, an estimate prepared by an unqualified consultant will lack descriptive detail that is required for contractor pricing and purchasing items. If roof installation has been measured as an activity, which items have been included? Does the rate or sum include roof covering, insulation, trusses? Are the estimated quantities based on supplier quotes, or have they been methodically calculated? Is it an estimate for purchasing materials, or is it for bidding?

You can send the same house plan for estimating to different parties - the contractor, engineer, certified construction estimator, quantity surveyor (QS), project managers etc., and you will see a substantial difference between the estimates. The estimate by the QS and certified Estimator is far more dependable, accurate and complete.

Why Should You Get a Cost Estimate?

Budgeting

Budgeting

A building cost estimate allows you to budget enough money for the project. You will know in advance the anticipated cost of building your proposed house, enabling you to make critical decisions. When you approach a bank or financier for a loan, you should furnish them with your cost estimate. Make sure that contingencies as well as price escalations are included in the bank. Escalation should be factored in when a contract is expected to run several months, at least 12 months duration. 

Decision-Making

Decision-Making

A cost estimate allows you to make decisions, whether to continue with your project or wait until you have the required funds. You can go on a fund-raising campaign to raise a figure that is within your contract value range. 

Changes

Changes

Instead of abandoning your proposed project or fund-raising to get building capital, you can choose to make changes to the architectural house plans. With the help of an architect or building designer, look for items that are taking up too much cost.  Decide if you want to substitute the items or remove them. Changes can be made to floor finishes, wall finishes, plan shape, number of rooms and other elements. The aim is to reduce the cost to the desired budget. Half a loaf is better than nothing. It's better to build a small home than abort a huge project which failed to take off due to lack of funds. 

Smooth Project

Smooth Project

When you have enough funds for your project, the project will run smoothly during the construction phase. Having enough capital in the bank means your project has passed the financial feasibility test. Financial feasibility should be a top priority in any project.  Construction financing ensures that workers are paid on time, which provides an incentive for maintaining productivity and finishing the project before the deadline. According to clauses contained in the preliminaries section of the Bills of Quantities, a contractor can be penalised for delaying the project. However, if the delays are caused by late payments and circumstances beyond the control of the contractor, the client should take blame. 

Types of Cost Estimates in Construction Projects

Types of Cost Estimates Available in the Design Stage and Contract Period

In your pursuit of getting a Quantity Surveyor or Construction Estimator, you must understand that an estimate is as good as the extent of the drawings. An estimate depends on the information provided by the architect. Architectural drawings take time to develop, therefore in the early stage of the project there might not be sufficient specifications to work with. In this case, the Estimator must work with available information. The earliest cost estimate that you can have is based on the Unit Method of estimating and the Superficial Floor Area Method. 

Cost Per Unit Method

In the Unit Method, a house estimate can be produced even if there are no sketch drawings. The client is required to state the number of bedrooms required, whether it should be a single family unit or multifamily dwelling. The client can also prescribe the materials for the building envelope, i.e., will it be a brick, stone or timber house? For a house, rooms are the main units. The number of rooms is multiplied by the known cost per room.

Superficial Floor Area Method / Cost per Square Metre

In the Superficial Floor Area Method, sketch drawings of the floor plan are required, including the type of floor finishes and room dimensions. With this information, a reliable cost estimate can be produced within a short time using the Cost per Square Metre.

Elemental Estimate and Approximate Quantities

At a later stage during the pre-contract period, the architect will produce detailed drawings with full specifications. These drawings have fully detailed wall elevations, substructure, superstructure, roof structure, roof coverings, sanitary fittings, joinery, floor finishes, wall finishes, drainage and external works. This is a time for the Estimator to produce detailed estimates, such as the Elemental Estimate and Approximate Quantities.

Bills of Quantities

For tendering and contract management purposes, detailed Bills of Quantities which contain contract clauses are produced. Bills of Quantities are the most detailed cost documents which are needed for any construction project. This document will be used throughout the construction stage for cost management, valuations, final account payments and closing the contract.

Cost Estimation

The magnitude of each of these cost components depends on the nature, size and location of the project as well as the management organisation, among many considerations. The owner is interested in achieving the lowest possible overall project cost that is consistent with its investment objectives. 

It is important for design professionals and construction managers to realise that while the construction cost may be the single largest component of the capital cost, other cost components are not insignificant.  For example, land acquisition costs are a major expenditure for building construction in high-density urban areas, and construction financing costs can reach the same order of magnitude as the construction cost in large projects such as the construction of nuclear power plants. 

From the owner's perspective, it is equally important to estimate the corresponding operation and maintenance cost of each alternative for a proposed facility to analyse the life cycle costs. The large expenditures needed for facility maintenance, especially for publicly owned infrastructure, are reminders of the neglect in the past to consider fully the implications of operation and maintenance cost in the design stage. 

In most construction budgets, there is an allowance for contingencies or unexpected costs occurring during construction. This contingency amount may be included within each cost item or be included in a single category of construction contingency. The amount of contingency is based on historical experience and the expected difficulty of a particular construction project. For example, one construction firm makes estimates of the expected cost in five different areas: 

  • Design development changes.
  • Schedule adjustments.
  • General administration changes (such as wage rates).
  • Differing site conditions for those expected.
  • Third party requirements imposed during construction, such as new permits.

Contingent amounts not spent for construction can be released near the end of construction to the owner or to add additional project elements.

Types of Construction Cost Estimates

Construction cost constitutes only a fraction, though a substantial fraction, of the total project cost. However, it is the part of the cost under the control of the construction project manager. The required levels of accuracy of construction cost estimates vary at different stages of project development, ranging from ballpark figures in the early stage to reliable figures for budget control prior to construction. Since design decisions made at the beginning stage of a project life cycle are more tentative than those made at a later stage, the cost estimates made at the earlier stage are expected to be less accurate. Generally, the accuracy of a cost estimate will reflect the information available at the time of estimation. 

Construction cost estimates may be viewed from different perspectives because of different institutional requirements. Despite the many types of cost estimates used at different stages of a project, cost estimates can best be classified into three major categories according to their functions. A construction cost estimate serves one of the three basic functions: design, bid and control. For establishing the financing of a project, either a design estimate or a bid estimate is used. 

Design Estimates

For the owner or its designated design professionals, the types of cost estimates encountered run parallel with the planning and design, as follows:

  • Screening estimates (or order of magnitude estimates)
  • Preliminary estimates (or conceptual estimates)
  • Detailed estimates (or definitive estimates)
  • Quantity Surveyor's estimates based on plans and specifications

For each of these different estimates, the amount of design information available typically increases.

Bid Estimates

For the contractor, a bid estimate submitted to the owner either for competitive bidding or negotiation consists of direct construction cost including field supervision, plus a mark-up to cover general overhead and profits. The direct cost of construction for bid estimates is usually derived from a combination of the following approaches: 

  • Subcontractor quotations
  • Quantity take-offs
  • Construction procedures

Control Estimates

For monitoring the project during construction, a control estimate is derived from available information to establish

  • Budget estimate for financing
  • Budgeted cost after contracting but prior to construction
  • Estimated cost to completion during the progress of construction

Common Types of Construction Cost Estimates

Design Estimates

In the planning and design stages of a project, various design estimates reflect the progress of the design. At the very early stage, the screening estimate or order of magnitude estimate is usually made before the facility is designed and must therefore rely on the cost data of similar facilities built in the past. A preliminary estimate or conceptual estimate is based on the conceptual design of the facility at the state when the basic technologies for the design are known. The detailed estimate or definitive estimate is made when the scope of work is clearly defined, and the detailed design is in progress so that the essential features of the facility are identifiable. The quantity surveyor's estimate is based on the completed plans and specifications when they are ready for the owner to solicit bids from construction contractors.  In preparing these estimates, the design professional will include expected amounts for contractor's overhead and profits. 

The costs associated with a facility may be decomposed into a hierarchy of levels that are appropriate for the purpose of cost estimation. The level of detail in decomposing the facility into tasks depends on the type of cost estimate to be prepared. For conceptual estimates, for example, the level of detail in defining tasks is quite coarse, for detailed estimates, the level of detail can be quite fine. 

As an example, consider the cost estimates for a proposed bridge across a river.  A screening estimate is made for each of the potential alternatives, such as a tied arch bridge or a cantilever truss bridge. As the bridge type is selected, e.g., the technology is chosen to be a tied arch bridge instead of some new bridge form, a preliminary estimate is made based on the layout of the selected bridge form based on the preliminary or conceptual design. When the detailed design has progressed to a point when the essential details are known, a detailed estimate is made based on the well-defined scope of the project. When the detailed plans and specifications are completed, a quantity surveyor's estimate can be made based on items and quantities of work. 

Bid Estimates

The contractor's bid estimates often reflect the desire of the contractor to secure the job, as well as the estimating tools at its disposal. Some contractors have well established cost estimating procedures, while others do not. Since only the lowest bidder will be the winner of the contract in most bidding contests, any effort devoted to cost estimating is a loss to the contractor who is not a successful bidder. Consequently, the contractor may put in the least amount of possible effort for making a cost estimate if it believes that its chance of success is not high. If a general contractor intends to use subcontractors in the construction of a facility, it may solicit price quotations for various tasks to be subcontracted to speciality subcontractors. Thus, the general subcontractor will shift the burden of cost estimating to subcontractors. If all or part of the construction is to be undertaken by the general contractor, a bid estimate may be prepared on the basis of the quantity take-offs from the plans provided by the owner or on the basis of the construction procedures devised by the contractor for implementing the project. For example, the cost of a footing of a certain type and size may be found in commercial publications on cost data, which can be used to facilitate cost estimates from quantity take-offs. However, the contractor may want to assess the actual cost of construction by considering the actual construction procedures to be used and the associated costs if the project is deemed to be different from typical designs. Hence, items such as labour, material and equipment needed to perform various tasks may be used as parameters for the cost estimates.

Control Estimates

Both the owner and the contractor must adopt some baseline for cost control during the construction. For the owner, a budget estimate must be adopted early enough for planning long term financing of the facility. Consequently, the detailed estimate is often used as the budget estimate, since it is sufficient definitive to reflect the project scope and is available long before the quantity surveyor's estimate. As the work progresses, the budgeted cost must be revised periodically to reflect the estimated cost to completion. A revised estimated cost is necessary either because of change orders initiated by the owner or due to unexpected cost overruns or savings. For the contractor, the bid estimate is usually regarded as the budget estimate, which will be used for control purposes as well as for planning construction financing. The budgeted cost should also be updated periodically to reflect the estimated cost to completion, as well as to insure adequate cash flows for the completion of the project.

Unit Cost Method of Estimation

If the design technology for a facility has been specified, the project can be decomposed into elements at various levels of detail for the purpose of cost estimation. The unit cost for each element in the bill of quantities must be assessed in order to compute the total construction cost. This concept is applicable to both design estimates and bid estimates, although different elements may be selected in the decomposition.

For design estimates, the unit cost method is commonly used when the project is decomposed into elements at various levels of a hierarchy as follows:

Preliminary Estimates: The project is decomposed into major structural systems or production equipment items, e.g. the entire floor of a building or a cooling system for a processing plant.

Detailed Estimates: The project is decomposed into components of various major systems, Le, a single floor panel for a building or a heat exchanger for a cooling system.

Quantity Surveyor's Estimates

The project is decomposed into detailed items of various components as warranted by the available cost data. Examples of detailed items are slabs and beams in a floor panel, or the piping and connections for a heat exchanger.

For bid estimates, the unit cost method can also be applied, even though the contractor may choose to decompose the project into different levels in a hierarchy as follows:

Subcontractor Quotations: The decomposition of a project into subcontractor items for quotation involves a minimum amount of work for the general contractor. However, the accuracy of the resulting estimate depends on the reliability of the subcontractors, since the general contractor selects one among several contractor quotations submitted for each item of subcontracted work.

Quantity Take-offs: The decomposition of a project into items of quantities that are measured, or token off from the engineer's plan will result in a procedure similar to that adopted for a detailed estimate or a quantity surveyor's estimate by the design professional. The levels of detail may vary according to the desire of the general contractor and the availability of cost data.

Construction Procedures: If the construction procedure of a proposed project is used as the basis of a cost estimate, the project may be decomposed into items such as labour, material and equipment needed to perform various tasks in the projects.