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Beginning a construction project without cost estimation can lead to project failure. To avoid unfavorable outcomes, contractors prefer construction estimates from experts in the industry (estimators). They use different methods to estimate the project budget, depending on its scope. 

 

This blog will uncover the most common cost estimation techniques.

• Analogous Cost Estimation

The analogous method establishes similarities with previous (already estimated) projects. Based on previous data, stakeholders can estimate project costs by comparing the current job requirements to those already assessed. 

 

Although not very precise, this method provides a basic estimate within the shortest possible duration, supporting early project planning.

• Elemental Cost Estimation

The elemental cost estimate is more accurate for estimating project requirements and analyzing building costs since it is based on more comprehensive drawings and specifications. Contractors hire quantity surveyors who ensure adherence to guidelines (established by various institutes), allowing for constant and accurate costing. 

 

To get an accurate estimate using the elemental cost estimation technique, the building is divided into components (e.g., structural frames, facades, floor finishes, etc.), which are then divided into smaller categories with quantities multiplied by cost rates. This results in a total cost per component. 

 

Similarly, a cost per square meter is calculated using the component’s area. All components are added to produce a total building cost per square meter.

• Parametric Cost Estimation

Parametric cost estimation is a strategy that stands out from the others due to its effectiveness and adaptability. It is the process of predicting the cost of a project using a set of parameters or variables. 

 

The method uses statistical correlations between prior data and project factors to generate cost estimates instead of comprehensive estimates, which rely primarily on itemized lists and accurate computations. 

 

Let’s get into its subpoints…

• Plinth Area Cost Estimation

This estimate encompasses the building’s built-up area and is used to determine the approximate construction budget. It covers both the internal and the external areas, as well as the area underneath the walls. The plinth area rate of a building is calculated by determining the plinth area cost rate of similarly constructed buildings in the area.

 

The formula for plinth area cost estimation is:

Plinth Area Cost = Plinth Area x Plinth Area Rate 

• Cubic Method of Estimation

The cubic technique of estimating, also known as the cube rate cost estimate, is valuable for calculating costs for multi-story buildings. This method involves increasing the building’s volume content per m³.

 

Its formula is: 

Estimated Cost = Volume x Rate per cubic meter

 

Note: This approach is more precise than a plinth area cost estimation since it considers the entire building volume, from floor to rooftop.

• Bottom-Up Cost Estimation 

Bottom-up estimating is a simple method that starts from the smallest parts of a project. Each item, task, and expense is documented separately. After that, all the expenditures are added to get the total project budget. This way, nothing is missed. 

 

It gives a clear view of the project’s needs and how much money is required for the job. Also, the method is good for big and complex construction projects involving many small tasks interconnected with each other. 

• Top-Down Cost Estimation

Top-down cost estimation starts by estimating the total cost of a construction project. Then, that cost is broken into smaller parts for individual components. This method is quick and helps when full project details are not ready. Furthermore, it is often used in early planning.

 

The numbers come from past projects; the method does not go deep into every small task. But it still helps teams understand the budget range for the targeted project. 

• Three-Point Cost Estimation 

Three-point estimating is a method that uses three cost ideas. One is the best-case cost if everything goes right. The second is the worst-case cost if many problems happen. The third is the most likely cost if things go as expected. 

 

This method helps contractors and estimators calculate the project budget accurately by considering all three options and their average. It helps you identify possible risks and stay ready to mitigate them with effective strategies. 

• Data Analysis Cost Estimation

This technique is referred to as an alternative analysis technique. It identifies and outlines the possibilities for completing the job perfectly. 

 

Using historical data from past projects, understanding market trends, and benefiting from statistical models, the method helps you estimate an accurate budget for construction. 

 

In this method, assessment covers unexpected expenses/unforeseen circumstances, eliminating overbudgeting and increasing the statically planned budget.

Why Is Construction Cost Estimation Important?

There are so many reasons to do construction estimation before the project starts. You can see the most prominent ones here:

• Keeps the Budget in Check

Estimating helps you know how much money you will need for the construction. If you guess the cost wrong, you can run out of money. That causes delays or stops the job. A good estimate helps you stay within the budget. It also stops you from spending too much on materials or labor.

• Helps You Plan Better

When you know the project cost, you can efficiently plan the project step by step. You can decide what to buy first and what materials will be required later. Similarly, you can plan how many workers your project will need. Accurate cost estimation also helps with project scheduling, eliminating the chances of delays. 

• Makes the Client Trust You

Clients want to know how much they will spend before they say yes to the project. The client is satisfied if your estimate is close to the final expenses. But they may not trust you if your estimate is too low or too high. Good estimates help you get more jobs and keep your name good in the market. 

• Helps You Make More Profit

Knowing a project budget lets you set a good profit margin for yourself. You can spot where you might lose money and avoid that point in the plan. It helps you fix problems before they happen, increasing your earnings from each targeted project. 

What Technologies Do Construction Estimators Use During Assessment?

The professionals from certified Construction Estimating Companies use modern, innovative technologies during estimation to stay competitive in the market. It has a high impact on the accuracy of the estimates.