Costs are an essential factor to cater for in construction project owing to the budgets that project on the industry involved. The budgets are enormous;thus, the stakes are high for the project owners. Due to this, accurate, and thorough cost estimation and analysis are an essential need.
There are many tools and technologies available now which help with a correct estimation of expenses and suggest measures to stay and operate within the confines that a project’s budget allows. Besides these tools and techniques, the project manager does, however, need the help of expert witnesses during the construction process.
This article aims to introduce you to the essential tools and techniques which you can employ for your next construction project.
Five tools essential for cost estimation in construction projects
Without cost estimation, it is impossible to craft a budget forthe project. If there is not defined budget, you cannot possibly shape your project’s budget in general. The next parts of the project, including resource requirement predictions and attempting to control the levels of expense, are thus insurmountable challenges. Effective tools for appropriate cost estimation are as follows:
1. Expert Judgement
There is no substitute for experience. There never will be. Expert judgment guided by legacy projects is a source of useful insights thatwill not only help with resource planning and estimation but also identify the potential risks.
You can rely on Expert judgment of delay experts if the delay claims arise. Thus it is important for you to keep in the loop a consultancy for services of a quantum and a delay expert for your project’s effective management.
2. Analogous Estimating
Every project has a defined scope, budget, time duration, costs, and scale in terms of weight, size, and complexity. The analogous estimating method takes into account all of these specifics of your project and provides the basis for the estimation of costs.
The method is based on drawing analogies from previous construction projects with a similar set of parameters and thus helps prepare the estimate and anticipate risks pertaining to the ground conditions.
3. Parametric Estimating
This method of cost estimation makes use of parametric data. It is based on an algorithm or a set of statistical relationships between different variables or parameters. It calculates the quantities of resources that are required to carry out an activity of the project and makes use of historical evidence for the purpose.
Better the quality of data used as evidence used in the algorithm, higher will be the level of accuracy of the resultant estimates.
4. Bottom-up Estimating
The bottom-up method of estimation, as the name indicates, looks at the individual, single entities, and then aggregates the result for a combined whole. For the cost estimation of projects, this technique involves a detailed analysis of each activity followed by aggregating results. With the help of this technique, you can estimate the aggregates of costs for work packages, project-level summaries, and control accounts.
Basically, it involves the estimation of one component of work to the greatest level of detail. You can then summarize and roll up the result of this detailed estimation for subsequent reporting and tracking of project-level details.
5. Three-point Estimating
Single point activity estimations are not often too accurate, as there are too many factors involved. To reduce the levels of risk and uncertainty that comes with single-point estimation, you can move towards three-point activity estimations. Three estimates can be: Most likely (M), Optimistic (O), and pessimistic (O), respectively.
- M represents the cost of an activity that has been assessed based on practical grounds for both the required amount of resources ad effort required.
- O represents the best-case scenario.
- P represents the worst-case scenario for the given activity.
You can then use one of the two formulas for a correct estimate of an activity.
- The formula for triangular Distribution is:
E = (O+M+P)/3
the formula for Beta Distribution (from a PERT analysis) is as follows:
E = (O+4M+P)/6
Estimate the project costs smoothly!
Costs and budgeting are essential factors in managing a construction project. You must not, thus, ignore the importance of taking the service of quantum and delay experts for your construction projects. You must ensure that the consultants working for your project use the best yet most suitable techniques and tools for cost estimation.
Effective, timely, and accurate cost estimation helps pave the way for a comprehensive business plan and detailed and definite project budget. You will be able to save the project process from surprise and unanticipated expenditures, which prove to be a burden for you as a business owner.
Construction projects are complex in nature. Matters can go out of hand. But vigilance and careful approach towards matters of expenses and hiring can save the day. So make your choices wisely.