Cost Estimates for Different Kinds of Building Tips, Property Guide, Real Estate
Cost Estimates for Different Kinds of Building
4 July 2020
Cost Estimates for Different Kinds of Building Architecture
Cost estimates are a crucial part of any project. For contractors, it is the difference between staying profitable or filing for bankruptcy. According to the Associated of General Contractors (AGC), the industry creates $1.3 trillion worth of structures every year.
The ability to prepare an accurate cost estimate determines whether a contractor is awarded a project or not. Cost estimation takes time and requires a lot of skill. The following are the three main types of cost estimates you should know.
- Design Estimate
Design estimates are prepared during the planning stages of a project. They are meant to inform the investors, engineers, and contractors on what the project will cost. Here are the types of design estimates.
- Screening Estimates – A screening estimate is prepared before the actual design of the building is made. It relies on information obtained from other similar projects.
- Preliminary Estimate – This is also known as conceptual estimates. It is used by contractors to figure out what they used to charge the client. It is merely a rough estimate prepared before all the information is available.
- Detailed Estimate – This document is prepared once the scope of the project has been understood. It is a precise estimation of what it would take to complete a project. It includes information on quantities, specifications, costs, and rates of materials to be used.
- Engineers Estimates – The engineer prepares this estimate after looking at the plans and specifications of the project. The engineer breaks down the project into smaller parts and makes estimates for direct labor, material, quality control, and overheads. This process requires experience and detailed knowledge of industry standards.
- Bid Estimate
The contractor prepares a bid estimate for the owner’s consideration. It can be submitted during a competitive bidding process or after successful negotiations with the owner. Bid estimates can be based on the client’s or based on industry standards. A typical bid estimate contains information on the following three areas.
- Construction Cost – Data on the overall cost of materials can be obtained from a quantity takeoff. This refers to a detailed list of materials and the quantities required to complete a project. The calculations are based on blueprints, plans, or architectural models. Fortunately, this can now be performed quite easily using construction estimating software. Construction cost also includes labor, equipment, and utilities used.
- Overheads – This can either be direct or indirect expenses incurred during the construction. It includes salaries of staff who don’t work at the construction site, the cost of supervision, location change, equipment rentals, sanitation, drinking water, or any temporary structures. It is better if overhead costs are trimmed.
- Contractor’s Profit – At the end of the day, a contractor is a business and must worry about the bottom line. Different companies have varying ways of remaining profitable. According to a construction cost survey conducted in 2017, profits make up 10.7% of the overall estimate.
- Control Estimate
A control estimate is designed to monitor the costs at each stage of construction. A control estimate helps the builder control spending during construction. Additionally, it is also used by the owner to secure financing for the project.
The control estimate is revised regularly to ensure there is still enough cash flow to complete the project. Of course, the control estimate is non-binding and can again be changed in the future. This process can either be initiated by the builder after encountering unexpected cost overruns.
Alternatively, the owner can approach the contractor and request specific changes with cost implications. Most contractors use the bid estimate as to the control estimate. In such situations, the contractor has to prepare a supplementary cost estimate detailing the reasons for the adjustments and their cost. This new estimate must be sanctioned by the owner before construction can proceed.
Cost estimates help builders determine how much to charge and remain profitable. More importantly, they are used by owners to secure financing for the project. An inaccurate cost estimate can cause disputes between the two parties and bring construction to a grinding halt. This forces contractors to spend a lot of time preparing the cost estimates to ensure they are accurate. Fortunately, this sensitivity can now be ready digitally. By visiting www.costcertified.com, contractors can get detailed and accurate cost estimates in a matter of minutes.
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