A high-quality building demands superior materials and design. These upgrades drive up costs, and estimators need to carefully consider how to manage these additional expenses.
Construction estimating is a five-level process that spans project phases. The accuracy of your estimate will depend on its stage in the estimating cycle.
Cost Analysis
When planning a high-rise project, an early construction estimate can help the owner understand the total cost and schedule of the project. This allows the owner to make informed decisions regarding design options, material selections and construction methods. It can also help reduce the risk of project overruns and inform the timing of key milestones such as relocation of staff. For contractors, a well-formed construction estimate is the basis for bidding on the work.
During the pre-design and design phases, estimating teams prepare engineering and quantity estimates as designs mature and the project gains definition. These estimates typically include direct costs, supervision costs and subcontractor quotes. They also include amounts for materials, equipment and contractor overhead and profit. Accuracy of these estimates increases from Level 1 (analogous estimate) to Level 4 (substantive estimate).
A contractor’s bid estimate is based on the engineer’s estimate and may include itemized work breakdowns, quantities and unit prices for each component. Using a bidding process, contractors can receive input from other bidders and compare prices for each item of work. This type of cost estimating is referred to as bilateral estimating and it is common in government projects.
Parametric and analogous estimating models are two major methods for forecasting construction costs. Analogous estimates use the cost of similar structures to predict the cost of your building. These estimates are often the quickest and easiest to produce, but they tend to be less accurate than a parametric estimate. Parametric estimates use data such as unit rates for materials, labor and equipment to forecast the cost of your building.
Rate Analysis
Rate analysis is a critical process in construction projects. It involves breaking down the project into different elements and calculating the rates for each component. This helps in preparing accurate cost estimates, budgeting, and controlling costs. It also enables project professionals to make better decisions about the best way to complete a project.
The first step in preparing rate analysis is identifying the various civil works involved in the project. These include excavation, foundation work, concrete work, brickwork, plastering, roofing, flooring, plumbing, electrical work, painting, and others. Once these are determined, the civil engineer should calculate the cost of each element by using local market rates. This should take into account the price of materials, labor, machinery, and overheads. It should also consider the contractor’s profit.
Another benefit of a rate analysis is that it can be used as a reference for pricing and negotiations with suppliers and contractors. This can help ensure that the project is completed within budget and on time. It can also help reduce the risk of disputes between project managers and their clients. Lastly, rate analysis can be used to evaluate work progress and to ensure that contractors are being paid fairly for their services. This can help prevent disputes and improve transparency in the construction industry.
Variation Analysis
Rate analysis is an important step in cost estimation that allows you to track actual costs during construction and make timely corrections if necessary. It also enables you to achieve accurate project completion within the allocated budget. Effective rate analysis makes it easier to identify and manage deviations from the estimated costs, reducing waste and enhancing project performance.
Depending on the estimating phase, you may use different estimating techniques. The level of accuracy you need and the time it takes to prepare an estimate determines the estimating technique. For example, you can use parametric estimating or bottom-up estimating. Parametric estimating uses assemblies, or combinations of materials that perform a function, such as foundations and windows, which are multiplied by the unit cost per assembly. This is suitable for early design stages and challenges or validations of a more detailed estimate. Bottom-up estimating (also known as stick, analytical or deterministic estimating) is more granular and prices out the components of a structure, such as concrete, steel, fasteners, wires and labor, and adds them up.
To prepare a reliable cost estimate, you need to consider trends in historical cost data. In addition to the general price indices (GDP deflators and consumer price indices) collected by government agencies, you can find special price indices for the construction industry, which are typically measured relative to the general price indices.
Change Order Analysis
During construction, change orders occur frequently. They may have a direct or indirect impact on the original scope of work, cost, schedule, or both. The process of estimating the impacts of these changes requires a good understanding of how the changes impact the entire project.
Level 1: Using educated guesses, judgment, and analogous or parametric cost estimating models, this type of estimate takes between 1 and 4 hours to prepare. The AACE says this is a rough order-of-magnitude estimate and can be used for screening or a concept decision. It is also referred to as an educated guess, ballpark estimate, idea study, concession license estimate, and rough cost estimate.
The preparation of a Level 3 estimate is based on a more defined project scope, coded work breakdown structures, and quantity takeoffs. These estimates typically use a numbered system of organizing structure components — such as the Uniformat II system sanctioned by the ASTM standards organization – and assembly construction cost formulas. This method allows for more precise forecasting of material amounts based on unit prices, the number of assemblies, and the amount of labor.
It is best to use this estimate to request bids from contractors or submit it to lenders for financing. A contractor may also use it to track and control costs throughout the project. This type of estimate is often referred to as the tender estimate, contract estimate, and project control estimate.