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 ball park figures in the early stage to fairly 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. In spite of 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.
1. 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)
- Engineer’s estimates based on plans and specifications
For each of these different estimates, the amount of design information available typically increases.
2. 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 markup 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 takeoffs
- Construction procedures.
3. 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.