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    Intro Cost Estimating

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    Basic of Cost Estimating and the important to construction project

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    Intro Cost Estimating

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    aizamakmur
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    Basic of Cost Estimating and the important to construction project

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    1. Intro Cost Estimating

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    Basic of Cost Estimating and the important to construction project

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    15 views17 pages

    Intro Cost Estimating

    Uploaded by

    aizamakmur
    Basic of Cost Estimating and the important to construction project

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 17

    INTRODUCTION

    TO
    COST
    ESTIMATING

    DDWQ3373
    BY MDM. NFM
    • What is an Estimate?
    • What is the Purpose of Estimating?
    • What is the Role of the Estimator? What the
    Estimator Must Know (Skills)?
    • The Components of an Estimate.
    • Possible Sources of Errors in Cost Estimates
    WHAT IS AN ESTIMATE?

    • A cost estimate is the approximation of the cost of a program, project, or operation. The
    cost estimate is the product of the cost estimating process which has a single total value
    and may have identifiable component values.
    • An estimate involves calculating the costs of construction work on the basis of
    probabilities
    • Two activities are undertaken when carrying out a cost estimate:
    Measurements: all measurements are approximate

    Pricing: the degree of approximation is even greater because of the


    difficulty in predicting all the probabilities of items such as labor
    productivity and site conditions.
    WHAT IS AN ESTIMATE?

    • Costs of construction work are classified as:

    1. Materials costs.
    2. 2. Labor costs.
    3. Equipment costs.
    4. Overhead (general and job) costs.
    5. 5 Profit.

    • Data on all of these costs are required to develop or prepare an estimate.


    WHAT IS THE PURPOSE OF ESTIMATING?

    • The purpose of estimating is to forecast (predict) the cost required to complete a


    construction project in accordance with the contract plans and specifications.
    • There are two distinct tasks in estimating:
    ❖To determine the probable real cost of the project.
    ❖To determine the probable real time to build the project.

    Because construction estimates are prepared before


    a project is constructed, an estimate is, at best, a
    close approximation of the actual costs.
    WHAT IS THE PURPOSE OF ESTIMATING?

    • The true value of the project will not be known until the project has been completed
    and all costs have been recorded.
    • Therefore, the estimator does not establish the cost of a project; he simply establishes
    the amount which the contractor will receive for constructing the project
    4 PRINCIPLES OF COST ESTIMATION

    • 1. Cost estimation is used to predict the quantity, cost and price of the resources required by the scope of a project. A
    project might be any process that is started to perform work activities and/or create assets.
    • 2. Cost estimation is needed to provide decision-makers with the means to make investment decisions, choose
    between alternatives and to set up the budget during the front end of projects. For this, estimates made by vendors and
    contractors need to be validated by clients as well
    • Related to this principle, it is always challenging to collect and read the huge amount of cost data, which does not help
    with the decision making. Analyzing and visualizing the cost data opens the doors to making the data useful and
    meaningful.
    • 3. Estimating is done by breaking down the total scope of a project in manageable parts, to which resources can be
    assigned and cost. There are standardised ways of breaking down a project, like the Work Breakdown Structure (WBS)
    depending on the needs of the project team and external parties multiple structures are often implemented to align
    reporting and sharing of cost data.
    • 4. A cost estimate is more than a list of costs. It also includes a detailed Basis of Estimate report that describes the
    assumptions, inclusions, exclusions, accuracy and other aspects that are needed to interpret the total project cost.
    WHAT IS THE ROLE OF THE ESTIMATOR?

    • The estimator’s job is to prepare estimates of building project costs.


    • The success of a contractor’s business depends on the accuracy of these estimates.
    • The estimator’s success will be based on his previous experience and knowledge of the
    construction industry.
    • A contractor or estimator lacking this experience may over-, or under-estimates his
    project costs.
    WHAT THE ESTIMATOR MUST KNOW (SKILLS)?

    • 1. He must have a thorough knowledge of the building trades.


    This includes types of construction and methods of construction.
    • 2. He must be able to read building plans and notes, and understand the specifications.
    If he finds any discrepancies between the plans and specifications, he will bring them to the
    attention of the architect or owner for solution.
    When all the questions are answered and problems are solved, he can then prepare and finish the
    cost estimate.
    WHAT THE ESTIMATOR MUST KNOW?

    • 3. He must have a thorough understanding of the building codes in the area where the
    building project is to be constructed.
    • 4. He must have a thorough understanding of construction materials.
    He must understand the sizes, strengths, and the capabilities of the materials with which he works.
    He must be able to substitute equal quality materials when specified material are not available.
    WHAT THE ESTIMATOR MUST KNOW?

    • 5. He must keep up with the development of new construction products and materials.
    To keep current, he should frequently visit trade shows and subscribe to building magazines.

    • 6. He has to possess some basic mathematical ability.

    • 7. He has to have at his fingertips reference materials, books, tables, and tabulating equipments
    to speed up his job.
    In time he will acquire reference materials in the form of material catalogs, brochures, and
    manufacturer specification sheets for the product he uses.
    WHAT THE ESTIMATOR MUST KNOW?

    • 8. Finally, he must project (forecast) labour cost changes.


    The estimator must realize that labour costs may vary in different geographical areas of the
    country.
    He must also realize and project in his estimates future increases in labour costs because of
    upcoming events.
    THE COMPONENTS OF COST OF PRELIMINARIES

    • Most PRELIMINARIES ITEMS are made up of the following 3 parts:

    • INITIAL COST
    • RECURRING COST
    • FINAL COST
    * refer your textbook for details explanation
    THE COMPONENTS OF AN ESTIMATE

    • Most estimates are made up of the following five parts:

    Materials: The estimator makes a take-off of all the different materials required on the
    project from the plans and specifications.

    Labour: The estimator estimates the hours needed to do the required work and
    then multiply by the appropriate wage.

    Equipment: The cost of equipment includes ownership or rental fees, moving to the
    job site, erecting, dismantling and operating
    THE COMPONENTS OF AN ESTIMATE

    • 4. Overhead:
    • There are two types of overheads:
    4a. General overhead: includes all costs that can not be directly charged to any particular project,
    such as the cost of office supplies, rent, travel expenses and salaries.
    4b. Job overhead: includes all costs which apply directly to the project and cannot be charged to
    materials, labor, or equipment.

    5. Profit: Most estimators show the profit expected from a job as a percentage of the total
    estimated cost of the project. The profit varies from 6-15%.
    POSSIBLE SOURCES OF ERRORS IN ESTIMATES

    1. Mistakes in material take-offs.


    2. Errors in carrying forward material from quantity sheets to summary sheets
    and from there to direct cost sheets.
    3. Mistakes in estimating the labor time required for certain items of work.
    4. Errors in estimating hourly wages of labor.
    5. Failure to allow for rising costs of materials.
    6. Failure to allow for delays due to breakdown of machines and acts of God
    (e.g. earthquakes and storms).

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