Introduction to Cost Estimation

Lecture# 6

LECTURER : SANA ALEEM

MSc Architecture and Environmental
Design
BSc Architecture Engineering
INTRODUCTION

What is an Estimate?
• 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
condition
INTRODUCTION

What is an Estimate?
Costs of construction work are classified as:
• 1. Materials costs.
• 2. Labor costs.
• 3. Equipment costs.
• 4. Overhead (general and job) costs.
• 5. Profit. ‰

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

PURPOSE

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.
PURPOSE

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.
ESTIMATOR

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.
ESTIMATOR

What is the Role of the Estimator?

In either case, this could impact the success of his company: ‰
• If costs are too high, his jobs will be few and far between. ‰
• If costs are too low, he will not be able to stay in business. ‰
• All cost data is acquired from experience. ‰
• If an estimator does not have cost data from his own experience, he must use cost
data from price books and handbooks
ESTIMATOR

What is the Role of the Estimator?

The more valid data the estimator has available, the better he will be able to estimate
the probabilities of costs.
The following factors affect the accuracy of cost estimates:
• 1. Site location and accessibility.
• 2. Subsurface and soil conditions.
• 3. Time and season.
• 4. Climatic conditions.
• 5. Wage agreements.
• 6. Strikes.
• 7. Market prices of basic materials.
• 8. Availability of money.
• 9. The demand for construction
ESTIMATOR

What the Estimator Must Know (Skills)?

• He must have a thorough knowledge of the building trades. ‰
• This includes types of construction and methods of construction.
• 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.
ESTIMATOR

What the Estimator Must Know (Skills)?

• He must have a thorough understanding of the building codes in the area where
the building project is to be constructed.
• 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.
ESTIMATOR

What the Estimator Must Know (Skills)?

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

What the Estimator Must Know (Skills)?

• Finally, he must project (forecast) labor cost changes. ‰
• The estimator must realize that labor costs may vary in different geographical
areas of the country. ‰
• He must also realize and project in his estimates future increases in labor costs
because of upcoming events.
The Components of an Estimate
• Most estimates are made up of the following five parts:
1. Materials:
• The estimator makes a take-off of all the different materials required on the
project from the plans and specifications.
2. Labor:
• The estimator estimates the hours needed to do the required work and then
multiply by the appropriate wage.
3. Equipment:
• The cost of equipment includes ownership or rental fees, moving to the job site,
erecting, dismantling and operating.
COMPONENTS OF ESTIMATE

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 can not
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%.
COMPONENTS OF ESTIMATE

The Components of an Estimate

• Approximate profits usually expected are:
• Small projects 15%
• Medium projects 12%
• Large projects 10%
• Very large projects 6-8%
ERRORS IN ESTIMATE

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).
• 7. Making no provisions to have estimates checked.
• 8. Insufficient allowance for overhead.
• 9. Omission of profit.
REQUIREMENTS FOR ESTIMATE

The following Requirements are necessary for preparing an estimate:

• Drawings like plan, elevation and sections of important points.
• Detailed specifications about workmanship & properties of materials etc.
• Standard schedule of rates of the current year.
REQUIREMENTS FOR ESTIMATE

• Estimate give an idea of the cost of the work and hence its feasibility can be
determined i.e, whether the project could be taken up with in the funds available
or not.
• Estimate gives an idea of time required for the completion of the work.
• Estimate is required to invite the tenders and Quotations and to Arrange contract.
• Estimate is also required to control the expenditure during the execution of work.
• Estimate decides whether the proposed plan matches the funds avail or not.
PROCEDURE FOR ESTIMATE

Procedure for Estimating Estimates

Involve the following operations:
• 1. Preparing detailed Estimate.
• 2. Calculating the rate of each unit of work.
• 3. Preparing abstract of estimate.
PROCEDURE FOR ESTIMATE

Data Required
• Specifications:

A. General Specifications:
• This gives the nature, quality, class, work and materials in general terms to be used
in various parts of work. It helps to form a general idea of building.
B. Detailed Specifications:
• These gives the Detailed description of the various items of work laying down the
quantities and qualities of materials, their proportions, the method of preparation
workmanship and execution of work.
LUMPSUM ESTIMATE

Lump sum
• While preparing an estimate, it is not possible to workout in detail incase of petty
items.
• Items other than civil engineering such items are called Lumpsum items or simply
L.S. items.
• The following are some of L.S. items in the estimate:
• 1. Water supply and sanitary arrangements.
• 2. Electrical installations like meter, motor, etc.,
• 3. Architectural features.
• 4. Contingencies and unforeseen items.
• In general, certain percentage on the cost of estimation is allotted for the above
L.S. items.
DETAILED ESTIMATE

Detailed Estimate
• The preparation of detailed estimate consists of working out quantities of various
items of work and then determine the cost each item.
• This prepared in two stages:
• a) Details of measurements and calculation of quantities
• b) Abstract of Estimated cost
DETAILED ESTIMATE

• The complete work is divided into various items of work, such as Earthwork
concreting, Brick work, R.C.C. plastering etc.,
• The details of measurements are taken from drawings and entered in respective
columns of prescribed pro forma.
• The quantities are calculated by multiplying the values that are in numbers
columns to Depth columns as shown in below:
Abstract of Estimated Cost
• The cost of each work is worried out from the quantities that already computed in
the details measurement form at workable rate. But the total cost is worked out in
the prescribed form is known as abstract of estimated form.
• 4% of estimated cost is allowed for petty supervision, contingencies and
unforeseen items.
DETAILED ESTIMATE

Structure of a Detailed Estimate

• The total detailed estimate should accompanied with:
• a. Report
• b. Specification
• c. Drawings(plans, elevation, section)
• d. Design charts and calculations
• e. Standard schedule of rates.
APPROXIMATE ESTIMATE

Approximate Estimate Preliminary or approximate estimate

• is required for studies of various aspects of work project and for its administrative
approval.
• The estimate is accompanied by a report duly explaining necessity and utility of
the project and with a site or layout plan.
• A percentage of 5 to 10% is allowed for contingencies.
APPROXIMATE ESTIMATE

Methods for Preparation of approximate estimates

• The following are the methods used for preparation of approximate estimates:
• a. Plinth area method
• b. Cubical contents methods
• c. Unit base methods
RATE ANALYSIS

Rate Analysis Definition:

• In order to determine the rate of a particular item, the factors affecting the rate of
that item are studied carefully. And then finally a rate is decided for that item.
• This process of determining the rates of an item is termed as analysis of rates or
rate analysis.
• The rates of particular item of work depend on the following:
• 1. Specification of works and materials about their quality, proportion and
constructional operation methods.
• 2. Quantity of materials and their costs.
• 3. Cost of labours and their wages.
• 4. Location of site of work and the distances from source and conveyance charges.
• 5. Overhead and establishment charges. 6. Profit.
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