introduction to costestimating

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uilding Economy ARE 431

r. Mohammad A. Hassanain

Introduction to Cost Estimating

Is Cost Estimating an Art or a Science?

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.

Todays Lecture


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Is Cost Estimating an Art or a Science?

Before answering this question, let us first define whatis an Art ? And what is a Science ?

An art is the process of arranging elements ina manner that affects senses and emotions. Itinvolves imagination and creativity.

A science is the systematic approach togathering knowledge and data based on lawsand theories.

Cost estimating involves calculating cost as well asvisualization of how the project will be built, therefore,cost estimating is a blend of both art and science.


An estimate involves calculating the costs ofconstruction work on the basis of probabilities.

Two activities are undertaken when carrying out a

cost estimate:

Measurements: all measurements areapproximate.

Pricing: the degree of approximation is evengreater because of the difficulty in predictingall the probabilities of items such as laborproductivity and site conditions.


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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 orprepare an estimate.


The purpose of estimating is to forecast (predict) thecost required to complete a construction project inaccordance 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 theproject.

Because construction estimates are prepared beforea project is constructed, an estimate is, at best, aclose approximation of the actual costs.


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The true value of the project will not be known untilthe project has been completed and all costs havebeen recorded.

Therefore, the estimator does not establish the costof a project; he simply establishes the amount whichthe contractor will receive for constructing the project.


The estimators job is to prepare estimates of buildingproject costs.

The success of a contractors business depends on the

accuracy of these estimates.

The estimators success will be based on his previousexperience and knowledge of the construction industry.

A contractor or estimator lacking this experience mayover-, or under-estimates his project costs.


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In either case, this could impact the success of hiscompany:

If costs are too high, his jobs will be few andfar between.

If costs are too low, he will not be able to stayin business.

All cost data is acquired from experience.

If an estimator does not have cost data from his ownexperience, he must use cost data from price booksand handbooks.


The more valid data the estimator has available, thebetter he will be able to estimate the probabilities ofcosts.

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.


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What the Estimator Must Know (Skills)?

1. He must have a thorough knowledge of the buildingtrades.

This includes types of construction and methodsof construction.

2. He must be able to read building plans and notes, andunderstand the specifications.

If he finds any discrepancies between the plansand specifications, he will bring them to theattention of the architect or owner for solution.

When all the questions are answered andproblems are solved, he can then prepare andfinish the cost estimate.

What the Estimator Must Know?

3. He must have a thorough understanding of thebuilding codes in the area where the building projectis to be constructed.

4. He must have a thorough understanding ofconstruction materials.

He must understand the sizes, strengths, and thecapabilities of the materials with which he works.

He must be able to substitute equal qualitymaterials when specified material are notavailable.


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The Components of an Estimate

Most estimates are made up of the following five parts:

1. Materials: The estimator makes a take-off ofall the different materials required on theproject from the plans and specifications.

2. Labor: The estimator estimates the hoursneeded to do the required work and thenmultiply by the appropriate wage.

3. Equipment: The cost of equipment includesownership or rental fees, moving to the jobsite, erecting, dismantling and operating.


4. Overhead: There are two types of overheads:

4a. General overhead: includes all costs thatcan 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 whichapply directly to the project and can not becharged to materials, labor, or equipment.

5. Profit: Most estimators show the profitexpected from a job as a percentage of thetotal estimated cost of the project. The profitvaries from 6-15%.


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Approximate profits usually expected are:

Small projects 15%

Medium projects 12%

Large projects 10%

Very large projects 6-8%

Possible Sources of Errors in Estimates

1. Mistakes in material take-offs.

2. Errors in carrying forward material from quantity sheetsto summary sheets and from there to direct costsheets.

3. Mistakes in estimating the labor time required forcertain 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 ofmachines and acts of God (e.g. earthquakes andstorms).


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Possible Sources of Errors in Estimates

7. Making no provisions to have estimates checked.

8. Insufficient allowance for overhead.

9. Omission of profit.

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