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Construction cost estimation is a process of determining the cost of building a project. It’s a complicated process that requires research, engineering, and math. You can use several methods and techniques to estimate the cost of a construction project, but not all of them are reliable or accurate.
Below are some common construction estimating techniques construction contractors use when estimating project costs.
Cost Of Quality Estimating Technique
The cost of quality is a type of cost that is incurred to produce a quality product. This cost can be measured in terms of time and money spent by the organization on ensuring that its products meet the specified requirements.
This technique estimates the total cost of quality assurance activities such as inspection, testing, and evaluation procedures performed during construction. Hiring an expert in quality assurance can optimize this process further.
Here are some of the benefits of using the cost of quality estimating technique:
- It can help organizations identify areas where costs can be reduced or prevented.
- It can help organizations make informed decisions about how to allocate their resources to improve quality.
- It can help organizations track the effectiveness of their quality improvement efforts.
Vendor Bid Analysis Method
This method involves gathering information from contractors, builders, and subcontractors to determine the project cost. The more bids you receive, the better idea you will have of what projects in your area cost.
The problem with this method is that getting people to respond is time-consuming and difficult if they are busy or don’t want your business. It also requires you to explain exactly what you are looking for regarding pricing and other details about the project before you can get any bids back from potential vendors.
Here are some tips for getting the most out of the vendor bid analysis method:
- Be clear about your needs and expectations. The more information you can provide to vendors, the better they will be able to estimate the cost of your project.
- Get quotes from multiple vendors. This will give you a better idea of the range of prices and services available.
- Compare apples to apples. Make sure you are comparing quotes that are for the same services and level of quality.
- Don’t be afraid to negotiate. Once you have received quotes, you may be able to negotiate a better price.
Data Analysis Method
The data analysis method identifies, analyzes, interprets, and presents data to support decision-making. It is an essential part of the decision-making process. This method can be used for cost estimation purposes.
In this method, data is collected from the construction project which has already been completed. This data can be collected from different sources such as government sources, private sector sources, private companies, etc. The collected data is analyzed and interpreted to find out the best cost estimation estimate. This way, it can be used to estimate the costs of future projects more accurately and efficiently.
Here are some of the benefits of using data analysis:
- It can save time and effort by eliminating the need to create a new estimate from scratch for each project.
- It can be used to estimate the cost of projects that are similar to previous projects, even if the specific details of the project are different.
- It can be used to identify areas where costs are likely to be higher or lower than expected.
Here are some of the drawbacks of using data analysis:
- It is only as accurate as the historical data that is used.
- It can be difficult to use if there is not enough historical data available.
- It can be difficult to understand and use if you are not familiar with statistical analysis.
Parametric Estimating Method
The parametric estimating method is used to estimate the cost of a project based on historical data. The most common type of parametric estimation uses historical labor rates, materials prices, and other factors to calculate the cost of performing future projects. This method can be used for new construction and renovation projects because it relies on actual costs rather than arbitrary estimates.
Parametric estimating can be implemented using either an automated software program or by hand with spreadsheets or paper charts. In either case, you must keep track of all your calculations to verify them later if necessary.
Here are some of the benefits of using parametric estimating:
- It can save time and effort by eliminating the need to create a new estimate from scratch for each project.
- It can be used to estimate the cost of projects that are similar to previous projects, even if the specific details of the project are different.
- It can be used to identify areas where costs are likely to be higher or lower than expected.
Here are some of the drawbacks of using parametric estimating:
- It is only as accurate as the historical data that is used.
- It can be difficult to use if there is not enough historical data available.
- It can be difficult to understand and use if you are not familiar with statistical models.
Bottom-Up Estimating Method
Bottom-up estimating is the most common way to estimate costs. This method starts with the smallest components and then builds up to the final project cost. The bottom-up estimating method is useful when there are many unknowns, such as the project size, the materials required, and the number of people working on it.
It’s important to note that this approach does not account for any changes in scope or schedule during construction. Therefore, it may not be appropriate for projects where these factors are likely to change significantly during the design or construction phases.
The bottom line is that there is no best way to estimate construction costs. Each method has its strengths and weaknesses, so it’s up to you, as a project manager or professional construction estimators to decide which best suits your needs.
