Construction cost estimating is the process of forecasting the cost of a program, project, or operation. The cost estimate is the final product of the estimating process. Cost estimation is the cornerstone of every construction project. A comprehensive cost estimate is necessary to assess the feasibility of a project and helps developers determine if a project is viable and profitable.
Our Nashville construction law firm will delve into the subject of construction estimating in this four-part series.
The Importance of Cost Estimating in Construction
Although an estimator’s initial estimate will not be the same as the project’s final price tag. Cost estimations are still essential to the construction process. Estimations hold companies accountable for increased costs and overruns. A comprehensive estimate allows developers to make important decisions regarding changes in the design phase and materials. These decisions are critical because it keeps all parties focused on completing a project on time and within budget. Estimators also use estimates to determine the feasibility and profitability of a project. Procurement of financing also depends on an estimator’s report.
Who Prepares Cost Estimates?
Depending on the type of project and the industry, cost estimation may be performed by one person or a team of estimators. Contractors and subcontractors may prepare cost estimates on some projects, architectural firms may employ an in-house estimator, or a construction salesperson may prepare estimate as well. There are also qualified independent estimators who handle estimates that are verified by the contractor’s estimates.
An Estimator’s First Priority: Accurate Job Costs
When it comes to cost estimates, accuracy is highly important. Your company’s reputation depends on your ability to provide accurate estimates to your clients. Customers will not be happy about final project completion costs that are drastically different from your pre-construction estimate. An estimate should not be plus or minus 10 percent of the final cost, rather it should fall within one or two percent because good estimators know what things cost. They utilize historical data and continuously review costs for labor, materials, subcontractors, and other pertinent projects costs to accurately gauge the cost of new projects.
In part two, we will list important qualities and skills that estimators should possess to be successful, and we will also discuss the levels of construction cost estimates. Learn more about cost estimating techniques in part three. Part four will focus on estimating mistakes and the use of estimating software.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.