The ability to quantify precise construction cost estimates is vital to projects of all sizes. Construction costs constitute a significant portion of any project budget, and it is only through close, ongoing collaboration with a contractor and cost estimator that investors can receive a reliable initial cost estimate as well as revised estimates throughout the various stages of project development.
While it is normal to work off of loose estimates in the planning stage of a project, contractors should continually update the budget as needed prior to construction. A contractor attorney in Wilmington, NC can help you contend with cost estimate disputes or unreasonable budget inflation so your project is completed by its deadline without unnecessary or exorbitant costs.
Accuracy Depends on Available Information
It’s hard to factor tentative decisions into a cost estimate because the planning stage of a construction project is primarily conceptual in nature. Therefore, ideas that get the green light on day one might be axed as the project commences. This can have drastic consequences on your cost estimate, because accuracy relies on certainties. As a result, your estimate will reflect the amount of information available to the cost estimator when they perform an evaluation.
Understanding the Three Major Categories of Cost Estimates
Cost estimates are broken down into three categories that serve one of three basic functions: design, bid, and control. To establish a project’s financing, you must start with a design estimate or a bid estimate.
Design Estimates: Design estimates include screening (order of magnitude) estimates, preliminary (conceptual) estimates, detailed (definitive) estimates, and engineer’s estimates. These estimates run parallel with the planning and design of a project.
Bid Estimates: Bid estimates are submitted to the investor for purposes of competitive bidding or general negotiation. These estimates consider the direct construction cost including field supervision, as well as a markup to cover general overhead and profits. Direct construction costs include subcontractor quotations, quantity takeoffs, and construction procedures.
Control Estimates: Control estimates are used throughout a project to monitor costs. A control estimate establishes the budget estimate for financing, the budgeted cost before construction, and the estimated cost of completion during an ongoing project.
Cost estimation is vital to the success of any construction project, but if you fail to utilize the correct type of cost estimates, your project could result in failure. If you have had trouble with cost estimates in the past, a contractor lawyer in Wilmington, NC can help you avoid an unfair or inflated estimate.
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.