Introduction
Cost estimation is a crucial step in any project management, with the fact that estimating establishes the foundation of the development cost at varied phases of project development. A cost estimate at a particular phase in a project progress represents an estimation given by the cost engineer or construction manager based on the presented data. The costs involved in constructing a facility are inclusive of the maintenance and operation cost, in addition to the initial capital cost. The capital cost for a construction project includes the expenses ranging from planning and feasibility studies, testing and inspection, construction financing, equipment’s and furnishing, insurance and taxes during construction to many other costs and expenses. This paper will encompass a comprehensive coverage of the basic approaches to cost estimation in any construction or project management.
Basic approaches to cost estimation
Fundamentally, all the estimations of cost are usually performed on the following approaches:
The production function
In building, this function is expressed as a function that involves the size of the structure and as capital or labor as factors of production. It relates the amount of inputs of machines and material, labor or capital to the volumes of output (Adeli, Hojjat, and Mingyang Wu 20). For instance, the volumes of production K may be expressed in the form of factors p1, p2.. Pn by the use of a statistical or a mathematical model. The relationship that exists between the extents of the building project to the labor as the input, is a type of a function of production.
In this approach, a unit cost is allotted to every of the facility constituents or jobs of the facilities as embodied by the quantities bill. The summation of the amounts is then multiplied by their respective unit cost. This method is forthright in standard, but relatively arduous in the application. The level of the element involved during disintegration in various tasks will have varied from one estimate to another. The first step will be to disintegrate the procedure of the project into a specific number of jobs. Mutually, these specified tasks must finally come to completion of the facility being constructed (Ahmad, Irtishad, and Issam Minkarah 233). The moment these jobs are defined and the quantities that represent these tasks are analyzed and assessed, the cost of the unit is allocated to each task and then the aggregate cost is calculated by summing up the total cost incurred by every task.
Allocation of joint cost
The apportionment of cost from the accounts that are prevailing may well also be utilized in developing a function of the cost. The underlying ideology of this methodology is the fact that every disbursement element can be designated to specific features of the various operations. This basic cost may later be allotted equivalently to innumerable jobs that are part of the project subdivision (Khosrowshahi and Ammar 379).
Empirical cost inference
The cost functions use in empirical estimation of incurred cost necessitate techniques which are statistical and related to the construction cost or facility operation. The role of statistical inference is to predict the optimum values or constants in a cost function that has been assumed. Normally, this is encompassed with a means of regression techniques of analysis (Adeli, Hojjat, and Mingyang Wu 19).
Types of Construction Cost Estimates
The estimation of construction cost is normally being observed from diverse viewpoints, because of varied institutional requirements. Despite the numerous sorts of estimation that exist and used at altered junctures of a construction project, these estimates are best defined into three types namely:
Bid Estimates
Where the contractor’s bid estimate gives a reflection of the desire of him or her securing the job, in addition to estimation of tools at his or her disposal. Some contractors may have well established procedures of cost estimation while others may not. Since only the lowest bidder will be the one who will walk away with the contract, this consequently creates a bidding contest (Khosrowshahi and Ammar 381). Any devoted effort to the estimation of cost serves as a loss to the contractor who is not successful in the bidding contest. Additionally, the contractor may tend to use the least effort in making the cost estimate because there are high chances that it may not be successful. For the worker, the proposed estimation is normally viewed as the budget estimate, which can be utilized as for the purpose of planning for construction financing and control (Ahmad, Irtishad, and Issam Minkarah 233). The cost budgeted should also be periodically updated to have a reflection of the cost estimated for completion, in addition to ensuring adequate flow of cash for the accomplishment of the project goal.
Control Estimates
Control estimate is a type of estimation which involves both the contractor and the owner adopting a baseline for the cost control throughout the construction. For the possessor, an estimated budget must be implemented early enough for the purpose of long term planning on how to finance the facility. Consequently, the detailed estimation is often used as the budget estimate because it contains details which are substantial to define or reflect the scope of the project, considering that it is available before the engineers estimate (Adeli, Hojjat, and Mingyang Wu 22). As construction continues, the cost that is budgeted must be periodically revised to give an estimation of the overall completion cost. A reviewed estimated cost in required because of the order change initiated by the owner or due to the unforeseen cost overruns or savings.
Design Estimates
They reflect on the headway of the design; estimates are usually done before the design of the facility and it is compulsory, thus, referencing of the data of the cost of the preceding built facilities. A maiden estimate is centered on the theoretical ideas of design that a facility is designed with the use of essential technologies (Khosrowshahi and Ammar 379). A detailed estimate is prepared once the extent of work is vividly demarcated, as the comprehensive design goes on to make sure that the most necessary elements of the facility to be developed are distinguishable. The professionals estimate is grounded on a complete specification and plans. In the preparation of these kind of estimates, skilled professional will encompass all the anticipated amount for contractor’s profit and overhead (Ahmad, Irtishad, and Issam Minkarah 241).
Conclusion
For an analysis of the life cycle cost of a proposed facility, it is essential to estimate the maintenance and operation cost over time. The stream of operating cost through the period of the life of the facility depends solely on the consequent maintenance policies and the facility utilization. Particularly, the weight of the routine maintenance cost might depreciate if the facility goes through periodic renovation and repairs at the periodic intervals.
Work cited
Adeli, Hojjat, and Mingyang Wu. "Regularization neural network for construction cost estimation." Journal of Construction Engineering and Management 124.1 (1998): 18-24.
Ahmad, Irtishad, and Issam Minkarah. "Questionnaire survey on bidding in construction." Journal of Management in Engineering 4.3 (1988): 229-243.
Khosrowshahi, Farzad., and Ammar P. Kaka. "Estimation of project total cost and duration for housing projects in the UK." Building and Environment 31.4 (1996): 375-383.
