Cost estimation is the process of predicting the probable cost of a project so as to better gauge the financial requirements of a planned construction.
These estimates are made at a conceptual stage, before hard details and layouts have been formatted so as to provide an educated outlook on a projects’ demands and at the actual design stages as the project progresses and a logical and orderly succession of work items becomes evident.
Both enable the informed allocation of financial resources as well as a tailoring of the project so as to avoid any apparent excessive costs.
A cost estimate is typically two fold and includes capital costs alongside operational and maintenance estimates. While the former is useful for planning initial costs, a formulation of the latter helps get an appreciation of future spending, thereby allowing for design changes that can keep them to a minimum.
Both these estimates take into consideration a number of factors.
Capital costs estimates include estimates of costs related to the initial setup and generally include expenses related to the following:
- Construction including labour and equipment
- Architectural and engineering designs
- Acquiring land
- Taxes and insurance pertaining to the construction period
- Site and building inspections
- Assessments of feasibility
- Onsite supervision
Operational and maintenance estimates take into account the costs related to the following:
- Services and utilities
- Land rent and associated fees
- Maintenance and repair requirements including equipment, labour
- Ongoing taxes and insurance
- Additional owner expenses
The nature of the project and its magnitude and location dictate the extent of each of the above costs and a cost estimator can help in reducing these in line with investment expectations by providing predictions of these expenses.
Read our next article to find out more about different types of cost estimators.
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