Reliable Construction Cost Estimating

Reliable construction cost estimating is critical to the success of any repair, renovation, maintenance, or new build project.

RELIABLE – the quality of being able to be trusted to do what somebody wants or needs

Oxford Dictionary
Reliable Construction Cost Estimating

A construction cost estimate must be trusted and what is needed by a real property owners, architects, engineers, builders, or oversight groups to plan, procure, and execute a repair, renovation, maintenance, or new build projects. In theory, all groups should share the same need; to determine the cost for a planned construction activity.

While there may be several types of estimates in terms of granularity, this discussion is limited to detailed line item estimates. This is the most reliable form of estimate and a requirement before proceeding to the procurement and execution of a specific repair, renovation, maintenance, or new build activity.

Components of Cost Information:   A detailed construction cost estimate is comprised of individual line items for granular tasks.

Each task has a description and should be organized using the CSI MasterFormat data architecture. Each task should also have the following break downs and associated information (cost and descriptions as appropriate) for (1) labor, (2) material, (3) construction equipment. Construction supervision, and general office overhead, as well as any other costs should also be itemized separately. Considerations of crew composition, availability, and productivity, among others, also need to be addressed and fully defined. A locally researched unit price cost database can be of great value in this exercise both speed and validate the effort.

Each detailed line item in a locally researched detailed unit price book defines a a specific relationship between the output of a task/process and the necessary inputs and resources in terms of a production function. It is expressed by the relationship between the volume of construction and the associated factors labor, material, equipment, and capital. A unit of measure is associated with each line item (for example, square foot, linear foot, each, etc.) to associate the line item to a specific production requirement.

A unit cost is assigned to each repair, renovation, maintenance, or new construction task, and per designated quantities, as represented by the bill of quantities. The total cost is the summation of the products of the quantities multiplied by the corresponding unit costs. The unit cost method is straightforward and can be extremely labor intensive, unless supported by a locally researched unit price book. Each task has an associated time requirement, thus scheduling is also significantly enhanced. The final listing represents all tasks that must be completed for the associated project or work order.

Learnings. 

  1. A detailed line item construction cost estimate is the only form of reliable information that should be used to proceed to the procurement and project execution phases of any repair, renovation, maintenance, or new build project.
  2. Area costs factors, location factors, and other construction cost indexes should not be used in association with preparing a reliable construction cost estimate. The numerous aspects involved in creating a single cost factor clearly demonstrate why reliability is problematic: special local conditions, specified size or capacity, adjustment for inflation index, adjust for local regulatory constraints…
  3. Predictive cost indexes or predictive costs, i.e. future forecasts of costs are uncertain. Actual expenses may be much lower or much higher than those forecasted. The high level of uncertainty involved with predictive costing makes their use limited. Reasons for cost uncertainty include technological changes, changes in relative prices, inaccurate forecasts of underlying socioeconomic conditions, analytical errors, and other factors.
  4. While the use of historical information can be of value, it should not be used to prepare a reliable construction cost estimate. Furthermore, historical cost data is only useful if it was captured and organized in a way that is compatible with future applications. If used for a current estimate for example, detailed information must be updated with respect to current costs in addition to present needs. The format of cost data, such as unit costs for various items, should be organized according to the current standard which is CSI MasterFormat. Examples of various historical data source include various catalogs of vendor data products such as… Sweets’ Catalog published by McGraw-Hill Information Systems Company,  ENR, the McGraw-Hill Construction Weekly, Cost Engineering, a journal of the American Society of Cost Engineers, commercial cost reference manuals such as the Building Construction Cost Data published annually by R.S. Means Company, Inc., or Dodge Manual for Building Construction, published by McGraw-Hill and The Dodge Digest of Building Costs and Specifications.
  5. Parametric modeling, building level, or system level costing should not be used to prepare a reliable construction cost estimate.
  6. Detailed construction cost information should be shared, at a granular task level, on an early and ongoing basis with all project participants and stakeholders. This practice will minimize errors and omissions in the scope of work, greatly reduce change orders, and improve overall project outcomes with respect to time, cost, and otherwise assist in meeting project goals.

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