In any project, cost estimation and costing are essential. Once you’ve chosen your house plan and signed off on your architect’s initial plans, it’s time to get serious about the details of building your home. This process involves developing more detailed plans and estimates for every element of your new home, from its foundations to its roof.
While this may seem like an exhaustive list of tasks, don’t worry – we’ve got you covered with all the information you need about estimating and costing for your new home construction project in one convenient location! Keep reading for a breakdown of everything you need to know
What are estimation and costing?
Estimating is the process of forecasting and calculating the amount that will be required to complete a project. It is the first step in project costing and is used to predict the final cost of a project by applying average costs for all the materials, labour and other items needed for the project.
Estimating is done before purchase or construction commences, or during the initial planning phases. This process involves developing estimates based on past experiences and observations. The accuracy of the estimate depends on the amount of detail available and the duration of data analysis.
On the other hand, costing is the process of estimating the cost of the entire project before completion. It can be itemised or estimated using construction cost calculators. Costing involves three steps, namely, estimating, bidding, and finalising. Costing aids in forecasting the amount of money required for the construction project. Additionally, a “costing” refers to the cost of producing a single unit, which in this context is most likely construction work.
Estimating the cost of a project is important for commercial and residential construction projects. The construction cost is one of the major components of a total project cost. The total project cost includes the cost of land, design, engineering, management, financing, profit and other related costs.
The construction cost will depend on the type of construction, design, materials, labour and ancillary costs such as permits, fees and taxes.
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Estimation and costing: Cost analysis and budgeting for construction
The cost of your house largely depends on the size and the type of building materials. The prices of lumber, bricks, tiles and other construction materials are usually higher in urban areas with a high demand for these products. On the other hand, rural areas tend to have lower costs for construction materials.
To get an idea of how much the construction costs will be, you need to estimate all the costs associated with building your house first. This includes not just the actual construction labour but also other expenses like buying new furniture and fixtures, connecting utilities to your new home, and purchasing building materials such as wood or brick.
Once you have an estimate of the total cost of building your house, you can then compare it to any possible funding sources or grants that are available. If you find that you can afford to build your house using a low-cost financing option or a government grant program, you can save a lot of money on the overall cost of building your house in the long run.
Estimation and costing: Importance
Estimating is important while constructing your home. This is because there will be many decisions to be made. These decisions include what type of home to build, site preparation, foundation, framing, roofing, electrical, plumbing and all other aspects of construction.
It will lead to different materials and costs. The decisions made at the beginning will determine the costs of the project. Therefore, accurate estimating is essential for the early estimation of the project cost.
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Estimation and costing: Finding the right contractor is key to successful estimating
One important aspect of successful estimating is the selection of a competent contractor. There are many contractors available for any construction project.
However, not all contractors are competent for all types of construction. Therefore, it is important to select a contractor who has the necessary experience and skill for the type of construction you desire.
The contractor should be able to provide you with an estimate based on your plans and specifications.
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Basics of cost estimation techniques
While estimating the cost of a project, following points are taken into consideration:
- Cost of similar projects
- Wage rates
- Material costs
- Site conditions
- Bid timing
- Inflation factor
- Project schedule
- Quality of plans and specifications
- Granting agency
- Reputation of engineer
- Regulatory requirements
- Size of project
- Insurance requirements
- Value engineering
- Location of work site
- Contingency
- Judgement
- Supplemental investigations and studies
Project costing methods and strategies
Project costing is an essential part of the planning process for any project, and there are various methods and strategies available for estimating the costs of a project. Here are some popular costing methods:
Expert judgement method
This method involves seeking expertise from individuals or groups with specialised knowledge or training in team and physical resource planning and estimating. Expert judgement, guided by historical information, provides valuable insight about the environment and information from prior similar projects.
Analogous estimating method
This method uses the values such as scope, cost, budget, and duration, or measures of scale such as size, weight, and complexity from a previous, similar project as the basis for estimating the same parameter or measurement for a current project. When estimating costs, this technique relies on the actual cost of previous, similar projects as the basis for estimating the cost of the current project.
Parametric estimating method
This method uses an algorithm or a statistical relationship between historical data and other variables (e.g., square footage in construction) to calculate resource quantities needed for an activity based on historical data and project parameters.
Bottom-up estimating method
In this method, team and physical resources are estimated at the activity level and then aggregated to develop the estimates for work packages, control accounts, and summary project levels. Bottom-up estimating is a method of estimating a component of work. The cost of individual work packages or activities is estimated to the greatest level of specified detail. The detailed cost is then summarised or rolled up to higher levels for subsequent reporting and tracking purposes.
Three-point estimating method
This method involves improving the accuracy of single-point activity cost estimates by considering estimation uncertainty and risk and using three estimates to define an approximate range for an activity’s cost. These three estimates are Most likely (M), Optimistic (O), and Pessimistic (P).
Estimation and costing: Cost saving measures
There are many ways to save money during your construction project. One of the best ways is to be prepared. Make sure you have all the necessary plans and specifications ready to go before the contractor arrives. This will save time and money.
Another cost-saving measure is to have a good relationship with your contractor. A good relationship with your contractor will help to ensure that the project runs smoothly and that you can save money.
It is important to communicate with your contractor about your expectations. This way, you will know if something is going wrong before it gets out of control. It is also important to be realistic about your expectations.
Estimation and costing: Purpose
You will know the total budget for the project after the contractor has given you an estimate and you have checked for accuracy.
After the contractor has given you a rough estimate, you can break down the total project cost and compare it with the budget. If the budget exceeds the total project cost, you can review the plans and specifications and identify items that you can use the extra money on.
You can also keep this money for any unexpected expenses. On the other hand, if the project exceeds the budget, you can identify areas of the project that can be modified or reduced to bring it within budget.
Estimation and costing: Common mistakes
One of the most common mistakes made while estimating are imprecise or incorrect take offs. Take offs assist you in determining the exact quantities required for your goods and services. They must be completed in order to ascertain your manpower and equipment requirements. Not performing a site visit is another error. To avoid expensive and unforeseen complications during construction, you must make sure you are highly familiar with the site.
It’s crucial to make accurate labour cost estimates. If you make mistakes here, you might not have the best workers for your project. Not evaluating risks and creating alternatives for them is another common error committed while estimating. You need to be prepared for the worst case scenarios. You should also have a reliable estimate of the cost of the materials and supplies. Inaccurate projections for these could lead to financial issues.
Estimation and costing: Problems
An incorrect allocation of resources inside the project results from an inaccurate cost estimate in one portion of the project. This causes a surplus or deficit in resource allocation, which has an impact on production. Projects that are underestimated may not be finished on time or within budget. The impact on performance from underestimating something poses a risk. Staff members, especially those with less expertise, may produce subpar work in response to tight deadlines.
In conclusion, estimating and costing are important activities in the construction of any project. These activities help to identify the cost of a project upfront, to avoid any nasty surprises further down the line.
They also help you identify potential cost savings that can be achieved through more efficient construction methods or materials, as well as provide insight into the overall budget of your house construction costs.
Estimating and costing are important activities in the construction of any project. These activities help to identify the cost of a project upfront, to avoid any nasty surprises further down the line.
They also help you identify potential cost savings that can be achieved through more efficient construction methods or materials, as well as provide insight into the overall budget of your house construction costs.
FAQs
Why is cost estimation so important?
Cost estimation aids in setting the budget for the project, planning the required work, and managing additional materials. Estimated costs are also of the utmost importance when trying to win over new clients. Before starting an actual building, landowners also utilise cost estimates to evaluate the viability of their initiatives.
What are the essentials of estimating and costing?
The essentials of estimating and costing include labour, which is the price of the team members' time and salary spent on the project. It also includes materials and equipment, which is the price of the resources needed for the project, including hardware, software, and permissions.
What is the difference between estimation and costing?
Finding the exact cost is referred to as costing. In contrast to costing, estimating involves determining in advance the likely cost of producing an item, finishing a contract, or carrying out a procedure soon.
