Cost estimation involves calculating the specific budget required for a building project, encompassing all expenses from materials to labor. Accurate cost estimation ensures that the project stays within financial limits and helps prevent unexpected expenses.
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1. Conduct a Site Visit
In certain circumstances, a site visit may be necessary before making a bid. Instead of relying solely on elevation drawings or photographs of the planned construction site, estimators are advised to visit in almost every instance. This is because a comprehensive tour may help estimators better understand the site's circumstances.
2. Review Bid Package
The proposal package includes everything needed to place a bid, including owner-contractor contracts, bond forms, general terms, additional general conditions, construction specifications, and more. Accordingly, a competent estimator will invest considerable time to ensure they know about every project facet. Contractors who submit bids for a project must accomplish the work outlined in the bid package. In most cases, drawings are classified according to the reason they were created, including site, architectural, structural, mechanical, electrical, and other categories.
3. Perform a Material Takeoff
The material takeoff, also known as quantity takeoff, is conducted by estimators by perusing the building documents and counting each item necessary for the project. It is common practice to specify material requirements under the method by which they are measured. The proprietor or engineer may simplify the bid leveling process in the case of large construction projects, which may generate a bill of quantities (BOQ). Through the use of an itemized list of tasks and resources, this document provides a breakdown of the extent of the work.
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4. Write a Scope of Work
After comprehensively comprehending the necessary tasks, it is crucial to develop a scope of work. This construction document serves as a binding agreement between property owners, contractors, and subcontractors during the execution of a construction project.
5. Identify the Project Resource Requirements
Once you have determined the extent of the work that needs to be done, you may proceed to estimate the resources required for each project activity. These resources include labor, materials, equipment, and machinery.
6. Estimate Costs & Create a Construction Estimate
Since you should have an accurate understanding of what labor, materials, equipment, and machinery are required for the building project after you have written a scope of work, a material takeoff, and a bill of quantities, you are now in a position to produce a construction estimate and calculate the costs associated with those elements.
7. Keep Track With the Project
Constant cost estimates are essential throughout the construction phase for tracking actual spending compared to the anticipated budget. Because of this, project managers can detect cost overruns at an earlier stage and take corrective actions to restore the project to its original trajectory.
8. Project Completion and Evaluation
Final cost estimates are utilized to evaluate the financial performance of the order-of-magnitude project in comparison to its initial estimates during the completion stage. This evaluation is absolutely necessary to better understand profitability, enhance cost management techniques, and refine estimation practices for future projects.
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