This page introduces construction cost estimating best practices. It describe methods, procedures, and formats for the preparation of cost estimates and associated usage initial planning, procurement, and associated project delivery management.
“Accurate” Construction Cost Estimating
#1 Costs estimates are prepared by experienced professionals that are knowledgeable in applicable construction means, methods, and local market conditions.
#2 ”Estimates” are approximations of the cost of construction related activity to be accomplished at a future point in time.
#3 “Accuracy” is an inappropriate descriptive term for a construction cost estimate. Measuring accuracy requires a known data point or datum. For example, the comparison of a construction cost estimate to final construction costs (the most common datum used) is not a measurement of accuracy due to the multitude of variables that impact final construction costs. “Reilable” is term that more appropriately describes the “end goal” of a construction cost estimate. A reliable estimate can be described as beeing well documented (using industry standard terms, data architectures), comprehensive (granular and detailed at the line item construction task level), objective (based upon independent research of local market labor, material, and equipment costs and factors.)
#4 Appropriate and important descriptive terms that can be applied to a construction cost estimate included “reliable”, “objective”, “credible”, “verifiable”, “detailed/granular”, “comprehensive”, “current” and “representative”.
Accuracy refers to the level of agreement between the actual measurement and the absolute measurement. As there is no “absolute measurement” for comparsion, accuracy should not be used when describing costnruction cost estimates!
Key Terms.
Accuracy – 1.) the degree to which the result of a measurement, calculation, or specification conforms to the correct value or a standard (Oxford), 2.) Accuracy is the proximity of measurement results to the accepted value (Wikipedia), 3.) conformity to truth or to a standard or model, degree of conformity of a measure to a standard or a true value (Merriam-Webster)
Cost Estimate Format / Structure (also see Work Breakdown Structure, WBS) – Consistent data organization using standardized formats enables enhanced defintion of work requirement and information sharing as well as updating and reuse among appropriate planning, procurement, and project delivery team members. UNIFORMAT II and CSI MasterFormat represent the most common and robust standardized data architectures. Cost data vendors as well as some other organizations have enhance these architectures to provide greater functionality and benefit. All construction cost estimates should involve one or both of these formats. Detailed, granular line item estimates should use expanded CSI MasterFormat in oredr to ensure an an organized manner of collecting project cost data in a standard format for cost reporting and cost tracking and provide a checklist for categorizing costs; as well as provide a basis to maintain historical cost data in a standard format.
Current Working Estimates – Cost approximations for construction projects or workorders that are at some level of completions ( for example, 20%, 35%, 50%, 65%, 95%, or 100%) based upon accepted pracitces that descriped construction task requirements in terms of material, equipment, labor, productivity, quantities, and work breakdown structure (WBS) on a technical basis.
Degree of Detail – At the most detailed level; each task is usually related to and performed by a crew. Each construction task also has associated labor, material, and equipment information, includes granular costs for each castegory as appropriate. Construction tasks are granular and in individual line item format (typically expanded CSI MasterFormat) . Task descriptions are to be as complete as possible and must represent local market conditions to lend credibility to the cost estimate and aid in later review and analysis. Systems level, building square foot level, or other forms of parametric estimating do not provide comparable cost visiblity and should not be used for procurement/acquisition purposed. Similarly constructor or subconstractor quotes should not be be exclusively relied upon for procurement/acquisition purposes unless provides in a standardardize, granular format using objective and full vetted local market data.
Objectivity – Preparation and review of cost estimates form planning through project completion is the ultimmate responsibility of the real property owner while working appropriately with associated design/builders. Independence and consistency and leverage of robust means, methods, and knowledge of local market conditions is critical. Real property owners are ultimately accountable for the comprehensiveness, documentation, and credibility of a cost estimate.
Independent Government Estimate (IGE) / Owner Estimate – An objective estimate created by the the real property owner or its representative that is used to validate the builder’s estimate. An IGE is extremely important for identifying risks related to budget shortfalls or excesses as well as ensuring a well communicated and well documented scope of work (SOW).
Quantity – The number of required elements which is associated with the construction task and the unit of measure.
Unit of Measure – An industry stardard classification assigned to construction task elements, examples includel linear foot, square foot, each, yard, cubic yard, etc.
Work Breakdown Structure (WBS) – A standardized classification of building elements and related sitework. These elements are major components to most facilities and/or other forms of physical infrastructure (roadways, dams, bridges, airports, mass transit, etc. ) that perform a given function, regardless of the design specification, construction method, or materials used. Using a standard WBS assists in the communcation and consistency of project information, and overall project management for all involved parties. Examples include UNIFORMAT II and CSI MasterFormat.
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