7 Types of Construction Cost Estimates for Commercial Project Management.

Project management is the utmost necessity in the vast construction field. Therefore, wise project managers and contractors always rely on construction cost estimates. So, we can say that project management and cost estimation go hand in hand throughout. Therefore, we have no shortage of cost estimation techniques emerging in the present day. Depending on construction requirements, one can integrate them for project management.

Now, let’s explore the variety of techniques available for construction cost estimates. Along with this, we will see how they are benefiting the vast construction sector.

Construction Cost Estimates and Project Management

The accurate construction cost estimates serve as the basis of the project’s budget planning phase. It is a prevalent practice in the widespread construction project management field. Today, project managers can reasonably assess cost projections, encompassing both direct and indirect costs. And it’s only by the virtue of reliable project cost estimation by a skilled construction cost estimator.

7 Useful Types of Construction Cost Estimate Techniques

Now, let’s move ahead and roll down the cost-estimating techniques we use in common.

1. Analogous Estimation
2. Parametric Estimation
3. Bottom-Up Estimation
4. Three-Point Estimation
5. Factor Estimation
6. Equipment Factored Estimation
7. Lang Method and Hand Method

Analogous Estimation

It is one of the most popular techniques used by construction cost estimators. During this method, the estimators took help from a similar past project. Thereby, they depend on the historical data they collect and the informed judgment provided by the project manager.

Parametric Estimation

Next, we have the parametric estimation. This commercial cost estimating technique is the go-to choose for beginner-level project managers. Here, we use historical data in combination with statistical modeling. So, the dollar value stays attached to the project cost. Above all, the parametric construction cost estimates have more accuracy than analogous estimates. Anyhow, it requires a little more initial data for cost estimation. Importantly, this method excels at locating potential cost contributors. Also, it is essential for creating customized cost models.

Bottom-Up Estimation

It is the most well-suited technique for large commercial and residential construction projects. In this technique, the estimators generally dissect the project into small, manageable components. It facilitates them in performing detailed cost estimations. Next, different departments handle the estimates for the different components of the project. And everyone has the responsibility to deliver quality service in the process. Overall, this technique gives a comprehensive understanding to project managers. They can closely examine each project element and assure accuracy in the estimates.

Three-Point Estimation

Next, we have an interesting methodology used for commercial cost estimating. In this method, the project manager delineates three discrete cost estimates: optimistic, pessimistic, and middle ground.

• The optimistic estimate in the first phase focuses more on task completion and the prudent allocation of resources.
• Then, the pessimistic estimate marks the subsequent stage in this method of construction cost estimates. Usually, we characterize it as the least efficient use of project funds.
• The climactic third stage presents the most likely scenario. It artfully balances between the two previous extremes.

Factor Estimation

The project plan’s feasibility is the main focus of factor estimation. Essentially, it serves as a guiding compass to determine the acceptance of a specific project. It informs you if the project is worth your time and investment. Thus, it provides clear go-or-no-go judgment strength to the project manager.

Equipment Factored Estimation

Within this technique, we assess process equipment costs separately. Afterward, we scale them using an installation factor to get the final construction cost estimates. The equipment factor estimating method is considered the most reliable cost estimation, laden with practical implications. Generally, it involves the estimation of subcontracted costs, direct labor expenses, and material costs.

Lang Method and Hand Method

Hand’s method is a renowned cost estimation technique in construction project management. It was W.E. Hand who developed this method as an extension of the Lang method. The technique heavily relies on the abundance of project information for precise estimates. Thus, it employs different factors to calculate project equipment costs. Notably, it does not break down costs by process type. Indirect field expenditures, like home office expenses, are often not included in Hand’s variables.

Conclusion

Financial planning for a project takes time. However, using one of the aforementioned methods for construction cost estimates can greatly reduce your workload. These procedures are applicable at all stages of the development of your project. The keystone to having a good effect on every area of your project is accurately predicting the budget. On the other hand, a poorly constructed budget could encourage exaggerated expectations and, in the worst situation, result in a project failure.