You might be wondering what goes into a construction cost estimate. After all, you want to be sure that you’re getting a good deal and that the contractor is pricing the project appropriately.
There are 3 kinds of construction cost estimates: lump sum, unit price, and time and materials. Each has its own benefits and drawbacks. Let’s get a closer look at every.
Definition of a Construction Cost Estimate
When it comes to Cost Estimating Services project, you have three main options:
- The first is a lump-sum estimate. According to all the available information at the time, this is a rough estimate of the total cost of a project.
- The second is a unit-cost estimate. In order to calculate this, the estimated cost of each task is multiplied by the number of tasks required to complete the project.
- The third type of estimate is a time-and-materials estimate. This is an estimate of how much it will cost to complete the project given the current rates for labor and materials.
Types of Construction Cost Estimates
There are three types of construction cost estimates:
The first is the conceptual estimate, which is the roughest and most approximate. Early in the planning process, this is a high-level estimate of the project’s costs.
The second type is the schematic estimate, which is more detailed than the conceptual estimate and uses more accurate pricing information. This gives a better indication of what the project will cost in total.
There is a third type of estimate that is the most thorough and accurate, called a detailed estimate or a line-by-line estimate. It breaks down each step of the project and lists the exact materials and labor costs associated with it.
The type of estimate you need depends on the stage of your project and your budgeting needs. For smaller projects or if you need a general idea of costs, a conceptual or schematic estimate will do. For more precise numbers, you’ll need a detailed estimate.
The conceptual estimate is the roughest and most approximate of the three types of estimates. In this estimate, the contractor simply tries to come up with a ballpark figure for how much the project will cost. This estimate is based on the contractor’s understanding of the project, so it’s not always accurate. However, it can give you a good idea of whether or not a project is feasible.
Keep in mind that a conceptual estimate is just that—an estimate. It’s not a guarantee that the final cost will be anything close to that amount. In fact, it’s usually quite different. But it can give you a good starting point for further discussions and negotiations.
Now for the definitive estimate. At the end of a project, this is the most accurate estimate. It usually comes into play during the construction phase, as it’s based on actual labor costs, materials prices, and equipment expenses—so you know it’s incredibly precise.
Because of this precision, the definitive estimate gives you a good idea of how much money you need to complete a project. In addition, it can serve as a benchmark for measuring changes and new additions. As such, this type of cost estimation gives project managers more control over the budget and a better understanding of discrepancies in spending.
The third type of cost estimate is the final estimate. You get this after all construction activities are complete and the project is complete. The final estimate takes into account any additional costs incurred due to revisions during construction, as well as any unforeseen costs that may have arisen along the way. Using this type of estimate will help you determine whether your project is within your budget by determining its total cost.
It’s important to note that this type of estimate will not give you a full picture of your financial situation, as it does not include long-term maintenance or repair costs. That’s why having a detailed plan in place before you start construction can help you make sure that you don’t go over budget and stay on track with your project timeline.
How to Choose the Right Cost Estimate for Your Project
With so many options to choose from, how do you know which cost estimate is right for your project? It all comes down to the size and scope of the project.
In most cases, a rough estimate of the order of magnitude (ROM) is sufficient for small projects. For projects with a total cost of less than $1 million, this type of estimate provides a preliminary estimate.
For medium-sized projects between $1 million and $5 million, a detailed or definitive estimate is a better choice. This type of estimate takes into account more factors and provides more detailed breakdowns to help you allocate funds correctly.
For large-scale projects that exceed $5 million in cost, you’ll want to look into hypothesis-based budgeting. When scope changes occur, this type of estimate allows for some flexibility and helps ensure you remain within budget.
So, there you have it: the three types of construction cost estimates. As you can see, each has its own strengths and weaknesses, so it’s important to choose the right type for your project. Keep in mind that the cost estimate is just that: an estimate. It’s important to get quotes from multiple contractors to get a sense of the true cost of your project.