Accurately estimating the cost for a construction project can be tough as each one is different, and so a construction cost estimation should be performed individually for each project. After all, inaccurate cost estimation can be detrimental to the project—if the cost is overestimated, the owner may end up paying over market rates, and when costs are underestimated, there may be many unforeseen expenses once the project is underway.
Having an accurate cost estimate & comparison process safeguards the builder from losing money and helps the client avoid overpaying, and so there are several basic things to consider in order to prepare an estimation that is as accurate as possible:
Thoroughly understand tender documents
Before even starting a cost estimation, it’s essential to understand the requirements and scope of the project, as additional costs may arise depending on the complexity of the project. This is why it’s vital to thoroughly read and understand council requirements, regulations & project documentation before preparing a cost estimate, to avoid having the overall costs go over budget.
Don’t look at the lump sum cost alone
It’s important to look at not just the overall sum, but the items within the project. There are various components in every project, so make sure you consider quantifiable measures such as hourly rate or cost per square meter, all the materials required, every subcontractor you will need to perform the scope of work, preliminary costs, and anything else that will be needed to complete the job. Once you’ve done this, you can break down the project and consider the costs involved with each individual part.
If you’re embarking on a residential project, find our Budget Estimation tool here for download.
If you miss out on any construction activity that may be essential for the project, your cost estimation may be off, so it’s important to include all activities and be as detailed as possible in order to estimate an accurate cost.
Take into account fluctuations in material pricing & availability
Price fluctuations do happen with materials due to current market trends or simple demand & supply issues. There is a chance there will be risks involved here depending on what materials you will be using. Scarcity of certain materials may also affect the cost—so if your project requires unique materials (such as Basalt Tiles from New Zealand used in a recent project), be sure to check how you will attain the materials and have them delivered to your site (especially if they need to be imported from another country).
Look at potential risks (and factor in their costs)
When looking at what can potentially go wrong during construction, it’s important to consider potential mishaps and factor them into the cost and timeline of the overall project. While this can be difficult, it’s worth looking back on old projects to scope out what risks there may be with similar projects.
Katherine Kouli of GAXA Group says, “We try to analyse and provide comparison items to narrow down the possible scope of works, and avoid misinterpretations and misquotations. Although, in my experience, variations in a project are inevitable and usually vary between three to five percent.”
Although it may be difficult to have complete accuracy when estimating construction costs, it is still important to get the closest possible estimate—and by considering the above, you will be on the right path for preparing an accurate cost estimation.
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Katherine Kouli – Design & Project Manager at GAXA Group
P: 0406 735 467