Following a carefully planned cost estimating methedology is highly beneficial for all projects and their stakeholders. To get the best results from a project, the cost estimate process needs historical data, good judgement, and planning. To adequately comprehend the cost estimation process, one must have a fundamental understanding of the construction process. Making a building estimate is made easier by using the following steps:
1. AGREEMENT ON COST ESTIMATION METHEDOLOGY
Before beginning the estimation process, the parties involved must come to an agreement based on the project's estimated process and methedology. Getting project details, along with historical data of previously completed scopes, estimates, and schedules, is required for this action. The project specifications, complexity, design matrix, and criterias are always determinants of the scope definitions. All assumptions made at this step, should be explicitly stated and documented by the cost estimator. For each estimate created, the cost estimator should keep track of additional and subsequent data to provide a traceable history.
2. ROUGH ESTIMATE
A base estimate includes all projected expenses for a project, excluding anticipated future escalations. These estimates are often computed based on various factors, including project size, complexity, and scope definition. On the other hand, precise estimations change based on the project's stage of development.
As the design develops, more information becomes available, providing a more precise cost estimate. Details on the scope, inflation rates, material take-offs, unit cost databases, and market conditions are crucial inputs needed at this point. The client receives a general idea of the costs of the required materials from the construction take-offs. Depending on the scale and scope of the project, different takeoffs are used.
The project team must improve the scope documentation, even if gathering and comprehending all scope documents can be difficult.
3. REVIEWING ROUGH ESTIMATE
Make sure all the underlying assumptions and the foundation of a project are accurate by reviewing the rough estimate. It also implies that the timetable and job scope be accurately reflected in all draft cost estimates.
Reviews helps ensure items are not counted twice and items are missing. By taking into consideration the necessary location and productivity criteria, this stage evaluates cost-based estimations incorporating historical data, or project-specific conditions. On the basis of the direct expenses, the estimator also examines the indirect and overhead costs.
While creating the rough estimate, the cost estimator also records all cautionary remarks, suppositions, and exclusions. The estimate can be added as an attachment and used as a guide for the project's remaining tasks.
4. Allowances and Unknowns
Creating an allowance for design evolution or estimate mistakes, is an essential component of intial project estimates. Cost risk management is a continuous activity that aims to reduce the likelihood of increases in costs while increasing the likelihood of project sucess. The estimator must also factor the cost effects of "know unknowns" into the overall intial project estimates.
5. Management Review
A cost estimate should always be reviewed by experienced managers. They carry out spot checks to confirm costs, quantities, and ensure complete project scope is accounted for. Peer review is a vital stage that offers a chance to fix substantial gaps in the estimate. At this point, assumptions are also outlined and explained.
Estimating is always a process that is ongoing. The project management team evaluates the updated estimates before taking it to the finance team for project cost baselines.
Project evolve over time. The estimator never stops updating the information during the project as it evolves; they are never finished estimating the project's result.
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