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Cost Es t im at ion in aConst ruc t ion Com pany
Department of Humanities and Social Science
Indian Institute of Technology, Bombay
Under the guidance of Prof. K. Narayanan
Submitted by :-Deepak Garg (05329015)Priyesh Wadhwa (05329011)Saurabh P. Singh (05329037)Mukesh S. Rawat (05329020)
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Road Map
• Introduction
• Types of Construction Cost
Estimates
• Approaches to Cost Estimation
• Unit Cost Method of Estimation
• Other Methods
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I n t roduc t ion
• Cost Estimation
– Cost estimation is one of the most
important steps in project management.
– What, why, when, how.
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Cost s in Const ruc t ion Fi rm• Initial Capital cost
– Land acquisition– Planning and feasibili ty studies
– Architectural and engineering design
– Construction, including materials, equipment and labor
– Insurance and taxes during construction
• Operation and maintenance cost– Operating staff
– Labor and material for maintenance and repairs– Utilities
– Periodic renovations
– Insurance and taxes
• Unexpected cost during construction– Design development changes
– Schedule adjustments– General administration changes
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Types of Construction Cost Estimates
• Design Estimates
– Screening estimates (or order of magnitude estimates)– Preliminary estimates (or conceptual estimates)
– Detailed estimates (or definitive estimates)
– Engineer's estimates based on plans and specifications
• Bid Estimates– As a contractor, a bid estimate is submitted to the owner
either for competitive bidding or negotiation.• Control Estimates
– Budget estimate for financing
– Budgeted cost after contracting but prior to construction– Estimated cost to completion during the progress of construction.
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Approac hes t o Cos t Es t im at ion
• Production functionQ = P(I1,I2,….. In)
• Empirical cost inference
• Unit costs for bill of quantities
• Allocation of joint costs
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Uni t Cost Met hod of Es t im at ion
Simple Unit Cost Formula
Formula Based on Labor, Material and Equipment
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Example
• Cost estimate using labor, material and equipment
rates.
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Ot her Met hods
• Allocation of joint costs
- Difficult causal relationship b/w element and associated costs
- Joint costs are prorated in proportion of basic costs of
elements
For example : F being overhead associated with differentelements
Fi = F * y i/y
Then total cost can be written as :-
L i = y i + Fi
• Historical cost data
- Widely used for forecasting / estimation future costs
- Collected and organized for future use
- Continuous updates
- May effect cost substantially if relative prices change
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Ot her Met hods c ont d .
• Cost indices
- Reflect price level changes for inputs and outputs
- Weighted aggregate average of different components of selectedelement
- Can be used for cost forecasting with historic data
- General price indices are provided by govt.
- Construction specific price indices are collected from industry
sources- Screening estimates are generally made on single factor likeconstructed area, no. of rooms etc
- Adjustments are made to these using- Inflation indices
- Construction specific indices
of detailed factors
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Ot her Met hods c ont d .•Based on Engineer's List of Quantities
- based on a list of i tems and the associated quantities
- list is provided to contractor
- costs for winning bidder is taken as starting estimates
- progress payments are made to contractor depending uponthe units of work done and unit prices listed
- each unit defined the level of detail of measure
- ex. Sample entries in bid table for engineer’s list-
Item Unit Quantity Unit price Item cost
Tiling sf 1000 12 12000
Water
Proofing
sf 1000 7 7000
.
.
.
.
.
.
.
.
.
.
Rs.19000
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Com put er A ided Cost
Es t imat ion
• Types:– Simple spreadsheet calculation software.
– Integrated systems.
• Features:– Databases for unit cost items.
– Databases of expected productivity for
different components types, equipments, andprocess.
– Version control, Flexible reporting formats,import and export utilit ies, archive of past
projects.• Advantages: Rapid cost estimation and with
less efforts.
• Example : as will be shown
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Est im at ion o f Operat ing Cost s• Depends upon: maintenance
policies and facility use.
• Minimized by: periodic repairsand rehabil itation at periodicintervals.
• Example: Maintenance cost on a
roadway– C = 596 + 0.0019 V + 21.7 A– Where, C is the annual cost of
routine maintenance per lane-mile.
– V is the volume of traffic onthe roadway measured inESAL (equivalent standardaxle loads)
– A is the age of the roadway in
years since the lastresurfacing.
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Case st udy
• Raheja builders
• Estd. in 1952
• Uses simple unit cost estimation
method
• Uses simple accounting tools
• In process of configuring ERP
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Thanks
Questions?
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Al loc a t ion of Const ruc t ion Cost
over t im e
• Rate of work doneduring various timeperiods expressedin percentage of
project cost per unit time.
• The value of work
completed at agiven timeexpressed as acumulative
percentage of project cost
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Example
• Decomposition of a building foundation into design
and construction elements.
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Price indices in subsequent years show a proportionate changes due
to price changes. Percent change in price indices for year t+1-
j t+1=((It+1-It) / It )* (100%)
- Measure price level changes
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