As a construction company that always tries to include our clients in every aspect of the building project, we thought it would be a nice idea, for the uninitiated, to present a series of articles that encompass the 6 points of our ‘project cycle of services.’

The first point on the Project cycle is ‘Cost Estimation.’ This is (if you’ll excuse the pun) the very foundation of every project, as costing must be defined within the parameters of the client’s available budget.

We don’t want these articles to get too technical, and we’ll try to avoid that, so let’s look at just the ‘4 Basic Principles of Cost Estimation (C.E).’

What is the Cost Estimate of a project?

As defined by one group of experts “Cost Estimation in project management is the process of forecasting the cost and other resources needed to complete a project within a defined scope. Cost Estimation accounts for each element required for the project and calculates a total amount that determines a project’s budget.”

Here we are talking about a building project, but in essence, these principles apply to many types of projects.

1. Forecasts – The C.E tries to forecast the quantity, cost and price of the resources that will be needed for the full range of the project. The accuracy of the C.E largely depends on how well this ‘scope’ of the project is defined. As we learn more detail of every aspect of the project, we can more accurately project costs.
2. Decisions and data – The C.E allow for investment decisions, alternatives and budget projections right at the start of the project. It is vital therefore that the contractors and our clients agree on these budgetary factors at the outset, as the decisions made upfront will be used to measure the project as it progresses. Nowadays project control software systems allow data to be collected and pretty accurately assessed.
3. Breakdown – By breaking down the project into manageable parts, which resources can be assigned and at what cost, a more accurate C.E can be obtained. Usually, the standard breakdown structures apply like the Work Breakdown Structure (WBS) and the Cost Breakdown Structure (CBS), but it depends on the scope of the project and sometimes multiple structures are implemented.
4. The BOE report – This is the Breakdown of Estimate report because an accurate C.E cannot be just a list of figures. Many other factors must be taken into account like assumptions, inclusions, exclusions, accuracy and whatever else is needed to fully understand the holistic project cost.

Consult the professionals

We hope these 4 Basic Principles of Cost Estimation have been helpful to you to gain some understanding of what is entailed in the successful management of a building project.

You can safely leave this in our hands though. We at Davel and Lottering Construction, through experience and a firm commitment to meet every client’s exact mandate, always expertly execute every aspect of a construction project.

Contact us now for all your new build and renovation requirements in this new decade …and watch this space for more on our ‘Project cycle of services.’ Have a spectacular 2020!