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By Harry Thomas | 09 Dec, 2023

In project management, cost estimates play a critical role in determining the success or failure of your project. Cost controls and accurate budgeting are essential parts of planning, executing, and monitoring any kind of successful project. 

It is vital to understand how much money needs to be allocated for each stage in order to accurately estimate costs throughout the entire process. Fortunately, there are several different types of cost estimation methods you can use when it comes to managing projects effectively. 

At Royal Estimation we will discuss 8 types of cost estimates used in project management including Analogous estimating, Parametric models, and bottom-up estimates so that you can get a better understanding of which approach might be best suited for your own specific purpose.

Preliminary Cost Estimate:

This is also known as an abstract cost estimate or budget estimate. In general, it is prepared during the preliminary phase of project planning to gain an estimate of the project’s approximate cost. The competent authority can learn about the financial situation and policies required for the administration sector with the help of this estimate.

In practice, the preliminary project cost estimate is calculated from a similar type of project cost. The cost is determined separately in order to determine the necessity and utility of each piece of work. The major item of work covered in this estimate is the cost of lands, the cost of roads, the cost of water supply, electrification, the cost of each structure, and more.

Plinth Area Cost Estimate:

Plinth area cost estimates are calculated using the plinth area of the building, which is the area covered by the external dimensions of the building at the floor level, and the plinth area rate of the building, which is the cost of a similar building with similar specifications in that locality.

The plinth area is calculated by multiplying the plinth area of the building by the plinth area rate. For example, if we need a plinth area estimate of 100 square meters in a specific location and the plinth area rate of a building in the same location is 2000 per square meter, the plinth area estimate is 100 X 2000 = 200000.

The plinth area does not include open areas, courtyards, and so on. If the structure has multiple floors, the plinth area estimate is produced independently for each floor.

Detailed Cost Estimate:

A comprehensive estimate is generated following the approval of a preliminary estimate by a competent administrative body. In this estimate, each item of work is precisely measured and the cost is determined independently. It is the most accurate estimate among the other methods of estimating.

The cost of a piece of work is computed using current market rates, and the total estimated cost is calculated. Contingencies amounting to 3 to 5% of the expected cost are added to the overall estimated cost for miscellaneous expenses. A detailed estimate is a major estimate required to obtain final financial approval from the relevant authority.

Revised Cost Estimate:

When the project’s original sanctioned cost exceeds by 5% or more, the revised estimate is calculated. It is a comprehensive estimate, but it is incorrectly predicting or underestimating the cost of the project and must be amended.

The main reason for preparing the revised estimate is that the cost of transportation, materials, and so on may have increased. The main cause for this estimate has to be disclosed on the last page of the revised estimate.

Cube Rate Cost Estimate:

The cubical content of a building can be calculated by multiplying the plinth area by the building’s height. The building’s height will be measured from the ground to the top of the roof. This approach is ideal for tall buildings. This cube rate cost estimate is more precise than the plinth area estimate. Divide the overall construction cost by the cubical content to get the cubical rate of construction.

The planned project’s cost is calculated by multiplying the cubic rate of a similar building in the same location by the cubic content of future construction. Assume the cubic rate within an area is Rs. 5000/m3 and the desired development area is 1000m3. The estimated construction cost is Rs. 50,000,000.

Approximate Quantity Method Cost Estimate:

In this method, the total length of the wall present in the complete construction is calculated. Following that, the length is multiplied by the rate per running meter to get the cost of the construction. There is a distinct meter calculation for the foundation and superstructure rate per run. It is best to consult with an expert for a precise quantity takeoff estimate.

The meter is evaluated for the cost assessment of the foundation rate per running by taking into account quantities such as brickwork cost up to plinth and excavation cost. Furthermore, the superstructure quantities such as woodwork, brickwork for the wall, floor finishing, and so on are taken into account when determining the rate per running meter.  Moving on, if you merely want an excavation cost estimate, then contact a professional estimating company in your region.

Supplementary Cost Estimate:

The supplementary cost estimate is a supplement to a comprehensive estimate that is generated when extra work is required while the original job is being completed.

Following approval of the supplementary estimate, the total estimated cost should include a detailed estimate cost as well as the cost of any supplemental work that requires permission.

Annual Repair Cost Estimate:

The annual repair cost estimate is also known as the annual maintenance estimate, and it is generated to determine the expenses of building maintenance that will maintain the structure safe. When establishing an annual maintenance estimate for a building, it will include the cost of whitewashing, minor repairs, painting, and so on.

Wrapping It Up:

Using these eight types of cost estimates, project managers can effectively manage costs on any project and ensure that the budget is kept on track. It’s important to remember, however, that all estimates are only as accurate as the information used to create them so it’s essential to take into account any changes that occur during the course of a project in order to stay within budget.

You Can Also Read:

Ways to Grow Your Construction Company

Benefits of Outsourcing Quantity Takeoffs

Common Mistakes of Contractors And How to Avoid Them

Author Details of Royal Estimation

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