Introduction to Cost Estimating
An overview of engineering cost estimating, covering its purpose, different types of estimates, and the general estimating process.
The Estimating Process
A typical detailed estimating process includes several systematic steps.
Creating a detailed bid estimate requires a rigorous, methodical approach to ensure no scope is missed and pricing is accurate. A typical detailed estimating process includes the following steps:
- Review Contract Documents: Thoroughly examine the plans, specifications, and bidding requirements to understand the complete scope of work and identify any discrepancies.
- Site Visit: Inspect the project site to understand existing conditions, site access, storage constraints, and potential risks that might affect construction methods and costs.
- Quantity Takeoff: Measure and quantify all materials and work items required for the project systematically from the drawings.
- Price Labor, Materials, and Equipment (Direct Costs): Determine the unit costs for the physical resources required to physically complete the work.
- Determine Subcontractor Costs: Obtain quotes from specialized subcontractors for trades outside the general contractor's direct expertise (e.g., electrical, plumbing).
- Calculate Indirect Costs: Add job site overhead (general conditions, temporary facilities) and home office overhead (corporate expenses).
- Add Contingencies: Apply a financial allowance for unknown risks and estimating uncertainties based on the project phase and risk profile.
- Add Profit Margin: Include the desired profit to determine the final bid price submitted to the owner.
Case Study 1: The Impact of Project Phase on Estimating Accuracy
Understanding how the "Cone of Uncertainty" dictates the type of estimate prepared.
A private developer is considering purchasing a downtown plot of land to build a 15-story mixed-use commercial and residential building. Before making an offer on the land, the developer hires a civil engineering firm to determine if the project makes financial sense. The firm is given only a rough idea of the building's total square footage and intended use.
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Case Study 2: Utilizing MasterFormat for a Detailed Bid
How a general contractor organizes an estimate to ensure complete scope coverage.
A general contractor is preparing a lump-sum bid for a new public library. The design is 100% complete, and the bid package includes hundreds of pages of drawings and a thick project manual containing the technical specifications. The estimator must ensure no item is missed, or the company could lose money.
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Key Takeaways
- A systematic process is essential for generating accurate detailed estimates and minimizing the risk of omission.
- Estimators must match the type of estimate (ROM, Parametric, Detailed) to the current level of project definition. Attempting a detailed estimate with 5% drawings is futile.
- Classification systems like CSI MasterFormat are critical tools for organizing complex bid estimates, ensuring alignment with project specifications and simplifying subcontractor coordination.