In the building and construction industry, achieving success entails managing a substantial inflow of funds while minimizing outflow, as well as coordinating materials and labor within a scheduled timeline. This is where the building cost estimator plays a crucial role.
What is a Commercial Building Cost Estimator?
Construction cost estimators are one of the most essential and least recognized contributors. Because building projects does not have price tag rather it’s the job of estimator to analyze various factors that contribute to project costs, including materials, labor, equipment, subcontractor fees, permits, and overhead expenses. They help clients and stakeholders make informed decisions regarding budgeting, planning and feasibility of the project.
Initial estimates for the budget of commercial real estate development determines the economic worth of the project based on the rental rate required to pay off its debt. Once a budget is established, the next task is to control cost and ensure they stay within the budget to make the prediction a reality.
There are several types of construction cost estimates commonly used in industry. Main two types are preliminary and detailed estimates.
- Preliminary Estimates: It is initial estimate done in early planning phase to get the rough idea of the potential cost before detailed project plans and specifications are available. It is necessary to determine project feasibility and financial viability. They have wider margin of error and uncertainty due to limited project information and assumptions made.
- Detailed Estimates: It is also known as comprehensive estimates, are thorough and precise cost assessments prepared during the later stages of a construction project. It involves breakdown of all project cost including, labour hours, quantities of material, equipment usage, subcontractors fees, permits, contingency allowances, overhead expenses and any other direct or indirect costs associated with the project.
Now, we know regarding the types of cost and estimation stages. So, here are 5 advantages for using construction cost consultants for your construction project.
1. Increased accuracy in cost projections
Main aim of cost estimation is to provide accurate information to stakeholders and hence helps clients to minimize expenses. Cost estimate is different than quote. Quote denotes exact price and on other hand estimation is not fixed price because price might change with project’s progress. It is divided mainly into Direct cost and Indirect cost.
- Direct Cost: It is immediately linked with the construction of the project such as labour and material cost. Material cost are mostly linked with market and vary depending on conditions. Estimators look at historical data for the price of materials. Labour cost are linked with the team working on the project and its related to the time allotted for project and wedges including overtime, compensation and insurance.
- Indirect Cost: Indirect cost are rather linked to variable and flexible cost to provide support the project. It includes administrative cost, temporary structures, designs, legal fees and permits and any overhead cost which can be managed if necessary.
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2. To evaluate the material and funding requirements
In construction industry, different types of projects such as residential, commercial, industrial etc have different material requirements and hence estimation needs more accuracy. Estimators require drawings and certain product specifications to gather the list of material required. Not only this, it is also crucial to manage funding to get those material within time frame. Because in the industry, it is common practice that payments might be received after the project starts. So, the prior costing helps identify adequate funding and loan requirements, if any, to ensure the smooth progression of project work and avoid interruptions due to a lack of funds.
3. To coordinate the timeline and equipment requirements
Construction projects normally require a lot of tools and equipment. Some of them are consumable such as bandsaw blades, drilling bits, electrical tapes, threading oils and some are to aid the process such as cranes, forklifts, electrical generators, excavators, trucks and other necessary heavy machinery. So, if contractor does not own any instrument, they need to rent them out. With a listing of all the items necessary in a project, the owner will have all the equipment listings required as most of the construction works take place simultaneously.
4. To calculate cost to benefit ratio and control cost
It is an indicator that shows the relationship between the foreseeable relative costs and expected benefits. If a cost-benefit ratio is more than one, a project is expected to deliver a high net value to its firm and investors. On the other hand, if the cost-benefit ratio is less than one, the costs outweigh the benefits, and thus the project should be reconsidered.
5. Competitive bidding
A detailed cost estimate gives you an advantage when seeking bids from contractors and subcontractors. It allows for accurate comparison and evaluation of different proposals, ensuring the selection of the most suitable and cost-effective options for your project. The cost consultant can also evaluate if the results are from inexperience or misunderstanding of contract requirements when a tender is impractically low.
Better understanding on cost control provides better control over task and timeline. It also have advantage of better client relationships because client understand cost of the certain project and can trust your expertise. Overall, it becomes easier to repeat business and create happy customers.
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