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March 28, 2019 There are three main types of estimates in construction. A company uses a specific type of estimate depending on what stage of the project it’s for and what line items are being estimated, according to ACivilEngineer.com. Looking to prepare your own estimate? This article has estimate templates, including free construction estimate templates for Excel, plus free project estimation tools. Or you can easily prepare your estimates online using FreshBooks estimating software. In this article, we’ll cover the following types of estimates:
1. Preliminary EstimatePreliminary estimates are also called rough or approximate estimates, according to Civil Engineering Daily. This is because they are not final—they give a ballpark idea of how much a project will cost. A preliminary estimate is made at the very beginning of a project when there’s limited information available. A very early preliminary estimate is called a screening estimate and is usually based on information from similar projects done in the past, according to Carnegie Mellon University. A preliminary estimate allows a trade or home service company to figure out the budget for a project and what to charge the client.
Once more information is available, a business can create a revised estimate, or detailed estimate, from the preliminary estimate. 2. Detailed EstimateA business can convert a preliminary estimate to a detailed estimate. A detailed estimate is drawn up when there’s more information available or the scope of the project is better known. Detailed estimates include incredibly detailed information on quantities, costs and rates—in fact, all items necessary to complete the project. All the line items are added together to reach the final cost, according to Civil Engineering Daily. Besides these line items, detailed estimates can also include:
Detailed estimates are often used as a contractor’s budget estimate. This planning tool helps him know how much cash flow he needs and whether he requires financing, according to Carnegie Mellon University. 3. Quantity EstimateA quantity estimate includes a list of quantities for all materials needed to complete a project. Its purpose is to give the client a complete list of all the quantities required for the project and what the cost will be for each quantity. It is a key estimating method in construction. Cost numbers are calculated by multiplying the dimensions on the project drawings by the rate for a particular item of work.
4. Bid EstimateA bid estimate is submitted to a potential client in hopes of winning a project. It is based on both a contractor’s prior estimations as well as her desire to win the project i.e. to provide the best price to hopefully outbid competitors, according to Carnegie Mellon University. A general contractor may only put a lot of work into this cost estimation method if she believes her chance of winning the bid is high. Otherwise, it’s a waste of her time. A bid estimate can be drawn up based on plans provided by the client or on standard industry costs. If the contractor wants more accurate amounts, she will need to calculate specific labor, material and equipment costs for the project.
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What Are the Types of Cost Estimates in Project Management?There are three main types of cost estimates in project management, according to Learning FM. Use the estimate type that gives you the most accurate cost estimate based on the information you have on hand. Historical EstimateThis type of estimate uses costs taken from a similar project done in the past. A tradesperson can then adjust these costs for inflation or any different parameters attached to this particular project. A historical estimate can be quick to make and doesn’t require a lot of resources from a company as one person can draw it up. It’s also useful for residential projects.
The flip side is that a historical estimate is the least accurate type of cost estimate. This method should only be used when drawing up a preliminary estimate (see above) when there isn’t a lot of information available about a project. Parametric EstimateParametric estimates use simple calculations to estimate costs. It often takes standard rates and multiples them by the dimensions of the space being worked on.
You can either estimate the entire project cost or parts of a project using this method. Parametric estimates are more accurate than historical estimates. Bottom-Up EstimateThis type of estimate prices each type of work involved in a project separately. It’s called bottom-up estimating because a contractor estimates the more basic type of work first and then costs progressively more complex types of work. Each activity is priced individually, so you can get a very accurate cost estimate. In fact, bottom-up estimates are the most accurate type of cost estimate. This method also takes lots of time to prepare and should only be used if there’s sufficient information and time to do so.
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