How do you estimate construction costs in a global and local market?

1 Define the scope

Identify the objectives, deliverables, specifications, and requirements of the project. The scope should be clear, realistic, and detailed, as it will serve as the basis for the cost estimation. Also consider the risks, uncertainties, and contingencies that may affect the project scope and budget.

2 Choose a method

There are different methods to consider depending on the level of detail and accuracy needed. The unit cost method involves multiplying the quantity of each unit of work by its cost, for example, if you need to build 100 square meters of concrete flooring at $50 per square meter, the total cost would be $5,000. This method is straightforward but may not account for variations in quality, complexity, or site conditions. The parametric method uses statistical data and formulas to estimate the cost based on certain parameters. This method is more accurate than the unit cost method but requires access to reliable data sources. Lastly, the bottom-up method breaks down the project into smaller tasks and subtasks and estimates the cost of each one, then adds them up to get the total cost. This is the most detailed and accurate approach but requires more time and effort.

3 Use a tool

Use cost databases, software, or models, that can provide you with unit costs, parametric costs, or historical costs of similar projects. Cost software applications or programs can help you perform calculations, create estimates, and generate reports. Cost models are mathematical or graphical representations of the relationship between cost and other variables that can help you predict the cost of a project based on certain assumptions or scenarios. Examples of these tools include RSMeans, ENR, BCIS, Microsoft Excel, PlanSwift, ProEst, regression models, learning curve models, and simulation models.

4 Adjust for location

Different regions or countries may have different labor rates, material prices, taxes, exchange rates, regulations, and market conditions. To account for these differences, use location factors or indices which can help you compare and convert costs across different locations. For instance, location factors are ratios or percentages that can help you adjust the cost of a project based on the location. For example, if the location factor for New York is 1.2 and the location factor for London is 1.5, this means that the cost of a project in London is 25% higher than the cost of a project in New York. Meanwhile, location indices are numerical values that can measure the relative cost of construction in different locations. For example, if the location index for New York is 100 and the location index for London is 150, this implies that the cost of construction in London is 50% higher than the cost of construction in New York.

5 Review and refine

Check your estimate for accuracy, completeness, consistency, and reasonableness. Also verify your assumptions, data sources, methods, and tools. Update your estimate as the project progresses and new information becomes available. Communicate your estimate to the relevant stakeholders and document your estimate for future reference.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?