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What are some of the advantages and disadvantages of using unit cost estimating?

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Unit cost estimating is a common method of calculating the cost of a construction project by multiplying the quantity of each work item by a unit price. It is widely used by contractors, engineers, architects, and owners for various purposes, such as budgeting, bidding, and controlling costs. However, like any other estimating method, it has its advantages and disadvantages. In this article, we will discuss some of the pros and cons of using unit cost estimating for your construction projects.

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1 Accuracy and Simplicity

One of the main advantages of unit cost estimating is that it can provide a high level of accuracy and simplicity, especially for projects with well-defined scope and specifications. By using standardized unit prices from reliable sources, such as databases, publications, or historical data, you can easily estimate the cost of each work item based on the quantity and quality required. This can help you avoid errors, omissions, and inconsistencies that may arise from other methods, such as lump sum or parametric estimating. Unit cost estimating can also simplify the process of updating and revising the estimate as the project progresses, as you only need to adjust the quantities or unit prices accordingly.

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Peter Cholakis

Improve facilities repair, renovation, maintenance, and new build outcomes and reduce costs
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There is no such thing as an "accurate" construction estimate. Use of the term demonstrates a lack of domain knowledge. An estimate can be verifiable, detailed, and even actionable.

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2 Flexibility and Transparency

Another advantage of unit cost estimating is that it can offer a high degree of flexibility and transparency, both for the estimator and the client. By using unit cost estimating, you can break down the project into manageable and measurable work items, which can help you identify and analyze the cost drivers, risks, and opportunities of the project. You can also customize the unit prices to reflect the specific conditions and requirements of the project, such as location, labor, materials, equipment, overhead, and profit. Moreover, unit cost estimating can enhance the communication and trust between the estimator and the client, as it can show the details and assumptions behind the estimate, and allow for easy comparison and negotiation of different options and alternatives.

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3 Limitations and Challenges

However, unit cost estimating also has some limitations and challenges that you should be aware of. One of the main disadvantages of unit cost estimating is that it can be time-consuming and labor-intensive, especially for complex and large-scale projects with many work items and variables. You may need to spend a lot of time and effort to collect, verify, and adjust the unit prices and quantities for each work item, and to account for the interactions and interdependencies between them. You may also need to use other methods, such as lump sum or parametric estimating, to estimate the cost of some work items that are not suitable for unit cost estimating, such as design, management, or contingency.

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Ethel Akema

Project Engineer @ Mineral Resources Development Company | Infrastructure Projects
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Unit cost estimating offers simplicity and quick analysis, making it advantageous for initial project phases. The method provides consistency and standardization, facilitating easy cost comparisons across projects. However, its limitations include a lack of detail, making it less suitable for complex projects, and reliance on assumptions, which can lead to inaccuracies. Additionally, unit costs may not adequately address unique project conditions, potentially resulting in underestimated or overestimated costs.

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Andrew Kleimola

Every successful construction project starts with a GREAT estimate!
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Unit cost estimating, while useful, has inherent limitations. Relying solely on historical data for unit prices can lead to inaccuracies. Each project is unique, demanding thorough analysis of site-specific conditions and the context of historical data used. Market conditions also play a crucial role. Often, errors in unit price estimates arise from insufficient evaluation of these factors. It's essential to adjust unit costs based on specific project criteria rather than adopting a one-unit price-fits-all approach. Understanding and adapting to each project's unique aspects is key for accurate unit cost estimating.

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Anisha Rajvanshi

Director of Energy and Special Projects | MEP Estimator
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Although I acknowledge the complexity and time-consuming nature of unit cost estimating, I firmly believe that it is crucial, particularly when reaching the 100% CD phase, to present the estimate in no alternative manner. Whether doing bid leveling, negotiating change orders or budgeting stages where you compare various estimates, a lump sum presentation would not yield a fair apples-to-apples comparison. There are certain Sections, like General Conditions, phasing, etc., which based on historical data could be carried as percentages of the overall cost, but I would carry unit costs for most other divisions.

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4 Uncertainty and Variability

Another disadvantage of unit cost estimating is that it can be affected by uncertainty and variability, both in the unit prices and the quantities. Unit prices are not fixed or constant, but depend on various factors, such as market conditions, supply and demand, inflation, productivity, quality, and competition. Therefore, you may need to update and revise the unit prices frequently to reflect the current and expected situation. Quantities are also not exact or certain, but depend on the accuracy and completeness of the scope and specifications, as well as the changes and variations that may occur during the project execution. Therefore, you may need to include some allowances and contingencies to cover the possible deviations and fluctuations in the quantities.

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5 Best Practices and Tips

To use unit cost estimating effectively and efficiently, you should follow some best practices and tips. First, you should use reliable and relevant sources of unit prices, such as databases, publications, or historical data, and adjust them to suit the specific project conditions and requirements. Second, you should use accurate and complete scope and specifications, and measure the quantities carefully and consistently. Third, you should consider the interactions and interdependencies between different work items, and use appropriate methods to estimate the cost of work items that are not suitable for unit cost estimating. Fourth, you should update and revise the unit prices and quantities regularly to reflect the changes and variations that may occur during the project. Fifth, you should communicate and document the details and assumptions behind the estimate, and explain the uncertainties and risks involved.

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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?

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Prakash M.

Delivering Indispensable Management
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Unit cost estimation is best if used correctly. If you have three estimators calculate project quantities then you will derive accuracy of quantity. Moreover if you take cost breakdown from subcontractor perspective then you will get best lowest price possible for prescribed quality. The quantity surveyor should be working together with project manager to quantify full scope of works. This should be done at tendering phase to avoid cost overruns.

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What are some of the advantages and disadvantages of using unit cost estimating?

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1 Accuracy and Simplicity

2 Flexibility and Transparency

3 Limitations and Challenges

4 Uncertainty and Variability

5 Best Practices and Tips

6 Here’s what else to consider

Construction Estimating

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