Preliminary Estimation Methods in Construction

Preliminary estimation methods play a vital role in the initial phases of a construction project, serving as a compass to guide decision-making. These techniques are employed to tentatively establish the project's cost, providing clients with essential insights into the financial commitments they are about to undertake. At this early stage, when detailed project plans are yet to be finalized, these estimates offer a crucial starting point for budgeting and financial planning.

The preliminary estimate holds significance for project designers. It empowers them to work within the confines of the available budget, ensuring that their creative visions align with the practical realities of project financing. This controlled approach to design not only promotes cost efficiency but also minimizes the potential for financial surprises down the road, contributing to smoother project execution and a higher likelihood of staying within budget constraints.

In essence, preliminary estimation is the foundation upon which well-informed project decisions are built, ultimately leading to successful and financially viable construction endeavors. These methods help project stakeholders make informed decisions and set budgets.

Here's a brief explanation some of the methods.

1. Conference Method

This method involves discussions with experienced professionals, contractors, and stakeholders to estimate costs based on their expertise and knowledge of similar projects.

Example:

Imagine a city planning committee is embarking on the construction of a new sports stadium, and they want to get a rough estimate of the project's cost. They gather a group of experienced professionals, including architects, civil engineers, project managers, and contractors, who have been involved in similar stadium construction projects.

2. Financial Method (NPV Method)

The Net Present Value (NPV) method evaluates costs and benefits over time, considering the time value of money. It's often used for long-term financial planning and investment decisions.

Example:

Imagine a construction company is evaluating an investment in a new project. The project is expected to have an initial cost of $1,000,000, and it's estimated to generate annual cash flows for the next five years as follows:

• Year 1: $300,000
• Year 2: $350,000
• Year 3: $400,000
• Year 4: $450,000
• Year 5: $500,000

To calculate the NPV, the company needs to consider the time value of money. Let's assume they use a discount rate of 10% per year, representing the opportunity cost of tying up their money in this project.

The NPV formula for each year's cash flow is as follows:

NPV = Cash Flow / (1 + Discount Rate)^Year

Now, let's calculate the NPV for each year's cash flow:

• Year 1: NPV = $300,000 / (1 + 0.10)^1 = $272,727.27 (approximately)
• Year 2: NPV = $350,000 / (1 + 0.10)^2 = $289,256.20 (approximately)
• Year 3: NPV = $400,000 / (1 + 0.10)^3 = $300,000.00
• Year 4: NPV = $450,000 / (1 + 0.10)^4 = $309,917.36 (approximately)
• Year 5: NPV = $500,000 / (1 + 0.10)^5 = $315,464.88 (approximately)

Now, to find the total NPV, you sum up these individual NPVs:

Total NPV = $272,727.27 + $289,256.20 + $300,000.00 + $309,917.36 + $315,464.88 = $1,487,365.71 (approximately)

If the total NPV is positive, as it is in this case, it indicates that the project is expected to generate returns higher than the initial investment. Therefore, based on this NPV analysis, the construction company may decide to move forward with the project, as it is financially viable.

3. Unit Method

The unit method estimates costs by multiplying the quantity of items (e.g., materials, labor, equipment) required by the unit cost for each item.

Example: Estimating Brickwork Costs

Suppose you're planning to construct a wall using bricks, and you want to estimate the cost of the bricks using the Unit Method.

• Identify the Quantity: First, you need to determine the quantity of bricks required for your project. Let's say you need 10,000 bricks to complete the wall.
• Unit Cost: Next, you'll need to know the unit cost of the bricks. The unit cost is the cost of one brick. For this example, let's assume the unit cost of one brick is $0.50.
• Calculate the Cost: To estimate the total cost of the bricks, you simply multiply the quantity by the unit cost.Total Brick Cost = Quantity × Unit Cost Total Brick Cost = 10,000 bricks × $0.50/brick Total Brick Cost = $5,000

Using the Unit Method, you have estimated that the cost of the bricks required for your wall construction project is $5,000. This basic approach can be applied to other construction elements such as concrete, steel, or any material or resource that is quantifiable in units. It offers a straightforward way to estimate costs based on quantities and unit prices, providing an initial budgetary overview for your construction project.

4. Functional Unit Method

The Unit Method and Functional Unit Method are related cost estimation techniques, but they are not exactly the same. They both involve estimating project costs based on unit rates, but they focus on different units and applications.

Examples:

• Hotel Construction (using the number of rooms as the functional unit): In this case, the functional unit would be the number of rooms. You start by determining the cost per room, which includes all construction-related expenses like materials, labor, equipment, and overhead.For example, if the estimated cost per room is $100,000, and the hotel is designed to have 100 rooms, your cost estimation would be:
• Total Estimated Cost = Cost per Room x Number of Rooms.
• Total Estimated Cost = $100,000 x 100 = $10,000,000.
• Therefore, the estimated construction cost for the hotel would be $10,000,000.
• Hospital Construction (using the number of beds as the functional unit): In the case of a hospital, the functional unit could be the number of beds. Similar to the hotel example, you'd determine the cost per bed, which encompasses all construction-related expenses.Let's assume the cost per bed is $150,000, and the hospital is planned to have 200 beds. Your cost estimation would be:-
• Total Estimated Cost = Cost per Bed x Number of Beds.
• Total Estimated Cost = $150,000 x 200 = $30,000,000.
• So, the estimated construction cost for the hospital would be $30,000,000.

5. Superficial Area Method

This method calculates costs based on the building's external surface area, often used for early cost approximations of building projects.

Example

Let's consider the construction of a rectangular office building. The length of the building is 100 feet, the width is 60 feet, and the height is 20 feet.

• Calculate the Superficial Area:

To find the superficial area, you sum the areas of all external surfaces. For this rectangular building, you would calculate:

- Two long walls: 2 (length height) = 2 (100 ft 20 ft) = 4,000 square feet

- Two short walls: 2 (width height) = 2 (60 ft 20 ft) = 2,400 square feet

- Roof: (length width) = (100 ft 60 ft) = 6,000 square feet

• Total Superficial Area:

Now, add up all these areas to get the total superficial area:

- 4,000 sq. ft + 2,400 sq. ft + 6,000 sq. ft = 12,400 square feet

• Cost Estimation:

Suppose you have an estimated cost per square foot for the construction of external surfaces, which is $150 per square foot.

• Calculate the Estimated Cost:

To estimate the cost of the building, you'd multiply the total superficial area by the cost per square foot:

- Estimated cost = Total Superficial Area * Cost per square foot

- Estimated cost = 12,400 sq. ft * $150/sq. ft = $1,860,000

So, using the Superficial Area Method, the early cost approximation for constructing this office building would be approximately $1,860,000. This method is particularly useful in the initial stages of a project when detailed plans and quantities are not yet available. It provides a quick way to estimate construction costs based on the building's external dimensions.

6. Cube Method

The cube method estimates costs based on the volume or cubic content of the building. It's suitable for projects with complex shapes or non-standard designs.

Example

Consider the construction of a modern art museum with a distinctive architectural design. The building features irregular shapes, varying heights, and a blend of materials, making it a challenging project to estimate using traditional unit-based methods. In this scenario, the Cube Method steps in to provide a more accurate cost estimate.

To employ the Cube Method, the project team would begin by breaking down the building into smaller, more manageable cubic sections. These sections could be as simple as individual rooms or as complex as unique architectural elements within the structure. Each cubic section's volume is calculated, considering its irregular shapes and varying heights.

Next, the team assigns a cost per cubic unit to each of these sections, taking into account the materials, labor, and other resources required for construction. These cost estimates are then summed to arrive at the total project cost.

7. Story Enclosure Method

This method considers the cost of enclosing spaces within each story of a building. It's particularly useful for multi-story structures.

Example

Imagine a construction project for a commercial office building with ten stories. Each story has a similar layout, comprising office spaces, corridors, and common areas. The goal is to estimate the cost of enclosing the spaces on each of these ten stories using the Story Enclosure Method.

• Determine the Enclosure Elements: The first step is to identify and quantify the elements that contribute to the enclosure of each story. This includes exterior walls, interior walls, doors, windows, and finishes (such as drywall, paint, and flooring).
• Assign Unit Costs: Assign unit costs to each of these elements. For example, you might have a cost per square meter for exterior wall construction, a cost per linear meter for interior wall framing, a cost per door, and a cost per square meter for window installation.
• Calculate Story Enclosure Costs: Calculate the cost of enclosing each story by multiplying the quantities of each element by their respective unit costs. For instance, for the ground floor, you'd calculate the cost of exterior walls, interior walls, doors, windows, and finishes.
• Repeat for Each Story: Repeat this process for each of the ten stories, ensuring that you account for any variations in the layout or design between floors.
• Sum the Costs: Finally, sum up the enclosure costs for all ten stories to obtain the total estimated cost for enclosing the entire building.

8. Elemental Method

The elemental method breaks down costs into specific elements (e.g., Sub-structure, Super-structure, Finishes, Services, External works etc.) and estimates each element's cost individually. This method provides a detailed cost breakdown.

Example

Let's consider an example to illustrate the Elemental Method in action. Imagine a construction project for a new office building. In this case, the elemental breakdown might look something like this:

• Sub-structure: Excavation and foundationsPilingBasement construction
• Super-structure: Building frame (concrete or steel), Floor slabs, Roof structure
• Finishes: Wall finishes (paint, cladding), Flooring (carpet, tiles), Ceiling finishes
• Services: Electrical systems, Plumbing and HVAC, Fire protection
• External Works: Landscaping, Parking areas, Access roads

The Elemental Method would involve estimating the cost of each of these elements separately. For instance, the "Services" element might include a detailed breakdown of costs related to electrical work, plumbing, and HVAC systems. This level of granularity enables project stakeholders to gain a deep understanding of where the project's financial resources are allocated.

9. Approximate Quantity Method

This method relies on rough quantities of materials, labor, and other resources to estimate project costs. It's often used when detailed quantities aren't available.

Example

Imagine a construction project for a new residential building where the client is interested in obtaining a rough cost estimate during the early stages of project planning. At this point, detailed architectural or engineering plans are not yet available, making it challenging to provide precise cost estimates based on exact quantities of materials, labor, and resources.

In such a scenario, the construction estimator might use the Approximate Quantity Method. They start by making rough approximations of the key project components. This could include estimating the total square footage of the building, the number of rooms, and the overall building height. They might also consider general aspects like the type of foundation, the exterior finish, and the roofing system.

Once these rough quantities and specifications are in place, the estimator refers to industry-standard cost data or historical project cost records. For instance, they might consult cost databases or records of similar past projects. They then apply unit costs to the approximate quantities to calculate an early cost estimate for the project.

These preliminary estimating methods allow project stakeholders to get a sense of the project's potential costs early in the planning stages. As the project progresses and more details become available, these estimates are refined and used as a basis for more accurate cost planning and budgeting. The choice of method depends on the project's complexity, available information, and the level of accuracy required at different stages of the project lifecycle.

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