Management of Construction

Construction Cost estimating

As suggested above, the major effort in tender preparation for a lump-sum/fixed-price or unitprice/ measure-and-value contract is the development of the cost estimate. We shall describe the several elements of such a cost estimate and the process for putting an estimate together, for both of these types, using realistic though oversimplified examples. We shall also consider the use of estimating software and show an example based on a product currently available to contractors. In addition, we shall revisit the topic of value engineering, this time from the standpoint of the contractor involved with proposal preparation. The term estimate is curious. It implies that the numbers are approximations, representing someone’s idea of what the final project costs will be, but subject to some limited accuracy. All that is true, but whether accurate or not, the cost number(s) generated for a lump-sum or unit-price estimate become contractual obligations if the contractor’s proposal is accepted. The contractor agrees to do the work, not for ‘about’ that amount, but for exactly that amount! First, we review the various levels of detail in which estimates are prepared and the use of each.


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