What is Cost Estimating and its methods?

Cost estimate also referred as (construction estimate) is a part of construction project development in which the total price of materials is marked. It all starts with construction takeoff services in which materials and their quantities are mentioned. Estimator’s job is to assign the prices of each material along with its quantities is called cost estimating. Construction estimating and cost estimating, The only difference between these two words is when you search construction estimating it means you require a material, quantity, and its pricing but if you search cost estimating it means you only acquire costs, your material and everything else is ready. Before we continue, let me tell you an interesting fact about construction workers.

According to construction statistics “52% of the construction workers in the US were born between 1960-1979”

Let’s continue to our blog, to complete every process there is a method or methods same applies in cost estimating. Here are the three methods for cost estimating.

  • Skilled Perception
  • Three-point Estimating
  • Bottom-up Estimating

Skilled Perception Method

In this method the cost is considered by the group of expert estimators or people with the knowledge of current situation in the market. It is basically a simple method with not a lot of technological work. This method is precise but can be time taking or sometimes human errors can occur. 

Three-Point Method

This type of method contains three situations that can happen in the future. There are three cases that are considered during this method.

  1. The best-case estimate
  2. The most-probably scenario
  3. The worst-case scenario

The Best-Case Estimate

This type of cost estimate is performed by keeping in mind the best possible cost in the future time. For example, if the cost of a material is $24 in the present time, estimators will guess the cost of that material in the future time (the time in which the estimate is going to utilize) it can be $26 or $27. This estimate can generate a great revenue and can provide the best possible results. Best-Case Estimate can also refer to (B).

The Most-Probable Estimate

This type of cost estimate is made by keeping in mind the most likely pricing of the materials and the labor in the time of utilization. The most probable estimate or also (P) can provide you a good revenue and will more or less deliver you the best result which means the results can be great or worse.

The Worst-Case Estimate

Worst-Case Estimate which can be also mentioned as (W) is the type of cost estimate made by keeping in mind the worst situation that can happen in the market. This estimate can’t give you any revenue and the provided are the worst. For example, if you are performing electrical estimating services for a project that is in the future you’ll guess the price by keeping in mind the worst as in “what worst can happen”. 

Bottom-up Estimating

Bottom-up estimate is a method made by focusing on the overall cost and the time in which the project is going to complete and by inspecting the work with the most detailed level. By combining all of the information, overall budget and the time of the completion contractor delivers it to other team members.

Conclusion

Pricing the materials and quantities are the most difficult part of an estimating job. Construction estimating and cost estimating services are the same but there’s a tiny difference in their meanings in the construction industry. There are a total of four main methods of performing cost estimating services: analogous estimating method, parametric estimating method, bottom-up estimating method, three-point estimating method. Cost estimators use these four methods to develop a cost in a construction estimate some of them are precise but time taking others are vice versa.

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