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Before any construction begins, your primary focus is on estimation. Here, you're in the planning stage, trying to forecast all possible expenses. This is where detailed estimation is crucial because it forms the foundation of your project’s budget.
Feasibility Study: Estimation helps determine whether the project is financially viable. For instance, if the estimated cost is beyond what the client or developer can afford, the project might need to be re-evaluated or adjusted before moving forward.
Bidding and Tendering: Accurate estimation is also vital during the bidding process. Contractors submit their bids based on their estimates of the project cost. A contractor who underestimates may win the bid but could face losses during the project, while overestimating might price them out of the competition.
Example: If a contractor estimates the cost of building a G+5 residential building at ₹2 crore, they’ll use this figure to create a bid. If another contractor estimates the same project at ₹1.8 crore, they might win the bid—but they also need to ensure their estimate is realistic and they can deliver the project within that cost.
Once construction begins, costing becomes the focus. Now, you're not just predicting costs; you're actively managing them. This involves:
Tracking Expenses: Every expense is recorded. This includes daily labor costs, material purchases, equipment rentals, etc. For example, if you estimated ₹45,00,000 for labor but find that you've already spent ₹30,00,000 halfway through, you might need to reassess your labor strategy to avoid overspending.
Managing Cash Flow: Costing helps in managing cash flow effectively. You need to ensure that there’s enough money available to keep the project going, which means monitoring payments to suppliers, workers, and subcontractors.
Adjustments and Variations: Sometimes, actual costs differ from estimates due to various factors like price fluctuations or unexpected issues on-site. Costing helps identify these differences early, allowing the project manager to make necessary adjustments. For instance, if steel prices suddenly increase, the project budget might need to be adjusted, or the construction plan might need to be altered to stay within budget.
Example: During the building of the G+5 residential building, suppose the cost of steel rises due to market conditions. If your original estimate was ₹50,000 per ton and it rises to ₹55,000 per ton, your actual costs will exceed your estimate. Costing will help you track this increase and adjust the budget or find savings elsewhere.
After the project is completed, a comparison between the estimated costs and the actual costs is made. This is a critical step for future projects as it helps improve the accuracy of estimates and enhances cost control measures.
Cost Analysis: You analyze where the estimation was accurate and where it wasn’t. This could involve looking at which items were under or overestimated and understanding why.
Final Budget Reconciliation: The final step in costing is to reconcile all expenses and ensure everything has been accounted for. This includes final payments to contractors, suppliers, and labor, as well as settling any disputes or claims.
Learning for Future Projects: The insights gained from this process are invaluable for future projects. If you consistently find that certain aspects, like labor or materials, are under or overestimated, you can refine your estimation process for better accuracy in future bids.
Example: After completing the G+5 residential building, you find that the total cost was ₹2.1 crore, while your initial estimate was ₹2 crore. You might discover that labor costs were higher than expected due to overtime or that material costs fluctuated more than anticipated. This analysis will help you make better estimates for your next project, ensuring more accurate budgeting and cost control.
Fri Aug 9, 2024
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