Tools and Methods for Estimation

Tools and Methods for Estimation

1. Unit Rate Estimation:

   • What It Is: This is a commonly used method where the cost of each unit of work (like cubic meters of concrete or square meters of plaster) is estimated based on past data and current market rates.
   • How It Works: For example, if you need to estimate the cost of concrete for the G+5 building, you'd calculate how much concrete is required and multiply it by the unit rate (e.g., ₹6,000 per cubic meter).
   • Example: If you need 500 cubic meters of concrete, the estimated cost would be 500 x ₹6,000 = ₹30,00,000.

2. Detailed Estimation:

   • What It Is: This method involves breaking down the project into smaller components and estimating the cost of each one separately.
   • How It Works: For the same G+5 building, you would estimate costs for each aspect—foundation, superstructure, roofing, finishes, etc. Each component would be broken down into its materials, labor, and equipment costs.
   • Example: You might estimate the foundation at ₹25,00,000, the superstructure at ₹50,00,000, and so on. Adding these together gives the total project estimate.

3. Parametric Estimation:

   • What It Is: This method uses mathematical models to estimate costs based on project parameters such as building size, number of floors, or square footage.
   • How It Works: If you know that similar buildings typically cost ₹2,000 per square foot to construct, and your building has 50,000 square feet, you can estimate the project at 50,000 x ₹2,000 = ₹1,00,00,000.
   • Example: For a 10,000-square-foot area, you might estimate the cost as 10,000 x ₹2,000 = ₹20,00,000.

4. Historical Cost Estimation:

   • What It Is: This approach relies on data from past projects that are similar in scope and scale.
   • How It Works: If a previous G+5 building cost ₹1.8 crore, and the current project is similar, you might estimate the new project around the same figure, adjusting for inflation or specific differences.
   • Example: If inflation has increased costs by 10%, you would adjust the historical cost upwards by 10% for your estimate.

5. Software Tools:

   • What They Are: Specialized software like MS Project, Primavera, or specific estimation tools like Candy or Estimator Pro are used to streamline the estimation process.
   • How They Work: These tools allow you to input all the necessary data—materials, labor, equipment—and generate detailed estimates quickly. They can also be used to track costs, create schedules, and manage resources.
   • Example: Using Estimator Pro, you can input the quantities of materials needed for the G+5 building, and it will calculate the costs based on the current rates you provide.

Tools and Methods for Costing

1. Cost Control Systems:

   • What They Are: These systems, often integrated with project management software, help you monitor and control actual costs against the estimated budget.
   • How They Work: As you record expenses daily, the system updates the project’s financial status, alerting you to any overspending.
   • Example: If you see that the labor costs are exceeding the budget, you can quickly investigate why and take corrective action, such as reassigning tasks or negotiating with suppliers.

2. Earned Value Management (EVM):

   • What It Is: EVM is a project management technique that integrates scope, time, and cost data to assess project performance.
   • How It Works: EVM compares the amount of work completed to the budget and schedule. It helps determine if the project is on track or if corrective actions are needed.
   • Example: If you've completed 50% of the work but spent 60% of the budget, EVM will show that you're over budget and need to make adjustments.

3. Variance Analysis:

   • What It Is: This method involves comparing the actual costs with the estimated costs and analyzing any differences (variances).
   • How It Works: You track every expense and compare it with what was estimated. If the actual cost is higher or lower, you investigate why.
   • Example: If the actual cost of steel is 10% higher than estimated, variance analysis will help you understand if it’s due to price fluctuations or ordering inefficiencies.

4. Cash Flow Analysis:

   • What It Is: This involves tracking the flow of cash into and out of the project to ensure there’s enough liquidity to meet ongoing expenses.
   • How It Works: By monitoring cash flow, you can ensure that you have enough funds at each stage of the project, avoiding delays or stoppages due to cash shortages.
   • Example: If you anticipate needing ₹10,00,000 for labor in the next month, but your cash flow analysis shows only ₹8,00,000 available, you might need to delay certain purchases or arrange for additional funding.

5. Procurement Management:

   • What It Is: This method involves managing the purchase and delivery of materials, equipment, and services required for the project.
   • How It Works: Effective procurement management ensures that you’re getting the best prices and that materials are delivered on time to avoid delays.
   • Example: If you’re managing procurement effectively, you might negotiate a bulk discount on cement, reducing your actual costs compared to the estimate.

How These Tools and Methods Work Together

In a well-managed construction project, estimation and costing are closely linked, and the tools and methods used for each feed into one another:

• Estimators use historical data, software tools, and estimation methods to create a detailed project budget.
• Project Managers then use cost control systems, EVM, and variance analysis to monitor actual expenses against this budget, making adjustments as needed.

A Real-World Scenario:

Imagine you're managing the construction of a high-rise G+75 residential building in Mumbai.

• Estimation Phase:

  • You start by using a combination of detailed estimation and parametric estimation to forecast the costs. For example, you estimate that the total cost will be around ₹200 crore, including materials, labor, and equipment.

• Costing Phase:

  • As the project progresses, you use cost control software to track every rupee spent. Let's say after the first 6 months, you’ve spent ₹50 crore, but you’ve only completed 20% of the work. This could be an early warning that costs are higher than estimated.
  • You perform variance analysis and find that material costs, especially steel, have been higher than anticipated. You decide to re-negotiate with suppliers or find alternative suppliers to bring costs back in line.

• End of Project:

  • After completing the building, the final cost comes out to ₹210 crore, slightly higher than estimated due to unforeseen delays and material price increases. You conduct a post-project review, analyzing where estimation could have been more accurate and where costing controls could be improved.

Mon Sep 2, 2024