Various factors influence the cost estimation of a construction project. Preparation of a construction cost estimate for any project is a very complex process which consists of many variable factors. Every variable has to be correctly estimated based on proper study, past experience and research to calculate total project cost of construction.
There are many factors which affect the construction cost estimate and have substantial impact on undertaking cost and they are as following:
The final cost of those similar undertakings can give the idea for the new building undertaking cost calculation. The final cost of past undertaking needs to be factored with current building cost indices. For the building estimate, the best reference will be similar building undertakings.
Construction material cost consists of material cost, shipping charges and taxes applicable if any. So, it is crucial consider all these variations while calculating construction material cost.
Labor wages varies place to place. If the undertaking has to be started after several months of estimating the undertaking cost, the probable variation in wage rates has to be considered in the calculation. So, local wage rate must be considered in calculation.
Site conditions such as poor soil conditions, wetlands, contaminated materials, conflicting utilities (buried pipe, cables, overhead lines, etc.), environmentally sensitive area, ground water, river or stream crossings, heavy traffic, buried storage tanks, archaeological sites, endangered species habitat and similar existing conditions etc. undertaking site conditions can increase building costs. can increase the undertaking cost during building phase if these variations are not considered during estimation.
A construction undertaking can continue for years before completion. During the construction period, the cost of materials, instruments, labors, equipments etc. may vary from time to time. These variation in the prices should be considered during cost estimation process.
Duration of construction project is affects the cost. Increase in project duration can increase the construction project cost due to increase in indirect costs, while reduction in construction cost also increases the project cost due to increase in direct costs. Therefore, construction project schedules also need to be considered during project cost estimation.
Good standard building plans and specifications reduces the building time by proper execution at site without delay. Any vague wording or poorly drawn plan not only causes confusion, but places doubt in the contractor’s mind which generally results in a higher building cost.
The cost of undertakings will be higher with sound construction professional reputation. Smooth running of construction is vital for undertaking to complete in time. If a contractor is comfortable working with a particular engineer, or engineering firm, the undertaking runs smoother and as a result is more cost-effective.
Approvals from regulatory agencies can sometimes be costly. These costs also need to be considered during cost estimate.
Cost estimation for construction projects must also need to consider costs of insurance for various instruments, equipments, construction laborers etc. In some special projects, there can be additional requirements which may have additional costs. General insurance requirements, such as performance bond, payment bond and contractors general liability are normal costs of construction projects.
For such a requirements, local workmen may not be adequate and workmen from different regions need be called. For a large construction undertaking, there can be high demand for workforce. These may incur extra costs such undertakings and also for the type of construction undertaking where specialized workforce is required.
When a location of construction undertaking is far away from available resources, it increases the undertaking cost. increases with distance and adds to the undertaking cost. Cost of transportation for workmen, equipments, substances, tools etc.
Sometimes it is necessary to carry out technical review of construction project to make sure the project will serve the required purpose with optimum operational and maintenance cost. This review cost shall also be added to the project cost.
It is always advisable to add at least 10% contingency towards the total undertaking costs for unforeseen costs and inflation.