Home Business & Management Construction Cost Estimation and Cost Control.

Construction Cost Estimation and Cost Control.

Costs are involved in every phase of construction and accurately estimating them is important for the success of the company or firm engaging in the construction activity.

There are many types of estimates that are made for different types of construction projects and involve the use of many different estimating techniques and tools including digital and computer-based ones too.

Cost control is one of the major activities that determine the fate of any construction project, and hence it is extremely important to estimate costs as accurately as possible.

We will discuss the concepts of cost control and estimation in this article with some of the methods, techniques, and tools used.

What is cost estimation?

cost estimation

Cost estimation is a process of calculating rough estimates of costs that are likely going to be incurred on a project.

 A construction project involves extensive use of materials, machinery, and men, and calculation of the cost of those resources required is an essential practice that is carried out before viding, essentially in determine if the project is worth doing.

Cost estimates help get a rough idea of all the costs involved and the idea is used to assist in bidding and other purposes.

Types of costs Associated

The costs of a construction project can be of many types some of the major are some minor like maintenance.

 Some of the major costs associated include: 

  •  Land acquisition and development costs.
  •   Costs associated with planning. 
  •   Engineering design costs.
  •   Construction costs including materials, equipment, and labor, etc.
  •   Supervision of the construction site.
  •   Legal costs like insurance and taxes. 
  •   Inspection and testing costs.
  •   Administration expenses like salaries of staff and office expenditure.

Types of Cost Estimates used in Construction

Various types of estimates are made for different types of construction projects some of the common ones are:

Budget Estimate:

budget estimate

 Also known as preliminary cost estimate or approximate cost estimate, it is prepared in the initial phase of project planning to know the budget of the project and the approximate costs involved to help in further planning. 

Material’s Estimate:

 It is an estimate of materials that are required to complete the project. It helps in the procurement process. 

Labor Estimate:

 It is the estimate of labor required. The quality i.e. the level of skill required and quantity of manpower required for the project is determined for successful execution.

Machinery Estimate:

 It is an estimate of machinery and equipment required and helps in determining the different types of equipment required for completion of the project. 

Time Estimate:

 It is an estimate of the time required to complete certain tasks and construction activities. Various tools like Gantt charts and network diagrams are used for the purpose. 

Detailed Cost Estimate:

 It is built upon the preliminary estimate and all costs are calculated accurately after careful revisions and modifications. 

Revised Cost Estimate:

 It is prepared when the original costs that were estimated in the detailed estimate exceed by a significant number. There can be various reasons for such discrepancies in the estimates like sudden price fluctuations, etc.

Operating Costs Estimate:

 It is an estimate of operating costs that will be incurred during the project’s life.

It is important to note that they are just estimates and their accuracy depends on many factors like the reliability of data used for estimation therefore care must be exercised while estimating the costs, particularly of large scale projects.

 Techniques of cost estimation

techniques of cost estimation

 To accomplish the task of estimating construction costs many techniques have been developed some of which are:

1. Top-down estimating– Also known as Analogous Estimating, it is a quick estimation technique, which is used when the information is limited and also is the least accurate estimating technique.

Despite its questionable accuracy, it is used because it takes very little effort. It essentially involves analyzing other projects and making a judgment based on the projects that resemble the current project, for which costs are being estimated.

2. Parametric Estimatingit is similar to Top-down estimating but it uses statistical data to achieve at the estimates. For example, the cost of an item like R.C.C can be determined from previous projects and can be used to estimate the cost in the current project by multiplying the total quantity.

3. Three Points Estimatingthree estimates are determined and estimates are made by averaging the results.

4. Bottom-up Estimating- it is a time-consuming technique but also the most reliable one too. It essentially involves breaking the work components into activities and estimating for them individually, thus providing a detailed estimate.

Importance of accurate cost estimation

Estimating the costs of a construction project is an important activity, especially for megaprojects involving a lot of resources and hence cannot be overemphasized. 

There have been many large construction failures due to inaccurate estimating of costs like the Marble Hill nuclear power plant in Indiana.

It, however, is not possible to estimate the costs of any project with absolute precision. But diligent estimation is necessary to eliminate the pitfalls. 

Some of the benefits of investing time and money in estimating the costs accurately include:

  • Reduction in the risks 
  • It helps in making more informed bids that can lead to higher profits.
  • Monitoring of the work. Cost estimates help in monitoring the work and help in identifying the discrepancies in the actual and estimated costs. This helps in bidding for future projects and value engineering.

 What is cost control?

cost control

Cost control is a process of managing the costs or expenses of a project using various techniques and tools to make sure that the project costs do not exceed the budget allocated for it.

It involves planning and making arrangements for dealing with the risks that are involved in the project.

 The primary objective of cost control is to make sure that the project is completed within the approved budget. 

 It involves developing the cost plan, that contains the details of the costs of all activities, and updating the cost plan with any variations and changes.

Cost Control Tools and Techniques.

There are various techniques and tools used to help in managing the costs efficiently, some of them are:

construction schedule

Construction schedules– used to monitor the progress, since work progress is directly related to the costs, of the construction project and the financial performance. The scheduled help in comparing the time and costs estimated and the actual costs incurred and this helps in devising appropriate cost control strategies.

Site inspection used to compare the work completed with the budget.

Meetings– Regular meetings are held to review project progress and discuss important issues. It also helps in building employee morale.

Cost and work progress records and reportscontinuous reporting is used to continually monitor the costs for tighter cost control. Cost reporting is important for smooth communication and avoiding cost overruns.

Construction management software– Using construction management software to communicate with everyone on the job site.

Prefabricated and Modular BuildingBy making use of prefabricated and modular building components the costs can be drastically lowered without compromising the quality of the structure.

This is being done across the world. For example, a modular hotel project by Marriott in New York, using prefab components was initiated in 2019. 

Construction Management Software

Construction software is also used to control costs. The software, particularly the field management software is being used extensively to communicate with the team members which are often scattered on a Jobsite, thereby reducing errors and unnecessary expenses that result in budget overruns. 

BIM (Building information modeling)


Building information modeling, or BIM, is a tool used to visualize the construction project at each stage in its life cycle. It can reflect the cost and material requirements that a project would demand. 

Additionally, cloud-based tools are also available that help in eliminating redundancy and time-wasting activities.


In conclusion, cost estimating and controlling are the major activities that are essential for any company to remain competitive in the market. Various tools and computer applications are available to help construction managers do their jobs more effectively and the technology for these tools is getting more sophisticated day by day, enabling the companies to deliver projects on time and under budget.

Explorer, writter and a teacher.

Explorer, writter and a teacher.

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