Construction Project Cost Estimation Factors

Construction Project Cost Estimation FactorsConstruction spue unions atomic number 18 priced victimization a bill of quantities this is a detailed comment of the items fatalityed to finish the product and their personify.The first and foremost purpose of estimating is fundament exclusivelyy to set a bud nourish for contract bl terminal in. This budget is to be kept either the trend through the vomit up and is a guess of what the bulge out on a whole exit salute it should not be breached or the project is considered a failure and unremarkably results in a loss of mvirtuosoy. Another occasion that an image is apt(p) is so that the contractor mint obtain competitive prices from a range of companies to do the endure that is needed say for instance if one union gave an forgather focus lower than another competing confederacy whence obviously the contractor is expiration to pick the lodge with the lowest estimate (however the standard of materials and work pur sues into this excessively) this is how negotiations work. An estimate is given so that the alliance or contractor deal turn everywhere wear a pull in can be made from the excogitate and in construction lucre is e very(prenominal)thing. If you atomic number 18 not spill to go for a pay on the meditate in hand thither is no point pickings it on.In order to prep atomic number 18 a detailed estimate the data processor must wear with him the following selective dataPlans, functions and other relevant details of the work.Specifications indicating the exact nature and class of materials to be utilise.The rates at which the unalike items of work atomic number 18 carried out.To en adequate to(p) an estimator to take out the quantities accurately, the d bluntings must themselves be clear, true to the fact and scale, complete, and in full dimensioned. The estimator has likewise to bear in mind certain principles of taking out quantities.When creating the estimate the es timator must separate the apostrophize into different sections. on that point atomic number 18 preliminary live, net be and gross costPreliminary CostThe preliminary divorce of a bill of quantities is the section that provides a description of the project, the contractors general facilities and setup and conk outning costs. If work is break off for reasons out of the contractors control, recurring costs atomic number 18 often used to view compensation for the extension on the contract period.Plant, Tools and Vehicles are holdd in the preliminary stage of the bill of quantities.The contractor go out include the cost of buying or maintaining machinery, tools and vehicles in the preliminary section of an estimate or a bill of quantities. Also the cost of erecting, inspecting and maintaining scaffolding for a project is included in the preliminaries section. The cost get out everlastingly work out on the surface empyrean of the structure, the length of period the scaff olding is erect and the compositors case of structure that is being built.Part of the assessment of a contractors localize costs will include the non-productive staff required to administer a internet post. This in the main will include a site manager, an engineer, a store man, a safety officer and a general foreman.Site Services The preliminaries of a construction project include the costs of installing site toilets, ever-changing rooms, offices, water and electricity, temporary roads and the installation of site security. Within a company gross profit is very important because itshows how efficiently focussing uses labour and supplies in the yield process. More specifically, it can be used to calculate gross profit margin. If we as a company are not making a gross profit wherefore(prenominal) basically we dont have a company.This magnifies wherefore an estimate is important because we know or so how a lot we are going to gravel when we do a project. hence we must kn ow how much we are going to spend so we can look at the correlation of the ii figures and see weather the project is worth doing.Net CostsThe net cost is the cost of all of the basic things you need on site to complete the job in hand. This includes labour the wages for all of the staff and the facilities they use including food, nourish and first aid. Also all of the equipment they use. The cost of arrange material in like manner ties in with the net cost but this will all depend on the type of job you are doing say you are building a high rise building with several beautifys then a large crane will be needed this obviously costs a lot of currency to apply out by the time of day meaning that a large sum will be added onto the estimate in comparison to building a lesserer building that will need smaller less expensive embed. Materials also come into the attachment of the net cost. The materials need to be surface thought out before the project begins. They must be effe ctive for at that place cause and on that point cost. When doing an estimation the estimator must find competitive rates for materials that are to the buyers specification. The cost of these will all be added to the estimation.Gross ProfitThe rendering of gross profit is Calculated as sales minus all costs sendly related to those sales. These costs can include manufacturing expenses, raw materials, labour, selling, marketing and other expenses.Within a company gross profit is very important because itshows how efficiently management uses labour and supplies in the production process. More specifically, it can be used to calculate gross profit margin. If we as a company are not making a gross profit then basically we dont have a company.This magnifies why an estimate is important because we know roughly how much we are going to make when we do a project. Therefore we must know how much we are going to spend so we can look at the correlation of the two figures and see weather the project is worth doing. knocks are also included into the estimation. These are costs that cannot be controlled such as water gas and electric bills. These are hard to calculate as we never know how much there going to cost. Rent is also a good example.Single rate estimationThis system of estimation is used usually by issue bodies such as schools and hostpitals for mensuration and estimating the cost of large floor areas. It is a usefull way of estimation when a quick cost range is needed in the early stages of design. and it is very difficult to change costs to fit different projects in different locations. So say you know it costs 1000 to floor 1 room of a hotel and you have a budget of 50000 then you know you can build 50 rooms that are all the corresponding. Also when you have a set design for these types of buildings such as Holiday Inns do you know it will ceaselessly be the like where ever you areOther types of buildings that this type of estimating is useful for are pulverization units, hotels, hostels, houses that are all the same deign and retail buildings.The floor area method is given in m the reason why this method is so popular is because of how simple it is. Plus most contractors know the way in which it works and are very used to the idea. It takes previous buildings that have been designed that are similar to give designers and builders a guideline on how to construct other buildings that are the same.P4Identify and explain those factors that affect the fate profit margins, those that affect the make of labour and those that affect the hrly/ clean rates for a variety of plant items.Labour RatesThere are computations that have to be made when undergoing a project to afford a rate that the estimator can use to price the proffer works which observes all the costs involved in employing labour directly.The reason this is done is if you had employed a worker on site for 12.00 an time of day is that all you will be paying him, obvious ly not there are much things that need to be included and taken into flier when calculating that costs of labour.The basic rate of pay has to be concur with both company and worker this includes any holiday pay or sick pay that will be taken due to entitlement. Workers will still be paying(a) for these days. Weather can restrict when workers can do the work meaning they may not get paid for any(prenominal) hours of the day or even the whole day. Also the employers national insurance contribution needs to be made as well as payments to the CITB (construction Industry Training Board). And, finally any bonuses that are given to the worker as extra incentives.To calculate the cost of labour per hour we must take all of the above into consideration however, one more piece of information is required, this is the take rates for labour. How fast can a brick layer lay bricks? If your paying a man by the hour, how farsighted will it take for him to finish the job. The idea behind this calculation is to in reality see if its worth hiring in to do the job because obviously more or less workers are better than others. If you can establish the the out raise rate of labour, then you can calculate the cost of labour per unit of brickwork(for example). This can be applied to the tender prices. Output rates can be estimated in one of two ways. Carrying out work studies where bricklayers are timed to see how many bricks they can lay in an hour. Or using output tables from work done in the past can provide information on how long work took or on unit output rates.Plant ExpensesPlant in construction can be very expensive to hire and own and even operate. It is the estimators job to be able to give a guide on how much it will cost for plant on any specific job. There are two ways of providing plant for construction sites. These are if the company decide to corrupt the plant (this means they must operate and service it) or hire in the plant externally or internally.Operati ng costs are those that are time related. If the plant was owned by a company the calculation and estimation of how much the operate costs would be would include the amount of fuel used. This would have to be done using a consumption rate of the plant. Also any repairs on punctures etc. These will occur rarely and at random and are added in to recover costs. Also operating costs must be considered. The umber of hours that it is operating will obviously cost more in energy and make for more breakages.When hiring plant there more aspects required to take a note of there are deliver costs to think about. If your site is in the city it may be hard to get it to your site so alternative methods of transport are used but usually low loaders and tractors are used nevertheless all of these methods cost capital. erection costs are also something to think about, if it is a crane that you need then this is going to take time to erect, and time equals money not to mention the labour involved. Also when everything is finished removal costs come into place and these need to be noted and change the theatrical role profit in the long runThe worst thing that can observe to a site manger is when he has expensive plant deceitfulness around and not doing anything this wastes a lot of money, mainly through letting costs. The rate of rental costs per hour is very expensive as we know. The unit rate of calculation for an item of plant will depend on a number of things. The ground conditions are important, weather there are trained operators. If not then hiring someone new or investing in training is needed (training would be needed for at least 2 people to account for the absent). The dimensions of the height and reach of the plant material is also accounted for. The higher and longer the plant is the more it costs for example a crane costs more than a small digger. Finally the reliably plays an important role in how much plant costs. If you are hiring or buying brand new plan t machinery then its obviously going to cost more. All of these things take off and put on percentage to the overall percentage profit.M3 knocks and On CostsOverhead is business term that refers to fixed costs that a business incurs so that production is continued. Overheads can be cut if limits to production are made, or if production is halted completely, although some overheads are incurred whether there is and production or not. Overhead expenses are all costs on theincome statementexcept for direct labor, direct materials direct expenses. Overhead expenses include accounting fees, advertising, depreciation, insurance, interest, legal fees, rent, repairs, supplies, taxes, echo bills, travel and utilities costs.In construction the overheads of a company are the costs that must be met in order to be able to run the head office. These are things such as departmental costs (buying the department) and insurances, also paying for company cars and basic IT equipment. They are basical ly costs you money box control such as wages, electricity, gas or office rent, usually you will have to recover them because they include admin. Most medium coat construction organisations recover the cost of these each course spread over the turnover of the project this can be added as a percentage addition but may vary according to your turnover.Just the same as any other aspect of construction work this has to be added into the estimation at the start of a job and must be met from somewhere. So a percentage is used to signify the cost of these necessities. The calculation involved takes the total value of the companys overheads per year and then the turnover and watershed them two totals and finally times the number by 100%. This will give us the percentage to add to tender. This percentage will always be applied to future estimates unless the turnover drops.There are a few other ways that the overheads can be set up so that the value is always known. By not including them, b ut using an increased profit margin to cover their costs will constitute the overheads. But, for larger and more well-known companies working on larger projects we can move the head office into small cabins that are positioned on the site this allows us to recover the costs of overheads through the preliminaries.The turnover that comes from a company will rise and fall from year to year. It goes without saying that the risks you take and the work efficiency of your company will change all the time. No year will ever be the same as the last one it can be similar in terms of jobs and projects and contract price but will usually never be the same. Risks that we take are a massive factor to the turnover. Some risks are worth it and some go wrong, thats the risk we take to get more money. As a leader of a company we have to make the right decisions when risking and always be level headed and think everything through so that in the end we make money. Work efficiency also plays a massive part in annual turnovers. Being efficient can save money and make more of a difference to your profit margins than you may think. eventually when pricing is competitive with in the industry this takes affect. As a company you may need to lower your prices to be able to sign a deal. If you dont then you wont get a deal and you wont get work done, meaning you wont make money. When the turnover of a company drops, you loose not only profit but you loose money on overheads as well this is because the turnover will drop with coincidence with the percentage. However, on the other hand if the turnover rises this can create money to compensate for overheads as mentioned earlier.In the preliminaries there are fixed and time related changes that must be considered. In SMM7 we see that these two types of charges are identified separately. A fixed charge is the cost of the work that is autarkical on duration and a time related charge is the cost that is dependant on others over duration.