What is Estimation ?

When the quantities and costs of various items in connection with the construction project are calculated, it's called  estimation

Why do we need it ?

Cost Estimation is done to get an idea of the project cost before the actual construction of the project.

  • Direct Cost - It includes cost of materials, equipment and labor.

  • Indirect Cost - It  includes overhead costs (both job office or site office overhead and general head office overhead), contingency i.e. cost for any unforeseen work and profit.

 Parties involved in any construction work :

1.The owner

2.The design professionals

3.The construction professionals

Generally, these are the three main parties involved in any construction project.

In many projects, the professionals for the designing purpose and the  professionals for the construction purpose are from the same company or in some cases, they form a joint venture to work for the owner of the project.

Why early estimates are significant ?

It is the responsibility of each of the parties that are involved in the construction process to calculate the estimation costs at various stages of the project.

If we do an early estimate, then it helps the owner to decide whether the project will be affordable for him or not within the available budget, while satisfying the project's objectives.

Work breakdown structure

Work breakdown structure is a very important part in the cost estimating process.

It serves as an important framework for organized collection project cost data and preparing the cost estimates at different levels.

It is a technique that involves the hierarchical breakdown of the project into different work elements at successive levels and defines the inter relationships between them.

Quantity take - off

For the preparation of cost estimates, the estimator performs quantity take-off to quantify each item of work by reviewing the contract drawings and specifications.

In cost estimation, quantity take - off is an important task because it is carried out before pricing each item of work and quantities should be represented in standard units of measure.

The total cost of the project 

For an estimator and his group that are related to any particular construction project, before bidding for any project, the estimator needs to determine the actual cost of any project in accordance with the contract documents consisting of drawings, specifications and all other technical documents and requirements.

The total project cost includes two types of costs:

  • Direct cost 

  • Indirect Cost

Types of Cost Estimation

The cost estimation is broadly classified into following two types :


Approximate estimates:

The approximate estimates are prepared during initial stages of the project life cycle.

These estimates are also known as preliminary budget or order-of-magnitude estimates.

These are prepared to determine the preliminary cost of the project.

From the approximate cost estimates, the owner of the project can be able to know whether the project can be undertaken within the available budget.

There may be more than one design alternative for a project depending on the location, site conditions, type of structure etc.

The estimator can determine the approximate cost of various alternatives for the project by taking preliminary design information from designer and can obtain the economical alternative that is affordable within the available budget for the project.

Detailed estimates:

Detailed estimates are prepared in accordance with the complete set of contract documents.

The contractors prepare the detailed estimates before biding for the project by thoroughly reviewing the contract documents.

Project site visit by the contractor personnel may be required to identify the parameters that can influence project cost and accordingly the estimate can be adjusted.

The detailed cost estimate showing the bid price of the project is important to both the project owner and the contractor, as the bid price represents the amount the contractor will receive from the owner for completing the project in accordance with contract documents.

The different types of cost estimates which are prepared during various phases of a project are described below:

  • Estimates during conceptual planning

  • Estimates during schematic design

  • Estimates during design development

  • Estimates during procurement (i.e. estimates for construction of the project)

  • Estimates for changing orders during construction​

Estimates during conceptual planning

This estimate is prepared during the initial stages of the project. 

It is prepared at the conceptual planning stage of the project.

It is based on little information and on broad parameters namely project size, location, conditions of the job site and the expected construction quality of the project.

Estimates during schematic design

During this phase, the estimate is prepared on the basis of preliminary design information along with the required schematic  documents.

The cost estimates of different design alternatives are reviewed keeping in view the project scope and budget and the acceptable alternative(s) selected in this phase is analyzed in a detailed manner in the next phase of the project.


This cost estimate is prepared by calculating the cost of major project elements by unit pricing from the available preliminary design information. Subcontractors or material suppliers may be asked to furnish information while pricing the major project elements.


As the cost estimate is prepared using preliminary design information, a contingency may be added in the estimate to accommodate for the unknown design details.

In this phase, the accuracy is more as compared to the previous phase.

Estimates during design development

During design development phase of the project, the cost estimate is prepared on the basis of more detailed design information and schematic documents.


With the improved level of information, the most of the major project items namely volume of earthwork (m3), volume of concrete (m3), weight of steel (tons) etc. can be quantified and the cost estimate is prepared using the known unit prices.


Detailed information from subcontractors or material suppliers should be obtained and used in pricing the major project items.


During this phase, all the identified major systems of the project namely structural systems (reinforced concrete vs. structural steel), masonry (clay brick units vs. concrete masonry units), pile foundation (concrete pile vs. steel pile) etc. are priced and then cost of each system is compared with that obtained from past similar projects.


The project elements costing too high or too low as compared to past data should be reviewed and accordingly adjusted.


With the availability of detailed design information and improved system definition, the expected degree of accuracy in this estimate is higher as compared to that in estimate prepared during schematic design phase of the project.

Estimates during procurement (i.e. estimates for construction of the project)

During this phase of the project, the cost estimate is prepared on the basis of complete set of contract documents that defines the project.


The contractors bidding for the project prepare the cost estimate in accordance with contract documents by taking into consideration the estimated project duration.

The total cost of project can be divided into two categories namely direct cost and indirect cost.


Direct cost includes cost of materials, equipment and labor associated with each item of work and cost of subcontracted works.

Indirect costs are the costs which are not attributed to each item of work and are calculated for the entire project and include overhead cost, contingency and profit.

The owner team also prepares the cost estimate to check the accuracy of the bid prices quoted by the contractors and negotiate a reasonable price with the contractor.

As this cost estimate is prepared in accordance with complete set of contract documents of the project, the degree of accuracy of this estimate is extremely high.

Estimates for changing orders during construction​

This estimate is prepared to cater the changes in the project scope as required by the owner during construction phase of the project.