Estimating Costs and Otherwise

Before even pursuing a project it is helpful, important to have an estimate of requirements. For something which can be bought off-the-shelf, it is generally a simple exercise of shopping round and getting various prices from various suppliers. If lucky the suppliers publish their prices, if they don’t then that may be the first indicator that cannot afford the goods and/or services desired.

For items in the building and construction industry a good starting point is with a quantity surveyor (QS), no drawings should be required. They use cost guides such as those by Rawlinsons and those by Cordell’s. These cost guides besides having costs of individual items also provide costs in $/sq. m, $/tonne for various building types. A buildings primary purpose is to enclose space, therefore before starting anything, a rough idea of the area needed should be known. From this an estimate of the cost of supply can be quickly determined, having decided on a form of construction: steel frame, masonry etc..

Depending on the type of building maybe able to find some cost guides on line. For example:

However the QS will also be able to estimate the cost of design. The cost of design is important has design has to be paid for irrespective of whether or not planning approval is granted. The purpose of the design activity is to determine if the proposal is feasible. Regulatory approval is dependent on the wants and whims of counsellors and the community. So bank loans being tied to whether or not development approval is granted, is totally unacceptable to the design activity.

It is thus important to separate the cost of the project into design and construction. Full development approval is only relevant when actually ready to go ahead and build: which means the proposal should be considered buildable. Thus if need a bank loan to finance the entire project and cannot afford the design fees from own funds then cannot afford the project.

Now something which appears to be lost with some people is that estimates are not exact costings. Exact costs are only viable after the project is complete, and even then there are parts which are still only an estimate, especially if time is an important factor. It is similar to value of warehouse inventory: the cost or value of the stock at any point in time is not known for certain. It can only be estimated. However there are different levels of estimates. With reference to the article 11 Types of Estimates, the following are the types of importance here:

  • Order of magnitude
  • Feasibility
  • Preliminary
  • Substantive
  • Definitive

As indicated in the referenced article, for each type of estimate the definition of requirements is only partial, and the estimate has an error.

Now if any of these estimates are any good, and our understanding of each types error, then they should all give substantially the same answer.

For example say I have a 3000 sq.m steel framed industrial building, then based on the reference above the cost per sq.m could be between say $100/sq.m and $500/sq.m. Therefore the cost of the building is estimated to be between $300,000 and $1,500,000. The cost could be refined by splitting it into parts:


Revisions:

  • [30/11/2019] : Original
  • [08/09/2020] : Published