elreedyman

The  cost estimate values can be seen from different baradigm as you are owner, contractor , a supplier all do the same task with different aspects.

The project success depend on the accurcy of the estimate cost. There are many methods in any text book but frankly speaking you are always usinga mix between them depending on your project charactrsistics, the phase of the project and depend also on the available data.

The uncertinint is hidden in every number, as there is no definite number and the type of project, the country of the project and many other factors shall be considered when you use a contingency . Its range from 10% to 40% depends on many factors you should be aware about it.

In most cases we use a parametric method to calculate the cost estimate. I’m alwatys asked by many colleagues about the cost of his new home. You shall have a figure depend on the location of the building. You shall have a figure for example the cost per feet square for one floor building.  The amout of steel and cement required have a figure about it in the ebook Builidng home Q&A.

For the contractor it will called a price which is not only depned on the cost but also his profit. To provide the Best Price i think it is challenge as you need to provide an optmum proposal to win the bidding.  The successful contractor who can submit the right price which it depends on the market situation,  and also to know very well the competetrors, your success point and the way for financial criteria as most of the companies choose the lowest price, in this case you shall provide the lowest cost whatever you deliver in this case you can decrease the quality level to the client quality limit.

Take care if you provide the lowest price and you do not have a good expectation about the client quality level you will be in crisis.

So, the cost estimator is not an easy job even you can see it easy. Why you see it easy as every day you do it by yourslef when you purchase a new car or food you can estaime how much money you need but in very complicated project, the scenario is different.

The other challenge that you will face if you have an old estimate for similar project you need to know the esclation factor and also the inflation factor.

Cost escalation is the process of determining the percentage increase in a product’s cost over time. On a large scale, cost escalation is used to determine inflation for our nation’s economy. Business owners cost estimator need to take into consideration cost escalation of all products or inventory purchased for business use because as costs rise, the business needs to adjust the price of its goods and services to absorb the cost escalation and continue to maintain the same level of profitability.

you need to define if the probability of prices increase due to the country economic situation. You can obtain the norm from differnt sources like ENR or other resources you have, considering that most norm data from USA market or Europe which is really different than the rest of the world.

Dr. Mohamed A. Elreedy

www.elreedyman.com