Have you ever wondered what Level of Cost Estimating is required at what stage of a construction project? Well, primarily that depends on how much current or updated information is available about a project at a given stage. As the construction project progresses, whether it's a new build, repair, or renovation, its scope becomes clearer. Thus, the detail level of an estimate also becomes reliable.
In this article, we are going to discuss various levels of estimates, which entail how much detail they must include according to a project's specific stage. But first, unravel why different types of detail levels are needed.
The Need for Different Types of Detail Levels of Cost Estimating
In any construction project, there are various stages, and each stage requires a certain level of cost estimation. For instance, you will need a rough and quick estimate. Conversely, at the later stages, you will need accurate figures and as much detail as possible. This is particularly true for complex systems within the project, where specialized MEP estimating services provide critical detail as the design evolves. This way, stakeholders will have relevant financial information based on a particular level, enabling them to make an informed decision before going ahead.
Now, a question arises that how will you know what level of cost estimation you want for your project at a given stage? To understand this, read the following.
How to Determine Project Cost Estimation Level
Before you embark on determining what Project Cost Estimation Level is required, know your project. In simple words, you need to have a clear understanding of a project's scope. It means that you must define your project's objectives, what you have to deliver, the project's constraints, and risks. This will help you in evaluating the key activities as well as milestones and the estimated costs associated with them.
Now you have a clear understanding of cost estimation levels. Let's discuss them individually to have a better conceptual grasp of them.
Levels of Cost Estimating In Construction
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Rough Order Magnitude - Level 5
This level is usually applied in the early stages of a construction project. It assesses how feasible a project will be. It is typically used for early project planning and budgeting. Also, the probability of estimates in this level is extremely low. This is because these estimates are developed by relying on past data, estimator experts, and from similar projects.
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Feasibility Estimate - Level 4
This level is often considered an extension of the above level. In this level, how financially practical a project can be is analyzed. This will further support the decision as to whether it is viable to start a project. The level of detail is also low in this estimate, and this is because although the level of detail is less than 20% which is more than ROM, it's still limited for making a definitive decision.
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Preliminary Estimate - Level 3
The details of cost estimating in this level start to build up. As it aids in knowing your financial options about a construction project. Its level of detail is more than ROM and feasibility estimate. The probability of information available at this level is around 10% - 25%. This means that you will have access to credible information, but the information will not be sufficient and is subject to change.
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Substantive Estimate - Level 2
As the name suggests, this cost estimation level provides you with a substantive cost breakdown for a well-defined construction project. The level of detail is higher than all of the above. This is because it involves an extensive cost analysis for all the components of a project. This means that it will include the analysis of resources, like materials, labour, and equipment needed for a construction project. Furthermore, the probability of information in this level is high, and the estimates of this level are used for detailed planning and financial control.
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Control Estimate - Level 1
The cost estimates of this level are definitive and accurate. In other words, these estimates can be used to prepare a final budget for a construction project. On top of that, these estimates give a better control over a project, thus contributing towards better management. The probability of available information at this level is the highest, and that is why these estimates lead to finalizing a project's plans. The only drawback of this level is the possibility of changing orders and any unforeseen circumstances. To tackle this possibility, a financial contingency is added. This can handle any change order or unfavorable event, thus making sure that the cost estimates are not compromised.
Bottom line
Wrapping it all up, there are many detail levels for cost estimation, and understanding each Level of Cost Estimating is crucial. In this article, several levels of cost estimation are covered. Each of these levels serves a different purpose and is used for a different phase of a construction project. For instance, if you want to know how viable your construction project is, you can apply from level 5 to level 3. On the contrary, if you have access to reliable information, then you can apply levels 2 and 1, as they assure that the estimates will be accurate.