Approximate estimates

The different types of cost estimates, those are prepared during various phases of a project are already stated in Lecture 2 of this module. As already mentioned in Lecture 2 of this module, the approximate estimates (also known as order-of-magnitude estimates) are prepared during initial stages of the project life cycle. The different methods used in the preparation of approximate estimates are described below. In addition to use in the preparation of estimates during early stages of project development, these methods may also be sometimes used for cost estimating in the detailed design phase.

Unit estimate

This technique is used for preparing preliminary estimates (i.e. order-of- magnitude type estimate). This estimate is generally prepared during the conceptual planning phase of a project, with less information available with the estimator. In this method, the total estimate of cost is limited to a single factor. The examples of some of the ‘per unit factor' used in construction projects are construction cost per square meter, housing cost per boarder of a hostel, construction cost per bed for a hospital, maintenance cost per hour, fuel cost per kilometer, construction cost per kilometer for a highway etc. The total cost is calculated by multiplying the cost per unit factor with the number of units of the corresponding factor. For example, a preliminary estimate is required to estimate the cost of constructing a new house with floor area of 170 square meter. If the cost per square meter is Rs.26,900 (assumed), then the cost of constructing the house will be Rs.45,73,000 (Rs. 26,900x170). Similarly the preliminary cost estimate of constructing a given length of highway can be calculated by multiplying the unit cost i.e. construction cost per kilometer by the length of highway (in km).

The details of unit cost of different factors can be obtained from records of past projects. The ‘per unit factor' obtained from past similar projects can be adjusted by taking into account different parameters namely location and size of the project, prevailing market conditions etc. The accuracy of this technique depends on the quality and reliability of the data available with the estimator.