Factor estimate

In this method, the estimate is divided into individual segments and then the cost of each segment is calculated followed by adding all the individual costs to estimate the total cost. Unlike unit technique, the factor technique includes separate factors for different cost items. Thus compared to unit technique, factor technique is a more detailed method of preparing the cost estimate and shows improved accuracy. The factor method is useful when several components are involved in the preparation of cost estimate.

Considering a simple example, a preliminary estimate is required to find out the cost of constructing a new multi-storey hostel of an educational institute. By unit method, the preliminary cost will be simply the cost per square meter multiplied with the total floor area (square meter) of the hostel. However a comparatively improved estimate can be prepared by using factor method wherein the total cost estimate is divided into different components. The hostel will consist of individual living rooms for students, hostel office, a kitchen cum dining room, a reading room, a common room, an indoor sports room, lavatories on each floor and other common amenities. The estimate of the total cost of the hostel will comprise of cost of these components. The cost of residing rooms for the students can be calculated by multiplying the cost of constructing one room (the information can be obtained from past similar projects with adjustment for different parameters as mentioned in unit estimate technique) by the required number of rooms. The estimate of the construction cost of the kitchen cum dining room can be calculated by multiplying its area in square meter by construction cost per square meter. Similarly the estimate of the construction cost of other common areas (i.e. reading room, common room etc.) can be calculated by multiplying the respective areas (in square meter) by construction cost per square meter. Then the total estimate of the construction cost of the hostel will be equal to the sum of all the cost components. As already mentioned the information about construction cost per square meter of common amenities can be obtained from past data on similar projects. In this example the estimate of construction cost of living rooms of students can also be calculated by multiplying the total area to be occupied by the rooms (square meter) by the cost per square meter.

Taking another example with more details, a preliminary cost estimate is required obtain the cost of materials to be used in constructing reinforced concrete sections of a structure. For reinforced concrete sections, the total cost estimate will comprise of cost of concrete and cost of steel reinforcement bars. For estimating the cost of concrete (considering normal strength concrete), the quantities of different ingredients namely cement, coarse aggregate and sand are calculated from known volume of concrete by using the mix proportion (either known or using data of similar grade of concrete from past projects). The cost of the individual ingredients of concrete can now be calculated by multiplying the quantities of the ingredients in the appropriate units with the respective unit cost. For example, the required quantity of cement can be expressed in kg or in terms of number of bags (i.e. total quantity of cement in kg divided by quantity of cement in kg per bag). Similarly the required quantities of both coarse aggregate and sand can be expressed in m³ (i.e. quantity of aggregate in kg divided by bulk density in kg/m³). The information about unit cost of different materials can be obtained from material suppliers. Similarly the cost of steel reinforcement can be obtained by multiplying the quantity of steel in tons with its unit price. Now the total cost of materials to be used in constructing reinforced concrete sections is calculated by summing the cost of concrete and cost of steel reinforcement. Similarly the preliminary estimate of other cost items can be obtained by using factor estimate method.