Suppose a philanthropic organization wants to start an academic institute. The organization is interested in knowing how much money is required to be spent. It can be just calculated from the experience with previous project of similar kind. Such as, 20 thousand money per student has to be invested. If academic institute is to be planned for one thousand students, 20 x 1000 thousand is required. Next level of details may be required is how much money is to be invested on different subheads, equipment, laboratories, hostels etc. These can be calculated based on knowing the area of construction and cost of construction per unit area. But suppose hostel has to be built based on specific drawing and specification. Now an estimate will be prepared from the drawing and specification using specified rules. This estimates form the basis for contract evaluation by the client.
Similarly when contractor is bidding for the hostel, he will prepare his own estimate such that he can buy the contract, also gets profit from the execution of the project. But during construction period the construction, company has to prepare an estimate for order and supply of the material, also for resource planning.
Thus we have seen from the above example that the estimate of same item of works differs in details based as need of the project implementation. Also the level of accuracy needed for the estimate is dependent on the purpose of estimate. Like estimate for material supply has to be very accurate because storage of material will be the burden for the project. But the accuracy of the estimate to know the total cost to study the feasibility of the project will not be very high. |