Cost Estimation Methods in Construction Industry

Publishing Journal Title
Journal XX (XXXX) XXXXXX https://doi.org/XXXX/XXXX
Cost Estimation Methods in Construction
Industry
Author Name1, Author Name2 and Author Name1,2
1 Department One, Institution One, City One, Country One
2 Department Two, Institution Two, City Two, Country Two
E-mail: [e-mail]
Received xxxxxx
Accepted for publication xxxxxx
Published xxxxxx
Abstract
Cost estimation is an important requirement in construction industry as generally, the construction projects use up a huge
amount of cost and even small deviations or overshoot from the actual budget may result in significant losses to the
construction company. Moreover, costs in construction projects are not straightforward; they are extremely complex and
require specifically tuned cost estimation techniques to determine an appropriate budget. This research report is based on
study of cost estimation techniques that are utilized in the construction industry for calculating complex costs and budget in
different projects.
Keywords: cost, estimation, accuracy, benefit, construction, effort, complex, variable
1. Introduction
Cost estimation is defined as the process through which
possible expenses and costs in a project are estimated using
specific techniques. Cost estimation, especially in complex
projects like construction projects, is extremely hard and
errors are very common. On the other hand, in order to
ensure financial return on investment in the project, it is very
important to estimate costs accurately without any errors
(Batselier & Vanhoucke, 2015). Manual calculations
including straightforward estimation is not suitable for
complex construction projects as many costs are variable and
change from time to time.
Developing accurated costs and budget are essential for
construction projects in which, there are numerous variable
costs including workers’ wages, changing prices of materials
and others. Furthermore, the costs in the project are also
affected by changes in decisions that are critical to the
project (Ashworth & Perera, 2018). These changes in costs
must be undertaken accurately in order to avoid budget
overshoot.
The purpose of this research is to study various cost
estimation techniques that are mostly utilized in the
construction industry. The research also looks to answer the
following questions by finding appropriate data from various
sources.
 What are the most effective techniques for cost
estimation in construction industry?
 What the techniques used to increase the
accuracy of the cost estimations in the
construction industry?
2. Construction Cost Estimation Techniques
Basically in the construction industry, there are three
common techniques that are used for cost estimation –
estimation with unit rates, resource based estimation and
factor estimation.
2.1 Cost Estimation with Unit Rates
In this technique, in order to determine the overall
costs for the project, unit rates for the materials are
considered. For example, if the project involves purchase
of materials like bricks, first, the unit cost of bricks is
considered and then the total required costs are
calculated. However, if the project is of long duration, the
unit costs are most likely to change due to changes in the
market prices (Xiong, Skitmore & Xia, 2015). As a result,
the estimated costs also become inaccurate. The
following table shows the unit cost estimations provided
by two different contractors for a railway project.
xxxx-xxxx/xx/xxxxxx 1 © xxxx IOP
Publishing Ltd

Publishing Journal Title
Journal XX (XXXX) XXXXXX https://doi.org/XXXX/XXXX
Items Quantity
Unit price
1 2
Mobilization 1 115,000 569,554
Removal, berm 8,020 1.00 1.50
Finish subgrade 1,207,500 0.50 0.30
Surface ditches 525 2.00 1.00
Excavation
structures 7,000 3.00 5.00
Base course,
untreated, 3/4'' 362,200 4.50 5.00
Lean concrete,
4'' thick 820,310 3.10 3.00
PCC, pavement,
10'' thick 76,010 10.90 12.00
Concrete, ci AA
(AE) 1 200,000 190,000
Small structure 50 500 475
Barrier, precast 7,920 15.00 16.00
Flatwork, 4''
thick 7,410 10.00 8.00
10'' thick 4,241 20.00 27.00
Slope
protection 2,104 25.00 30.00
Metal, end
section, 15'' 39 100 125
18'' 3 150 200
Post, right-of-
way,
4,700 3.00 2.50
modification
Salvage and
relay pipe 1,680 5.00 12.00
Loose riprap 32 40.00 30.00
Braced posts 54 100 110
Delineators, type
I 1,330 12.00 12.00
type II 140 15.00 12.00
Constructive
signs fixed 52,600 0.10 0.40
Barricades,
type III 29,500 0.20 0.20
Warning lights 6,300 0.10 0.50
Pavement
marking, epoxy
material
Black 475 90.00 100
Yellow 740 90.00 80.00
White 985 90.00 70.00
Plowable, one-
way white 342 50.00 20.00
Topsoil,
contractor
furnished
260 10.00 6.00
Seedling,
method A 103 150 200
Excelsior blanket 500 2.00 2.00
Corrugated,
metal pipe, 18'' 580 20.00 18.00
xxxx-xxxx/xx/xxxxxx 2 © xxxx IOP
Publishing Ltd