Construction Cost Estimation: Evaluating Material Market Influence

This report examines the critical role of accurate cost estimation in construction projects, with a specific focus on the material market. It identifies factors affecting the accuracy of early-stage building estimations, such as material availability, client specifications, and external economic factors. The report highlights the importance of effective material management, covering usability, purchasing, and storage, to minimize project costs and improve profitability. It compares elemental and trade cost breakdowns, using the internal wall as an example, and discusses the differences between Bills of Quantities (BQ), elemental cost breakdown and trade cost breakdown methods. Ultimately, the report emphasizes the necessity for project managers to consider all construction components accurately to ensure successful project completion within budget and schedule. Desklib provides access to this solved assignment and many other resources for students.

Running head: COST ESTIMATION
Assignment 1: Cost Estimation on Material Market
Name of the student:
Name of the university:
Total word: 1122

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Introduction
This report depicts the importance of appropriate estimation of cost for any construction
project is extremely important from the business perspectives. Different group are associated to
any construction projects such as project characteristics, labour market, external factors, financial
market, material market etc however, for this specific report the chosen group is material market.
If the actual cost exceeds the planned or estimated cost then the feasibility of the project
will be interrupted. It is the role of the project head to consider some factors such as location and
complexity of the project, price for the labours, price and quality of the materials, competitors,
competitive market etc individually that may affect the construction cost estimation.
Part 1: Factor affecting accuracy of earlier stage building estimation for the
chosen group
According to Shin (2015) the availability and type of specific material also affects the
approach of construction cost estimation. If the client of the project insists for any particular
material or particular product on manufacture for the success of the project then the cost of the
construction project can drive up over project cost. This is referred to as a type of close
specification for the construction projects.
On the other hand if the project head or the constructors accepts a material for
somewhere equal or a quality reduced range then the it will indicate the project head is leaving
the room for their competitors (Belay et al. 2017). On the other hand, the product availability or
the material availability can affect the project success that is relative to the expected schedule of
the clients. The project manager should consider the concept of lead time while estimating the

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project cost. Lead time is referred to as the time that will be taken for any order that has to be
delivered and measured according to the project requirement).
The material market of any construction project can also be affected through some
external factors such as punctuality in the periodic payment approach, availability of the finance
planning and management plans, tax uncertainty, status of the current business market, pressure
due to the financial inflation, commercial instability, accuracy of the financial cost etc (Komurlu
& Arditi 2017). Material management is defined as a process that helps to provide right choice of
materials at proper place of construction to the contractors and it is comprises of identification,
procuring, storage, receive and distribution. Right balance between the quality and quantity of
the material can minimize the total cost of the project.
The aim of the material management is to deliver right choice of material at the right
point of requirement. Thus, effective procurement of material management can represent the key
role in successful accomplishment of the construction projects. For making material management
a site effective fast track projects, they needs to be integrated accordingly (Belay, Tekeste &
Ambo 2017). Three different phases that holds the key success of the material management
include material usability, material purchase and material storage. The overall cost of the project
will be reduced that will lead to production streamlining and production profitability. The
components that are to be managed appropriately by the contractors include value analysis,
material handling, store keeping, recycling, purchasing etc.
The working capital should be identically utilized which can lower the inventory
investment. Proper material management can also increase the inventory turnover rate. Material
management can respond to market changes that are related to any construction related products

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(Larsen et al. 2015). Not only this but also, It provides best services to the consumers through
quality time management and quality control. In addition to this, it can build a strong relationship
between the consumer and the service providers.
Part 2: Elemental VS Trade cost breakdown comparison
The building element related to the construction project that has been nominated is the
internal wall. In order to design internal wall of the building the basic constriction materials
which are required include bricks, plaster, cement, primer, paint etc (Correa 2016). According to
a consistent analysis plan it has been found that Bills of Quantities (BQ) is referred to as one of
the systematic ways which is applied in the construction industry whose primary objective is to
create a fair agreement between the involved parties in construction.
The trade items of a Bills of Quantities (BQ) are as follows:
 Preliminaries (actual construction contract)
 Facilitating works
 Substructure
 Superstructure
 Internal work finishing
 Fitting, furnishing and equipments
 Servicing
 External workings
 Risk analysis
 Provisional summation
 Credits

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 Day-work
For the chosen element (internal wall) the trade item of BQ would be related to the
superstructure, internal work finishing, fitting, furnishing and equipments (Anumah et al. 2016).
However there is a difference between the elemental cost break and trade cost breakdown. Based
on the required element the cost outline of the project is structured and submitted to the finance
manager. This kind of cost estimation is dependent on the breakdown of the activities. The total
project cost is breakdown according to the trades of approval that is granted by the project
manager. While dividing the project cost the total schedule is breakdown into small parts and for
each of the project sub activities the cost is assigned (Gurcanli, Bilir & Sevim 2015). It is the
responsibility of the project manager to define the project cost and break it down as per the
requirements. This process always allows all the project associates to agree to the project cost.
The overall management of the project becomes much easier after the breakdown of the cost.
Due to this reason most of the large businesses utilize this approach for managing the project
cost.
On the other hand, the elemental cost breakdown approach is used mostly in the
construction industry and is prepared by the cost consultants. Through the tendering price
documents the elemental cost can be estimated by the finance managers. Apart from the initial
cost appraisal these are related to the construction project cost (Bianchini et al. 2016). This type
of cost structure is prepared after considering some of the cost actors in terms of inflation, VAT,
statutory fees, client contingency and professional fees. There are many construction owners who
utilized the similar cost structure for designing a feasible project.

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Conclusion
From the overall discussion it can be concluded that, in order to design and build any
construction project successfully this is mandatory for the project managers and the project team
members to consider all construction component accurately. The factors that may affect the cost
and time structure of the project are elaborated in this report. Additionally, the major difference
between the trade cost and the elemental cost are also illustrated considering in context with the
material management in construction project.

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