Cost estimation is the development of a number for the total cost to complete a particular project. A complete, detailed cost estimate can determine the viability of a potential project and the availability of the budget and resources needed to move forward with it. An owner’s representative or project manager can help you produce this number with no conflict of interest.
For if you rely upon a certain vendor to do so, that vendor may underestimate the budget, hoping to win future work if the project progresses. Additionally, the vendor may have expertise in one particular area but little or none in others, which may focus the budget on that area of expertise, leaving incorrect data for the rest. By contrast, a project manager or owner’s representative will help you to determine all proposed project costs—construction, specialty consultant(s), IT procurement, hardware upgrades, FF&E, relocation, signage, etc.—not just one set of costs. Furthermore, this number should include the expenses for all resources that will be charged to the project: labor, materials, services, contingency costs, etc.
Every project is unique in nature. As project managers and owners representatives who are hired to carry out cost estimating, it is our job is to produce a budget number that accounts for all costs related to a particular project. This estimate may include budgetary alternatives so the client can examine all possibilities and assess the project’s potential effects on their business, as well as a justification for its ROI. This early number can also establish basis financing, or perhaps a budget that can be a benchmark for the project’s duration. Furthermore, this number can be revisited and changed several times as the project’s scope of services is redefined.
Accurate cost estimation is key in moving forward with any project, as that number will be the backbone of all project documents. It will also ensure that designs are aligned with the budget. A well-resourced project management firm will help you to define your estimate according to these and other conditions:
- Historical data: utilizing the costs of past projects to come up with such line items as FF&E and IT.
- Market conditions: costs of materials, labor, bonds, insurance, lead times, taxes, adjustments for inflation, etc.
- Standard measures: common use of structural steel per square foot, or HVAC costs based on standard BTUs, etc.
- Economic conditions that cannot be controlled: inflation, steel or concrete shortages, labor deficits, etc.
- Work hour requirements, schedules, and work-site access conditions.
Cost estimation (s) made by a third-party project management firm / owner’s representative differ greatly from those coming from a construction manager or engineering firm: since the project manager / owner’s representative has oversight over a project’s big picture, it will incorporate those numbers into the overall budget beyond merely engineering and construction. If your organization is considering a real estate project that depends upon a budget number to move forward, it would benefit you significantly to hire an Owner’s Representative / Project Manager to help formulate a non-biased, all-inclusive number, to avoid surprises as your project proceeds.