Budgeting & Cost Estimating for Construction Projects
Methods & Techniques
Best practices dictate that a total project budget be developed early in a project, then the design managed to meet those budget requirements. A total project budget should include, in addition to hard construction costs, all architecture, engineering fees, inspections & testing, permits & fees, furniture & fixtures, construction management fees, contingency, cost escalation and other soft costs. Potential exposure to unforeseen conditions or other hidden costs will be captured through an appropriate contingency allocation. Through ongoing review of the design drawings, information will be gathered to advise the Owner on conflicts and potential overruns in advance in order to mitigate budget problems.
Cost estimating should be viewed as part of a total cost management effort. Costs should be broken down in detail and organized so that each discrete cost item is clearly identified. This allows the project team to target areas of discretionary spending, giving the Client and Architect better visibility and control over construction costs, and a template to manage the budget for the entire project. Market trends and conditions and potential cost escalation should always be given careful consideration. The cost estimate and budget should be constantly updated at milestones determined by the Owner. A good construction manager will generate a comprehensive construction cost estimate at the completion of Design Development and Construction Drawings stages. If the estimated costs exceed the Owner’s expectations, they can then make recommendations to reduce costs wherever possible.
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