What is an estimate? Role, notes and how to calculate a quick estimate (with illustrative examples)

What is the term estimate in construction?

In the construction field, cost estimating is the process of estimating the preliminary cost of a project. This is a prerequisite step in the preparation phase, to determine the total expected investment for the project. (According to the Pre-Feasibility Study Report)

Estimates typically include costs related to the size of the area, construction materials, labor, and capacity of the project according to the preliminary design. This process can use cost data from similar projects in terms of type, construction level, or based on the construction investment rate. Estimates help provide an overview of the necessary costs, support budget planning and evaluate financial capacity.

In addition, when making an estimate, it is necessary to carefully analyze market factors at the construction site to adjust costs to reality, ensuring feasibility. Although "estimate" is a common term in the construction industry, current legal documents often use the phrase "Preliminary total construction investment” to refer to this process.

The appraisal and approval of estimates must comply with legal regulations related to public investment, public-private partnerships, as well as the management and use of state capital. This helps ensure that projects are implemented in accordance with regulations and bring about the highest economic and social efficiency.

The role of cost estimating in project management

• Improved accuracy: Having a rough estimate of the investment level gives stakeholders a better understanding of the overall scope and valuation. This allows for more accurate budgeting and resource planning, reducing the risk of cost overruns and delays.
• Investors make better decisions: Through the process of working with investors, XHOME realizes that providing necessary information early helps customers balance the construction budget, easily choose construction options and ensure the project is always on track.
• More convenient in project implementation: The estimate also serves to enhance a shared understanding between all parties of the project requirements and scope, which facilitates communication and collaboration throughout the project.
• Increase project progress: By anticipating potential problems in the project, contractors will provide options to reduce risks and delays. This increases project completion time and ensures the original budget.
• Allocate resources appropriately: Estimates help the construction project management team allocate resources appropriately. They include things like how many workers, what equipment and materials will be needed for the project, and identify potential problems that need to be addressed.

In addition to the important roles mentioned above, according to the Estimating Engineer (quantity surveyor) of XHOME shares that it will also come with 03 limitations, leading to the inaccuracy of the estimate:

• Incomplete information: Estimates are based on information available at the time of estimation such as area, manpower, construction time. If some information is missing or incomplete, the estimate may not be as accurate as the original table.
• Change project scale: If the project scope, labor costs, or construction materials change significantly after the estimate is prepared, the estimate is no longer accurate.
• Unforeseen risks: Risks or challenges not identified in advance during the estimating process may affect the construction schedule.

Correctly distinguish between estimates and budgets – XHOME Estimate Engineer shares

Many customers will mistakenly think that the concept of estimate is the same as the budget. So what is the difference between estimate and budget? The 3 criteria to distinguish the two terms that XHOME provides below have been consulted by our professional budget engineers to answer for you:

1. About the time of implementation

For the estimate:

• First estimate: Deployment before the design contract signing stage with the company. At this stage, XHOME will give a preliminary cost based on the design plan.
• First estimate: Performed during submission interior design profile and architecture for customers, or customers who already have documents, will estimate based on that document. To help you know if the design documents are exceeding the original budget or not. If the budget is not suitable, XHOME will work with you to edit the design.

For estimates: Detailed material cost estimates will be made when the customer finalizes the design plan.

2. Costs in estimates and budgets

When estimating, engineers will calculate 7 common costs including:

• Compensation, support and resettlement costs
• Construction costs
• Equipment costs
• Project management fee
• Consulting fee
• Incurred costs
• Other costs (if any)

To make it easier to understand, at XHOME, we will estimate the initial total project cost based on m2, depending on the style and implementation items.

As for the estimate, the following 6 types of costs will be calculated:

• Construction costs,
• Cost of materials and equipment
• Consulting fee
• Project management fees
• Other costs (if any)
• Contingency fee.

3. About accuracy

Because the estimate is the step of estimating the total cost before signing the construction contract, the accuracy will not be high, allowing difference about 20% compared to the actual value of the project.

Estimates require higher accuracy so the allowable deviation is not to exceed 10% Actual project costs. Providing accurate figures will not be easy, because in fact no large-scale business unit can accurately determine all figures, almost all will have errors, more or less.

Example of estimates in civil housing construction

After understanding the term estimate, if you want to quickly estimate the project cost yourself, here is a simple method. It is an estimate based on m2 that XHOME is also implementing in the customer consultation stage. The simple formula is as follows:

Total construction cost per m2 x total construction floor area = Total preliminary budget

Please consider the following example of building a popular modern style 1-ground-floor-1-floor townhouse to visualize better:

Project information:

• Land area: 150m2
• Construction area: 125m2 (1 ground floor, 1 floor)
• Structure: Reinforced concrete frame
• Roof: Corrugated iron
• Location: Suburban area of ​​Ho Chi Minh City

Assuming the total construction cost from architecture to interior at XHOME Saigon for a modern townhouse is 14.000.000 VND/m2 (note that this is a reference price), the total construction floor area is 250m2.

=> Estimated total cost: 250m2 x 14.000.000 = 3.500.000.000 VND

Refer to the interior material estimate sample at XHOME Saigon

Below is a reference material breakdown table of XHOME Saigon on housing estimates to help you learn in advance what a complete and detailed estimate will look like. Note that this document is for reference only. If you need to understand more clearly what an estimate is and how to calculate your own project, please contact the hotline. 0899199786 for advice and support.

If the customer agrees with the estimate and has a certain budget plan, XHOME Saigon will contact material suppliers to get price information, thereby creating a detailed and accurate quote for the project.

See more:

• Detailed quotation for building a complete villa in 2024

• Interior design quote 2024 detailed by style and type of house

• Quotation for complete old house renovation in 2024 with many types

What are the things to keep in mind when making a budget?

When creating an estimate for a construction project, there are a few important things that clients need to understand to monitor the accuracy and effectiveness of the estimate process. So what are the things to keep in mind when creating an estimate?

Clearly define your initial desires

You need to determine your goals, scale and desires. design style of the project. This helps designers execute the concept correctly, from which the estimating engineer can determine the standard price of materials, labor and necessary equipment. The investor can increase or decrease the construction area, change the layout of the functional space, increase or decrease the interior materials. Above all, you should plan ahead for future plans, such as having more family members, which will expand the spaces.

Double check the costs on the estimate

After receiving the estimate, the customer needs to carefully check the material price, labor cost, and other necessary item costs. If there is a need to adjust to fit the budget, please inform immediately to have a suitable estimate to ensure the quality of the project later.

Prepare for the unexpected

With experience in implementing more than 100 projects each year, XHOME Saigon advises customers to prepare for risks and difficulties that may arise during the project implementation process. You need to set aside a reserve for unexpected costs such as bad weather, increased material prices, or changes in project requirements. A reasonable reserve helps ensure that the project does not exceed the budget even if there are any unexpected costs.

Prepare legal and regulatory documents

The investor must ensure compliance with all regulations and legal requirements related to the project. Legal documents include: construction permits, labor safety regulations, and other requirements.

Thus, XHOME Saigon has just provided you with a complete description of what an estimate is, its role and notes before making an estimate. Hopefully, the above article has provided you with useful information. If you already have a design document and need to find a design and construction unit, please contact XHOME Saigon via hotline. 0899199786 for quick support advice.