1. Building Economy ARE 431
Dr. Mohammad A. Hassanain ١
Introduction to Cost Estimating
٢
Is Cost Estimating an Art or a Science?
What is an Estimate?
What is the Purpose of Estimating?
What is the Role of the Estimator?
What the Estimator Must Know (Skills)?
The Components of an Estimate.
Possible Sources of Errors in Cost Estimates.
Today’s Lecture

2. Building Economy ARE 431
Dr. Mohammad A. Hassanain ٢
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Is Cost Estimating an Art or a Science?
Before answering this question, let us first define what
is an Art ? And what is a Science ?
An art is the process of arranging elements in
a manner that affects senses and emotions. It
involves imagination and creativity.
A science is the systematic approach to
gathering knowledge and data based on laws
and theories.
Cost estimating involves calculating cost as well as
visualization of how the project will be built, therefore,
cost estimating is a blend of both art and science.
٤
What is an Estimate?
An estimate involves calculating the costs of
construction work on the basis of probabilities.
Two activities are undertaken when carrying out a
cost estimate:
Measurements: all measurements are
approximate.
Pricing: the degree of approximation is even
greater because of the difficulty in predicting
all the probabilities of items such as labor
productivity and site conditions.

3. Building Economy ARE 431
Dr. Mohammad A. Hassanain ٣
٥
What is an Estimate?
Costs of construction work are classified as:
1. Materials costs.
2. Labor costs.
3. Equipment costs.
4. Overhead (general and job) costs.
5. Profit.
Data on all of these costs are required to develop or
prepare an estimate.
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What is the Purpose of Estimating?
The purpose of estimating is to forecast (predict) the
cost required to complete a construction project in
accordance with the contract plans and specifications.
There are two distinct tasks in estimating:
To determine the probable real cost of the project.
To determine the probable real time to build the
project.
Because construction estimates are prepared before
a project is constructed, an estimate is, at best, a
close approximation of the actual costs.

4. Building Economy ARE 431
Dr. Mohammad A. Hassanain ٤
٧
What is the Purpose of Estimating?
The true value of the project will not be known until
the project has been completed and all costs have
been recorded.
Therefore, the estimator does not establish the cost
of a project; he simply establishes the amount which
the contractor will receive for constructing the project.
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What is the Role of the Estimator?
The estimator’s job is to prepare estimates of building
project costs.
The success of a contractor’s business depends on the
accuracy of these estimates.
The estimator’s success will be based on his previous
experience and knowledge of the construction industry.
A contractor or estimator lacking this experience may
over-, or under-estimates his project costs.

5. Building Economy ARE 431
Dr. Mohammad A. Hassanain ٥
٩
What is the Role of the Estimator?
In either case, this could impact the success of his
company:
If costs are too high, his jobs will be few and
far between.
If costs are too low, he will not be able to stay
in business.
All cost data is acquired from experience.
If an estimator does not have cost data from his own
experience, he must use cost data from price books
and handbooks.
١٠
What is the Role of the Estimator?
The more valid data the estimator has available, the
better he will be able to estimate the probabilities of
costs.
The following factors affect the accuracy of cost
estimates:
1. Site location and accessibility.
2. Subsurface and soil conditions.
3. Time and season.
4. Climatic conditions.
5. Wage agreements.
6. Strikes.
7. Market prices of basic materials.
8. Availability of money.
9. The demand for construction.

6. Building Economy ARE 431
Dr. Mohammad A. Hassanain ٦
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What the Estimator Must Know (Skills)?
1. He must have a thorough knowledge of the building
trades.
This includes types of construction and methods
of construction.
2. He must be able to read building plans and notes, and
understand the specifications.
If he finds any discrepancies between the plans
and specifications, he will bring them to the
attention of the architect or owner for solution.
When all the questions are answered and
problems are solved, he can then prepare and
finish the cost estimate.
١٢
What the Estimator Must Know?
3. He must have a thorough understanding of the
building codes in the area where the building project
is to be constructed.
4. He must have a thorough understanding of
construction materials.
He must understand the sizes, strengths, and the
capabilities of the materials with which he works.
He must be able to substitute equal quality
materials when specified material are not
available.

7. Building Economy ARE 431
Dr. Mohammad A. Hassanain ٧
١٣
What the Estimator Must Know?
5. He must keep up with the development of new construction
products and materials.
To keep current, he should frequently visit trade
shows and subscribe to building magazines.
6. He has to possess some basic mathematical ability.
7. He has to have at his fingertips reference materials, books,
tables, and tabulating equipments to speed up his job.
In time he will acquire reference materials in the
form of material catalogs, brochures, and
manufacturer specification sheets for the product
he uses.
١٤
What the Estimator Must Know?
8. Finally, he must project (forecast) labor cost changes.
The estimator must realize that labor costs may
vary in different geographical areas of the country.
He must also realize and project in his estimates
future increases in labor costs because of
upcoming events.

8. Building Economy ARE 431
Dr. Mohammad A. Hassanain ٨
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The Components of an Estimate
Most estimates are made up of the following five parts:
1. Materials: The estimator makes a take-off of
all the different materials required on the
project from the plans and specifications.
2. Labor: The estimator estimates the hours
needed to do the required work and then
multiply by the appropriate wage.
3. Equipment: The cost of equipment includes
ownership or rental fees, moving to the job
site, erecting, dismantling and operating.
١٦
The Components of an Estimate
4. Overhead: There are two types of overheads:
4a. General overhead: includes all costs that
can not be directly charged to any particular
project, such as the cost of office supplies,
rent, travel expenses and salaries.
4b. Job overhead: includes all costs which
apply directly to the project and can not be
charged to materials, labor, or equipment.
5. Profit: Most estimators show the profit
expected from a job as a percentage of the
total estimated cost of the project. The profit
varies from 6-15%.

9. Building Economy ARE 431
Dr. Mohammad A. Hassanain ٩
١٧
The Components of an Estimate
Approximate profits usually expected are:
Small projects 15%
Medium projects 12%
Large projects 10%
Very large projects 6-8%
١٨
Possible Sources of Errors in Estimates
1. Mistakes in material take-offs.
2. Errors in carrying forward material from quantity sheets
to summary sheets and from there to direct cost
sheets.
3. Mistakes in estimating the labor time required for
certain items of work.
4. Errors in estimating hourly wages of labor.
5. Failure to allow for rising costs of materials.
6. Failure to allow for delays due to breakdown of
machines and acts of God (e.g. earthquakes and
storms).

10. Building Economy ARE 431
Dr. Mohammad A. Hassanain ١٠
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Possible Sources of Errors in Estimates
7. Making no provisions to have estimates checked.
8. Insufficient allowance for overhead.
9. Omission of profit.