Factors affecting cost estimation accuracy

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.

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 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.

Examples from industry cases and research findings

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 (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.

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
• 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.

Relation of internal walls and Bill of Quantities

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.

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.

References

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