Purposes of estimating; estimate never actual cost

Purposes of estimating

1. To know the probable cost of the project and decide on its feasibility.
2. To obtain technical, administrative and financial approval and budget allocation.
3. To prepare tender documents, the engineer's estimate and the bill of quantities.
4. To plan the materials, labour and equipment needed, and the work schedule.
5. To fix the period of completion and the cash flow.
6. To control cost by comparing actual expenditure with the estimate.
7. To determine the rate and payment for variations, and compare design alternatives.

An estimate is never the actual cost

An estimate is a forecast prepared on the assumption of the present rates, the drawn quantities and standard norms. In real work these assumptions change:

• Rate variation: market prices and wages change from the time of the estimate; the District Rate itself is revised every year.
• Quantity variation: unforeseen site conditions (rock, loose soil, water) and design modifications change the executed quantities.
• Productivity and wastage: actual consumption of materials and labour differs from norms.
• Unforeseen events: delay, weather, strikes, shortage of material.
• Errors and approximations in measurement, and the limited accuracy of preliminary estimates.

Hence, an allowance for contingency is made, and when the difference becomes large a revised or supplementary estimate is prepared. The estimate is therefore a guide for decision and control, not an exact record of cost.