---
title: "Estimated cost is never the actual cost"
subject: "Estimating and Costing"
chapter: 1
key: "semester_7/estimating_and_costing:est-cost-never-equal-actual"
source: https://www.bctengineer.com/q/semester_7/estimating_and_costing/est-cost-never-equal-actual
site: BCT Engineering
---

# Estimated cost is never the actual cost

Estimating and Costing · Chapter 1: Introduction

- Asked in: 2080 Bhadra, 3 marks
- Answer checked by Claude Opus 5.5 (high effort) on 2026-10-14
- Page: https://www.bctengineer.com/q/semester_7/estimating_and_costing/est-cost-never-equal-actual
- Whole chapter: https://www.bctengineer.com/md/semester_7/estimating_and_costing/chapter-1

## Question

Estimated cost is never equal to the actual cost of a project. Give your opinion.

## Short answer

Estimated cost is a forecast that almost never matches actual cost because material prices, labour wages and site conditions change, quantities may vary due to design alterations or unforeseen ground, and actual productivity and wastage differ from standard norms. Contingency is added to cover such uncertainties.

## Answer

I agree. The **estimated cost** is a forecast made before the work, from drawings and current rates. The **actual cost** is what is really spent when the work is finished. The two are almost never equal because an estimate rests on assumptions that change in practice.

Reasons:
- **Change in rates:** prices of cement, steel, fuel and wages rise or fall between the estimate and construction (price escalation).
- **Quantity changes:** design variations and site conditions (for example rock found in excavation, or a different soil) change the quantities actually executed.
- **Norms and allowances:** estimates use standard norms and wastage allowances, but real wastage and productivity differ.
- **Unforeseen events:** floods, landslides, strikes, delays, shortage of materials, or the need for extra safeguards.
- **Variation orders and additional work** requested by the owner.
- **Human and approximation errors** in taking out quantities, and omitted items.

Estimates carry a **contingency** (usually 3 to 5%) for such uncertainty. A careful estimate can come close to the actual cost, but exact equality is a matter of chance. When the difference becomes large, a revised or supplementary estimate is prepared to keep the cost under control.

## Check yourself

The answer's key points as multiple-choice questions, with the correct option and why.

1. Why is estimated cost almost never equal to actual cost?
   A. Estimates are deliberately made wrong
   B. Actual cost is calculated before the work
   C. Contingency makes the two always equal
   D. The estimate rests on assumptions (rates, quantities, norms) that change in practice
   Answer: D. Rates, site conditions and productivity change after the estimate is made. (Key point: Why they differ)

2. Which is an example of a quantity change?
   A. Rock found during excavation instead of ordinary soil
   B. A rise in cement price
   C. A strike by workers
   D. A change in VAT
   Answer: A. Different site conditions change quantities actually executed; the others are price or event factors. (Key point: Quantity change)

3. What is the purpose of the usual 3 to 5% contingency?
   A. To guarantee that actual cost equals the estimate
   B. To cover uncertainty, though exact equality is still not expected
   C. To pay the contractor's profit
   D. To replace the need for revised estimates
   Answer: B. Contingency covers uncertainty but a revised estimate is needed when the difference is large. (Key point: Contingency)

## Related in Estimating and Costing

- [Estimated cost never actual; data required](https://www.bctengineer.com/question.md?key=semester_7%2Festimating_and_costing%3Aest-cost-never-actual-data) — Estimating and Costing, chapter 1
- [Purposes of estimating; estimate never actual cost](https://www.bctengineer.com/question.md?key=semester_7%2Festimating_and_costing%3Apurposes-estimate-never-actual) — Estimating and Costing, chapter 1
- [Compare estimated cost and actual cost](https://www.bctengineer.com/question.md?key=semester_7%2Festimating_and_costing%3Acompare-estimated-actual-cost) — Estimating and Costing, chapter 1
- [Estimate, quantity survey, estimated vs actual](https://www.bctengineer.com/question.md?key=semester_7%2Festimating_and_costing%3Aestimate-quantity-survey-actual) — Estimating and Costing, chapter 1

## Related in other subjects

- [Cost variance analysis from standard and actual](https://www.bctengineer.com/question.md?key=semester_6%2Fengineering_economics%3Acost-variance-analysis-9000-units) — Engineering Economics, chapter 1