ESTIMATED AND ACTUAL COST

ESTIMATED AND ACTUAL COST

Estimated cost can be regarded as the following: capital cost, contract sum. Estimated cost is the sum allocated to complete a project within the required time.

It probably goes without saying that cost should involve all expenditure both estimated and actual that the client has to make. Actual costs and returns are notoriously difficult to predict over the expected lifetime of a building but even estimated costs are by no means a simple proposition.

Ashworth (1988) has suggested that tendering contractors price the whole building at what they consider to be the ‘socially acceptable’ price and that Bill of Quantity rates are merely a means of justifying this figure.

It happens, therefore, that the initial tender price is not what is finally paid. This, without saying, results in poor cost performance of construction projects, leaving many a customer unsatisfied.

It should be noted that a favorable cost performance of any given project depends on the effectiveness of the contract sum. The word “effective” according to the Oxford Advanced Learner’s Dictionary, means having an effect or producing an intended result. It also means ‘actual’, like in actual cost of construction works.

The success or failure of a project is dependent on the accuracy of several estimates prepared throughout the course of the project, that is, from conceptual and feasibility estimates through to the detailed or bid estimates (Enshassi et al, 2007). An accurate, liable and realistic bid preparation demand good judgment and estimating skills (Skitmore et al, 1990, Dysert 2005), there are several factors that the estimator should consider when preparing a construction cost estimate. These cost factors include: fluctuation of costs, traffic conditions, restrictive work hours or method of work, small quantities of work, separated operations, handwork and inefficient operations, accessibility, geographic location, construction season, and material shortages (Enshassi et al, 2007).

The challenge that faces cost estimate is to have it close the actual cost; this inquires good skill, method used and experience. Dysert and Elliot (2000) and Leng (2005) said that an effective estimating organization requires highly knowledgeable personnel, possessing technical skills. Furthermore they define a set of skills as estimating core competencies as follows:
1. Understanding of the capital project process and estimate requirements for each class of estimate.

2. Understanding of the contractual relationships

3. Ability to identify important aspects of the contract

4. Understanding of building design

5. Ability to read and interpret drawings, documents and specifications

6. Detailed understanding of the estimate requirements for each class of estimate.

7. Code of accounts/works breakdown structure/project breakdown structure.

8. Basic project controls on budget, schedule, cost control, change management, progress measurements, earned value, forecasting.

9. Data analysis on labour productivity, database standards and development, historical data analysis, and benchmarking.

10. Strategic estimating skills (capacity factoring, equipment factoring, cost modeling, general factor, and ratio development).

11. Detailed estimating skills (material takeoffs, pricing and costing).

12. Presentation skills including report writing and listening skill

13. Communications and interpersonal skills

14. Organizational ability in order to communicate the estimate in a logical and clear presentation.

15. Well-organized works to the extent that in an unforeseen circumstance, someone else may step in, completes the estimate, and submit a proposal on the project.

The actual costs are defined as real, accounted project costs in Naira determined at the time of project completion. The total project cost estimate includes the estimated costs of all component activities from the initiation of the project design to project construction finalization (Creedy, 2005). These include the cost of: Conducting investigations and developing the design, detailing the design, acquiring land, Construction, Project administration and handover.