Cost assessment is a crucial step for commercial construction projects. Cost estimation is a process that you should not take lightly as the success of your project depends on it. Right estimations help the owners and contractors to allocate resources and budget. However, a bad estimation is a catastrophe that can ruin the budget and may cost you heavily.
Cost assessment of a commercial construction project is a complicated activity that depends on several factors. You must focus on every variable based on research and your experience.
Factors that Affect Cost Assessment
It is better for you to assess the cost and discuss it with the contractor when you are hiring a Commercial Construction Company. This could save you from worries and you would have a clear idea about the project cost.
Here are the main factors that you should keep in mind during the cost assessment process.
1. Similar Construction Projects
Typically, the best reference for commercial construction assessment is a similar commercial project. You can get a better idea about the estimated budget by looking at the final costs of a few similar projects. However, you should factor the final costs with the current construction trends.
2. Type and Size of Project
The type and size of your commercial construction project play a huge role in cost assessment. For instance, the type of your project may require specialized labour and contractors. Similarly, if you are building a large project, you may have to hire additional workforce. Sometimes, contractors have to hire labour from other areas which may increase the overall cost.
3. Location of Construction
Transportation cost for materials, equipment, and labour is another main factor that you should keep in mind. If the construction site is far from the urban area, the increased distance will cost you in terms of charges.
4. Construction Site Conditions
Different sites have different conditions and you must estimate project cost depending on your site conditions. Poor conditions such as wetlands, contaminated materials, groundwater or heavy traffic could increase estimation cost.
In addition, you should also consider conflicting utilities i.e. overhead lines, cables, buried pipe, etc. Stream or river crossing, environmentally sensitive area, endangered species habitat, and archaeological sites are some conditions that you should consider as well.
5. Construction Material Costs
Construction material cost includes the cost of different materials, transportation charges, and applicable taxes. This is an important factor that you should also keep in mind with all the variations.
6. Wage Rates
Wage rates vary from state to state and place to place. Therefore, you should consider the local wage rate of the area where the construction will take place. if you are planning to start construction after months or more than a year, don’t forget the probable variation in wages.
7. Project Schedule
This is an obvious point that most owners and contractors are aware of. The cost of construction will increase with increase in project duration and vice versa. Increased duration directly impacts the indirect costs which you should count while making a cost assessment.
8. Inflation Factor
Commercial construction projects usually take months to complete and even years in some cases. So, you should consider the inflation factor as the cost of equipment, materials and labour would increase. You can estimate these additional costs by considering the inflation rate or calculating increase in previous years.
9. Plans & Specifications
Proper execution of plans can reduce delays and decrease the construction time. On the contrary, a poorly drawn plan or vague wording can cause confusion, which can create doubts. And doubts in contractor’s or labours’ mind usually results in slow progress and higher construction cost.
10. Regulatory Requirements
You may need approvals from several regulatory authorities, which sometimes can take days or weeks. You may have to pay fees for getting approval which can increase the commercial construction cost of your project.
11. Insurance Requirements
Commercial construction needs heavy and costly equipment and tools which require insurance. Insurance of the workforce or other additional requirements may also be required depending on the type of project. Contractor’s general liability, payment bond, and performance bond are general insurance requirements which you must include in the cost estimation process.
There are some other factors that could also affect the estimation cost such as engineer’s reputation or final engineering review. Sometimes, contractors are required to get legal certificate to ensure that the project is in compliance with the rules and regulations. In addition, you should always add contingency towards the total estimated budget for unforeseen costs.