A construction project is costly and while many of the costs are justifiable, there are different aspects where more than one option may be present. Project managers, design teams, construction contractors, and any other parties involved want to avoid that as much as possible. How does construction cost estimation play into these factors?
First, what is a cost estimate? Consulting the Business Dictionary, it is the approximation of the plausible cost of a project, program, or product which is computed basing on available information. There are four types of cost estimates: planning, budget, firm, and not-to-exceed. Planning is for information purposes only, budget uses preliminary cost data and ground rules, firm is for determining whether it’s sound to enter in a binding contract, and not-to-exceed is the minimum or maximum amount required for a given task.