Cost estimates are used for a variety of reasons, some of which are as follows:
1. As an indication of what a project would cost at a particular stage of the project. The owner needs to know what the project will cost so that a budget can be developed.
2. In order to track costs on a continuous basis, the project manager (PM) should review the cost of the project from the initiation of the design process. Thus, a cost estimate should be prepared at conceptual design, schematic design, design development, and 75% of construction documents stage.
3. As a preparation of a pro forma for a development project. A pro forma is used by developers and financial institutions to determine the financial feasibility of a project.
4. Value engineering for a project to determine how costs can be reduced. This may occur after each design phase (schematic design, design development, and construction document phases).
Cost estimate flowchart.
5. To evaluate alternatives for a project. This may include different types of curtain wall systems or other suppliers of mechanical equipment (in addition to the ones specified).
6. To assist in the evaluation of the bids submitted by the subcontractors.
7. As a review of change orders.
8. To evaluate the affect of a delay in the schedule.
9. To determine the cost for performing out of sequence work.
10. To indicate the cash flow of a project so that the owner will know how much money has to be available for payment to the construction manager/general contractor (CM/GC).
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