Therearemanyfactorswhichaffecttheconstructioncostestimateandhavesignificant

impactonprojectcostandtheyareasfollowing:
1)SimilarConstructionProjects:Fortheconstructionestimate,thebestreferencewill
besimilarconstructionprojects.Thefinalcostofthosesimilarprojectscangivetheidea
forthenewconstructionprojectcostcalculation.Thefinalcostofpastprojectneedstobe
factoredwithcurrentconstructioncostindices.
2)ConstructionMaterialCosts:Constructionmaterialcostconsistsofmaterialcost,
shippingchargesandtaxesapplicableifany.So,itisimportantconsiderallthese
variationswhilecalculatingconstructionmaterialcost.
3)LaborWageRates:Laborwagesvariesplacetoplace.So,localwagerateshouldbe
consideredincalculation.Iftheprojecthastobestartedafterseveralmonthsofestimating
theprojectcost,theprobablevariationinwagerateshastobeconsideredinthe
calculation.
4)ConstructionSiteConditions:Projectsiteconditionscanincreaseconstructioncosts.
Siteconditionssuchaspoorsoilconditions,wetlands,contaminatedmaterials,conflicting
utilities(buriedpipe,cables,overheadlines,etc.),environmentallysensitivityarea,ground
water,riverorstreamcrossings,heavytraffic,buriedstoragetanks,archaeologicalsites,
endangeredspecieshabitatandsimilarexistingconditionsetc.canincreasetheproject
costduringconstructionphaseifthesevariationsarenotconsideredduringestimation.

5)InflationFactor:Aconstructionprojectcancontinueforyearsbeforecompletion.
Duringtheconstructionperiod,thecostofmaterials,tools,labors,equipmentsetc.may

varyfromtimetotime.Thesevariationinthepricesshouldbeconsideredduringcost
estimationprocess.
6)ProjectSchedule:Durationofconstructionprojectisaffectsthecost.Increasein
projectdurationcanincreasetheconstructionprojectcostduetoincreaseinindirectcosts,
whilereductioninconstructioncostalsoincreasestheprojectcostduetoincreaseindirect
costs.Therefore,constructionprojectschedulesalsoneedtobeconsideredduringproject
costestimation.

7)QualityofPlans&Specifications:Agoodqualityconstructionplansand
specificationsreducestheconstructiontimebyproperexecutionatsitewithoutdelay.Any
vaguewordingorpoorlydrawnplannotonlycausesconfusion,butplacesdoubtinthe
contractorsmindwhichgenerallyresultsinahigherconstructioncost.
8)ReputationofEngineer:Smoothrunningofconstructionisvitalforprojectto
completeintime.Thecostofprojectswillbehigherwithsoundconstructionprofessional
reputation.Ifacontractoriscomfortableworkingwithaparticularengineer,orengineering
firm,theprojectrunssmootherandthereforeismorecosteffective.
9)RegulatoryRequirements:Approvalsfromregulatoryagenciescansometimesbe
costly.Thesecostsalsoneedtobeconsideredduringcostestimate.
10)InsuranceRequirements:Costestimationforconstructionprojectsshouldalsoneed
toconsidercostsofinsuranceforvarioustools,equipments,constructionworkersetc.
Generalinsurancerequirements,suchasperformancebond,paymentbondandcontractors
generalliabilityarenormalcostsofconstructionprojects.Insomespecialprojects,there
canbeadditionalrequirementswhichmayhaveadditionalcosts.
11)SizeandTypeofConstructionProject:Foralargeconstructionproject,therecan
behighdemandforworkforce.Forsucharequirements,localworkmenmaynotbe
sufficientandworkmenfromdifferentregionsneedbecalled.Thesemayincurextracosts
suchprojectsandalsoforthetypeofconstructionprojectwherespecializedworkforceis
required.
12)LocationofConstruction:Whenalocationofconstructionprojectisfarawayfrom
availableresources,itincreasestheprojectcost.Costoftransportationforworkmen,
equipments,materials,toolsetc.increaseswithdistanceandaddstotheprojectcost.

13)EngineeringReview:Sometimesitisnecessarytocarryouttechnicalreviewof
constructionprojecttomakesuretheprojectwillservetherequiredpurposewithoptimum
operationalandmaintenancecost.Thisreviewcostshallalsobeaddedtotheprojectcost.
14)Contingency:Itisalwaysadvisabletoaddatleast10%contingencytowardsthe
totalprojectcostsforunforeseencostsandinflation.