In this way you now ensure clarity about cost estimates

What is a ‘cost estimate’? When does it apply? What do you include in it? How are you legally strong? How do you prevent the cost estimate from taking on a life of its own that you are not happy with?

Cost estimate. A ‘cost estimate’ is nothing more and less than a preliminary estimate of costs usually for a construction project in the preparatory phase. A cost estimate precedes a final budget and a construction quotation / offer. The goal may be to consider whether a construction project is feasible and possibly profitable. A cost estimate is a report / budget in which the construction costs are listed and in which unclear factors are also made clear. Sometimes the design costs are also included.

What are the ‘construction costs’? These are the costs involved in the actual realization of the project. It is the sum of:

• the direct costs (labor, equipment, materials, subcontractors);
• the estimated costs for parts not yet developed;
• the indirect costs (one-off costs, implementation costs, general costs, profit and risk).

What do you need?

How do you avoid hassle? Because usually not everything of a project under development has been worked out in detail yet, you must have access to sketches / design drawings, a global description and especially measurements, and certainly an oral explanation. If you don’t have one, you cannot make a reasonably reliable cost estimate. Tip. Make notes of the oral explanation yourself and work them out to include as an attachment to the cost estimate. This way you avoid unnecessary hassle about what has or has not been said.

Cost estimate content. You can set up a cost estimate as a ‘normal’ budget. Since most items will be estimated items, this should be made clear. You must prevent that later, when the final plan is ready, the cost estimate will be seen as a final budget. You run unnecessary risk if you do not make it sufficiently clear that these are cost estimates.

The importance of an explanation. In order to give meaning to the value of a cost estimate, it is provided with an explanation of the assumptions and exclusions. Call it an extra on your terms and conditions in these types of situations. The explanation provides clarity about what has and what has not been calculated or even excluded. Especially when it concerns items that are difficult to estimate because it is not known exactly what the final effect will be. E.g. connection costs for public facilities, length of piles, heavy construction and construction methods. Based on the aforementioned principles and exclusions, the client / architect can take all these points into account in his own assessment.

Put cost estimate on paper

The work and material description must be worked out well, so that it is clear what you have estimated and excluded for what. Put on paper on the basis of which information you have compiled the cost estimate, add data. In this way you indicate within which limits the estimate has been built up and that all changes have consequences for a final price formation. For your legal certainty, add “… that your customer cannot derive any rights from the cost estimate” .

Treat a cost estimate as a ‘normal’ budget, with the difference that you should always clearly state on paper that it is an estimate based on data known to date. You can exclude unnecessary risks by means of an explanation. Don’t forget your notes of the oral explanation!