Four basic types of construction estimates

No investment can be complete without a precise construction cost estimate. This is a document containing estimated costs, including contractor rates and construction material prices. Thanks to a cost estimate, the investor can maintain control over the entire project. Depending on the purpose and type of construction work, there are four types of construction cost estimates: investor’s cost estimate, bid estimate, as-built cost estimate, and replacement cost estimate. Find out why it’s worth having a cost estimate and which one to choose.

What is an investor’s cost estimate?

This document is prepared by the investor or commissioned by them before construction begins. It determines the average value of the work. An investor’s cost estimate is used, among other things, during tenders, negotiations, and discussions with contractors. A cost estimate can also be useful when applying for a loan or European Union funding. Importantly, this cost estimate only specifies the estimated cost of completing the project, not specific calculations.

What is a bid cost estimate used for?

Before signing the contract, a bid cost estimate is prepared by the contractor and submitted to the investor. The calculation concerns the bid price at which the contractor will be willing to undertake the work. Typically, such a document is prepared by the contractor submitting a tender.

As-built cost estimate

This is usually prepared when a bid cost estimate has not been prepared. It is the final amount of remuneration for the contractor after the work is completed. It is most often used for renovation, undergrounding, or modernization work, the scope and terms of which could not be predicted in advance when the contract was signed.

Replacement cost estimate

This is prepared in place of the bid cost estimate when unexpected changes occur in the scope of work during the project. However, if the scope or amount of work changes as a result of changes in the project documentation by the investor, the investor should request that the contractor prepare an appropriate bid cost estimate.

Who decides on the form and content of the cost estimate?

The investor decides on the form and content of the cost estimate in the case of the investor’s and bid cost estimates in the public procurement system. However, in the case of other cost estimates, the final document is jointly agreed upon by the investor and contractor during bilateral consultations.

Why is it worth preparing a precise cost estimate for construction works?

The most important functions of cost estimates include:

• the investment cost estimation function,
• the price-setting function,
• output function,
• settlement function (after completion of the work).

A cost estimate of planned project expenses minimizes the risk of unforeseen expenses that could delay completion. Its goal is not only to assess the investment’s profitability, but also to precisely determine the work schedule, the demand for construction materials, and the dates for renting necessary equipment or warehouses.

Thanks to this information, the investor gains full control over the funds they must allocate to the project, and can also precisely plan the supply of materials and predict the duration of the work. The construction cost estimate also plays an important role in settlements with subcontractors, ensuring clarity and transparency in financial matters.