Cost estimating is the process of forecasting the likely cost of constructing a building or item of infrastructure on the basis of available information. The quality of the estimate depends on the quality of that information, the experience of the estimator, and the appropriateness of the method used. An estimate prepared on the basis of sketchy concept information cannot reasonably be expected to deliver the same accuracy as one prepared from a fully detailed design.
Estimates are commonly classified by reference to the stage of the project at which they are prepared and the level of design information available. An order-of-magnitude estimate may be prepared at the very earliest stage, often on the basis of a comparison with similar projects expressed as a cost per unit of gross internal area or per functional unit. A budget estimate, prepared once the brief has been confirmed and a concept design developed, draws on more specific information about the form and scale of the works. A definitive estimate, prepared from a developed design, is intended to support a firm commitment to the project budget.
The methods used to prepare construction estimates vary with the stage and the available information. At the earliest stages, the principal method is comparison with historic data — typically expressed as cost per square metre or per functional unit — adjusted for differences in scope, location, time and market conditions. As the design develops, the estimate is built up element by element, with rates applied to measured or estimated quantities. At the most detailed stage, the estimate is built up item by item from first principles: labour, plant, material, subcontract and overheads.
Adjustment of historic data for differences in time, location and specification is a particular skill. A project completed in Dubai in 2020 cannot simply be uplifted by a generic inflation factor and applied to a project to be constructed in Riyadh in 2026: the differences in market conditions, currency, supply chain, regulatory environment and specification all need to be considered. The estimator who applies a single rate from a single comparator project, without rigorous adjustment, is inviting trouble.
Common pitfalls in cost estimating include over-reliance on a small data set of comparator projects, failure to adjust for differences between the comparator and the subject project, omission of significant cost items (preliminaries, design development risk, escalation, inflation, finance charges), overly aggressive treatment of contingency and risk, and a failure to disclose the limits of the estimate to the employer. Each of these pitfalls can result in an estimate that is materially understated, and in disputes that follow when the actual cost emerges.
Inflation and escalation deserve particular mention in the current Middle Eastern market. The volatility of commodity prices, the impact of supply chain disruption, and the inflationary pressures of the post-pandemic period have made the estimation of escalation a far more demanding exercise than it was a decade ago. An estimate that ignores escalation, or that adopts a generic figure without analysis, is unlikely to provide a reliable forecast of outturn cost on a project of any duration.
Construction Expert Witness provides independent cost estimating services and also provides expert evidence in disputes arising out of alleged failures of cost estimating by other professionals. Our experts apply a rigorous, transparent and well-evidenced approach to cost estimating that has been tested and accepted in arbitration proceedings across the GCC.