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What Is an Engineering Cost Estimate?

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  • Written By: Mary McMahon
  • Edited By: Shereen Skola
  • Last Modified Date: 21 November 2016
  • Copyright Protected:
    2003-2016
    Conjecture Corporation
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An engineering cost estimate details projected expenses associated with a project. This type of estimate is used in project management for activities like public works initiatives, real estate developments, and software design. It helps project managers determine how much a project is going to cost, locate areas where they could save, and stay on budget as the project moves forward. A professional cost estimator may prepare it, often with the assistance of software designed for this purpose.

This can be an involved process. Setting up an engineering cost estimate requires breaking down the project into different kinds of activities and areas of work, and creating individual estimates for each. Estimates can also be solicited from individual contractors with experience in a particular type of work. On a real estate development, for example, cabinetry might be a work area, and a contractor who designs and installs cabinets could offer a detailed estimate on the expenses. Appropriate overhead also needs to be added to each area, based on experience with similar kinds of work.

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All of these estimates, including the base costs for the work and the overhead expenses linked with it, are added together in an engineering cost estimate to determine a final number. This can be subject to change in response to inflation, cost overruns, and other factors. The document may include a discussion of what could lead the project to go over budget so managers know what to expect and how to avoid common pitfalls. For instance, timber costs might be projected to rise, in which case developers might want to establish a contract for delivery at a set price to ensure lumber doesn’t become too expensive over the course of a project.

Project engineers and cost estimators are familiar with all the different components of project development in their given industry. This is important for an engineering cost estimate because this bottom-up approach must consider possible expenses that might not be readily apparent. A team may work on the estimate to check numbers and confirm estimates if they appear unusual or involve special procedures and skills. The complete document can be signed off and included as part of a bid or project proposal.

As a project moves forward, an engineering cost estimate can become an important planning document. It helps managers with the timing of the project, as time scales are often closely associated with costs. If they fail to secure workers for a given activity in time, for instance, the whole project might stop while a crew is located, which will add to the final costs. Projected costs can also be used to guide expenditures on materials and services associated with the project.

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