Why must the financial cost of a construction project be estimated accurately? Quite simply, because you’re using the estimate to assess the entire viability of the project. You don’t want to go ahead with putting together a structure only to find that there are various other costs you have failed to account for… and, perilously, can’t afford. In this article, we look closer at why it is so vital that the estimate for your next construction project is correct.
You can too easily fall into broad generalisations
In an attempt to estimate your costs, you might use a technique called benchmarking. This basically involves looking at a previous project, measuring it in square metres, and then multiplying this project’s cost in accordance with your next project’s different size. That’s benchmarking in a nutshell – even if it’s fair to say that the procedure involves a bit more than that.
Now, what’s wrong with benchmarking? Well, that there are too many other factors you could be easily failing to take account of when making your new estimate. You could, for example, neglect to consider that, for the older project, you were using different materials that do not, in cost, match the materials you will be using next time. You could also be failing to sufficiently consider the influence of place on how much construction works cost. These are mistakes that can be too easily made when you aren’t careful enough in devising your estimate.
Unexpected costs can be a common hazard
As a general rule, you are more likely to end up having to spend more, rather than less, than you had originally expected to spend on a construction project. It is for this reason that, as The Self Build Portal recommends, you should always leave a contingency of 10-20% in order to cushion against unexpected costs. In fact, the guidelines you should adhere to when putting aside “emergency money” can get more complicated than this…
It is commonly suggested that, if the site is flat and you are aware of the ground conditions, your contingency should be 10%. If, on the other hand, the site is sloping or you are uncertain what may lie beneath it, 20% can be more suitable. And then there are various other factors, like the water table and ground stability, to take into account. But you aren’t even in a position to accurately judge what contingency money you should set aside until you have an accurate cost estimate for your overall project. We have the expertise to provide exactly that.
Don’t forget the VAT that you could claim back!
Upon completing a new house, you might be eligible for a hefty VAT refund; typically, the amount that you could reclaim on the cost of the materials you have used for building is about £10,000. However, you have to actually pay out the VAT before you can claim it back. An accurate cost estimate should factor in the VAT you have to spend in the first place.