10 Types of Cost Estimation

An cost estimate is a calculation of quantities of a different item of work and the expenses likely to be incurred during project work. The sum cost of all quantities of work gives the idea of the total construction cost or estimated cost of project work. The calculated cost of a work is a close approximation of its actual cost.

There are various types of cost estimation used in project management such as 1. Preliminary Cost Estimate, 2. Plinth Area Cost Estimate, 3. Cube Rate Cost Estimate, 4. Approximate.

Underestimated cost of the project results in many revisions during the execution of work. This is due to a shortage of financial support due to underestimation. This may also result in the delay of the project and become a reason for dispute between contractor and owner.

Read More: Long Wall Short Wall Method | Estimation By Long Wall Short Wall Method

Types of Cost Estimation

The following are different types of cost estimation in project management.

1. Preliminary Cost Estimate

The preliminary cost estimate is also known as an approximate cost estimate, abstract cost estimate, or budget estimate. It is generally prepared in the preliminary phase of project planning to know the approximate cost of the project. By this estimate, the project authority can judge the financial position and policy for the administration section.

10 Types of Cost Estimation
Preliminary Cost Estimate

The preliminary cost of the project is calculated from the cost of similar type projects practically. In this estimate, the cost of an important item of work is calculated individually to know the necessity and utility of each item of work.

In this estimate, important item of work includes the cost of lands, cost of roads, electrification, water supply costs, cost of each building, etc.

2. Plinth Area Cost Estimate

The plinth area estimate is prepared by considering the cost per plinth area of a similar type of construction in the locality. It is an area covered by external dimensions of the building at the floor level and plinth area rate of the building which is the cost of a similar building with specifications in that locality.

The plinth area estimate of the proposed building is prepared by multiplying the plinth area of the building with the plinth area rate. For example, if the plinth area of the proposed building is about 100 sq.m in a particular locality and the plinth area rate of a building in the same locality is 2000 per sq.m then,

The cost of the building by plinth area estimate is 100 X 2000 = 200000.

The open areas, courtyards, etc. are should not be included in the plinth area.  For multi-storied construction cost of each floor must be calculated separately.

3. Cube Rate Cost Estimate

The cubical content of the building is obtained by multiplying the plinth area with the height of the building. The height of the building is considered from floor level to the top of the roof level. This method is more appropriate for high-rise buildings.

The cube rate cost estimate method is more accurate than the plinth area estimate. The cubical rate of construction is obtained by dividing the total construction cost by its cubical content.

The cost of the proposed project is calculated by multiplying the cubic rate of similar types of buildings situated in that location by the cubic content of future work.

Suppose, the cubic rate in an area is Rs. 5000 / m3 and the area of the proposed construction is 1000m3

Approximate cost of construction = 5000 x 1000 = Rs. 50, 00,000

4. Approximate Quantity Method Cost Estimate

In this method of an estimate, the Total length of the wall of the whole construction is calculated and this length is multiplied by the rate per running meter which gives the cost of the building.

For the foundation and superstructure rate per running, the meter is calculated separately.

For cost estimation of foundation rate per running, the meter is calculated by considering quantities such as excavation cost, and brickwork cost up to the plinth.

The superstructure quantities like brickwork for the wall, woodwork, floor finishing, etc. are considered for deciding the rate per running meter.

5. Detailed Cost Estimate

A detailed estimate is prepared after the approval of a preliminary estimate competent administrative authority.

In this estimate, each item of work is measured accurately and the cost is calculated separately. It is the most accurate estimate among the other method of estimation.

The cost of an item of work is calculated from current market rates and the total estimated cost is calculated.

For miscellaneous expenditure, the contingencies amount to 3 to 5 % of the estimated cost is added to the total estimated cost.

A detailed estimate is a major estimate required to get a final financial sanction from the competent authority.

The detailed estimate should include the following details and documents.


  • General Specifications
  • Detailed Specifications
  • Drawings/plans – layout plans, elevation, sectional views, detailed drawings, etc.
  • Designs and calculations – In the case of buildings design of foundations, beams, slabs, etc.

Read More: Building Estimate | Building Estimate Format In Excel | Estimation, and Costing of Building

6. Revised Cost Estimate

The revised estimate is prepared when the original sanctioned cost of the project is exceeded by 5% or more. It detailed estimate but improper estimating or underestimating the cost of the project needs to be revised.

The reason behind preparing a revised estimate may sudden increase in the cost of materials, cost of transportation, etc. The major reason behind the preparation of this estimate should be mentioned on the last page of the revised estimate.

7. Supplementary Cost Estimate

The supplementary cost estimate is a supplement to a detailed estimate and it is prepared freshly when there is a requirement for additional work during the progress of the original work.

After approval of the supplementary estimate, the total estimated cost should include a detailed estimate cost as well as the cost of supplementary work for which sanction is required.

8. Annual Repair Cost Estimate

The annual repair cost estimate is known as the annual maintenance estimate which is prepared to know the costs of maintenance of the building that will keep the structure in a safe condition.

It includes the cost of whitewashing, painting, minor repairs, etc. are considered while preparing an annual repair estimate for a building.

Purpose of Cost Estimation

The main purpose of estimation is to give a reasonably accurate idea of the cost. The estimated accurate cost of the project is necessary to give the owner a reasonably accurate idea of the cost to help him decide whether the works have sufficient finance or need to arrange more money. 

How many projects will cost him and what are the returns from it after completion of the project? In the case of government work or a project, the estimate is required to get financial sanction.

Sometimes, small nonpriority work is given on a lump-sum basis; in which case the Estimator must be in a position to know exactly how much expenditure he is going to incur on them

1. Materials Estimating

An estimate of material gives an idea about the type of material and the quantity to be required for the completion of the project. It will help in the advance arrangement of that material and make an order.

2. Estimating Labor

Labor estimates provide the quality and quantity of manpower required during project work. Sufficient and skilled labor is essential to complete the project within the given time limits.

3. Estimating Plant

An estimate will help in determining the different types of equipment and plants required for the completion of the project.

4. Estimating Time

The estimation of the quantity of item work helps in deciding the time of completion of the project. Also, the accurate estimation of project duration is important.

It is a fact that as our time of completion increases the cost of the project also increases with that, so making an accurate estimate of project duration is essential.

Read More: Center Line Method Of Estimation | Centre Line Method | One Room & Two Room Estimate By Center Line Method


Types of Cost EstimationDescription
Preliminary Cost EstimateRough estimation conducted at the initial stages of a project using limited information to assess overall feasibility.
Budget EstimateAn approximate calculation of project costs based on historical data, similar projects, or rough unit costs.
Definitive EstimateA detailed and accurate estimation based on a comprehensive analysis of project plans, specifications, and detailed quantities.
Parametric EstimateUtilizes statistical relationships between historical project data and project parameters to estimate costs.
Analogous EstimateAlso known as top-down estimation, it relies on comparing the current project to similar past projects for cost approximation.
Bottom-Up EstimateInvolves estimating individual components or work packages and then aggregating them to calculate the total project cost.
Three-Point EstimateUtilizes optimistic, pessimistic, and most likely scenarios to calculate a weighted average for a more realistic cost prediction.
Reserve AnalysisInvolves setting aside contingency reserves to account for potential risks or uncertainties that may impact project costs.
Vendor Bid AnalysisRelies on bids received from vendors and suppliers to estimate costs, especially applicable in procurement-oriented projects.
Life-Cycle Cost EstimateTakes into account the total cost of a project throughout its life, including initial construction, maintenance, and operating costs.

Project Cost Estimation Example

The project cost estimation excel sheet free downloads,

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