Cost-estimating principles

Estimates of materials, time, and costs provide information to some construction decisions in a similar way that financial accounting information provides to others. Financial statements are required to comply with generally accepted accounting principles, described in accounting literature, to ensure information is accurate and useful to decisions. This paper suggests general estimating principles that similarly guide good estimating practice. An estimate must be an accurate reflection of reality. An estimate should show only the level of detail that is relevant to decisions. Completeness requires that it include all items yet add nothing extra. Documentation must be in a form that can be understood, checked, verified, and corrected. Attention must be given to the distinction between direct and indirect costs and between variable and fixed costs. Contingency covers possible or unforeseen occurrences, both the expected value of possible identified events and the expectation that events will occur that cannot be identified in advance.