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What is a Control Estimate in Construction and Why is it Important?

When working on complex construction projects, creating a control estimate is one of the most critical steps for ensuring success.

This essential tool determines the project’s financial direction and lays the foundation for effective cost management throughout the entire project lifecycle.

A control estimate guides every decision by weaving together comprehensive budgeting, forecasting, and risk assessment.

Without it, even the most meticulously planned project could become a costly disaster.

 

What is a Control Estimate?

A control estimate in construction is much more than a ballpark figure or a preliminary guess.

It's a detailed financial plan that outlines the project's cost based on the defined scope, including labour, materials, equipment, and contingency for potential risks.

This estimate is often used as a reference point to measure and manage the financial performance of a project.

Typically developed once the project scope and design details have been finalised, the control estimate serves as a baseline for decision-making.

It gives stakeholders a clear picture of the project’s financial requirements, making tracking costs easier and ensuring the project stays within budget.

More importantly, it serves as a financial compass for navigating the often unpredictable construction landscape, helping companies mitigate the risks of cost overruns.

One lesser-known fact is that control estimates are often adjusted with the evolving market conditions.

Fluctuations in material prices, labour rates, and even political factors like tariffs can necessitate adjustments to the control estimate throughout the project’s duration.

 

The Role of a Control Estimate in Project Planning

For any construction project to move from conception to completion smoothly, proper planning is critical—and this is where the control estimate comes into play.

Unlike preliminary estimates, which are more like rough financial sketches, a control estimate is built on detailed data and a clearer understanding of project goals.

A well-prepared control estimate ensures that:

  • All stakeholders have aligned expectations regarding costs.
  • Potential financial risks are identified early on.
  • A solid budget is established for the entire project lifecycle.

Control Estimate vs. Preliminary Estimate

While both serve as financial guides, a control estimate is far more detailed and refined than a preliminary estimate.

The latter might be created in the early stages of a project to give a rough idea of potential costs, while the former is developed only after the full project scope is clearly defined.

A control estimate is a realistic reflection of anticipated costs, whereas a preliminary estimate is more of an educated guess.

Consider a high-rise building project. Early on, the developer may receive a preliminary estimate based on square footage and general construction costs.

Once the design is finalised, specific details—such as material choices, custom architectural features, and engineering complexities—are incorporated into the control estimate.

This refined estimate becomes the guiding financial document the team will use to stay on track throughout the project.

 

How to Create an Accurate Control Estimate

Crafting an accurate control estimate is a complex but necessary task that requires collaboration between various departments.

Estimators, project managers, procurement teams, and sometimes outside consultants must work together to ensure every detail is accounted for.

Steps to Develop a Control Estimate

  1. Review Project Scope
    The first step is to review the project scope thoroughly. This includes the architectural design, engineering plans, and client requirements. Understanding the full extent of the project is crucial for accurately predicting costs.
  2. Break Down Costs
    Once the scope is understood, the next step is breaking down the costs. This involves calculating expenses for labour, materials, equipment, and overhead. For instance, if you're building a commercial facility, labour costs will vary depending on the skill level required for different tasks, and materials like steel or concrete will have different price points depending on availability.
  3. Account for Risks
    No construction project is without risk, which must be factored into the estimate. Unexpected site conditions, weather delays, and changes in market prices for materials are just some of the risks that can increase costs. Project managers can mitigate the impact of these risks by including a contingency budget.
  4. Analyse Historical Data
    Another essential part of creating a control estimate is looking at historical data from similar projects. Using past projects as benchmarks can help identify cost trends, labour productivity rates, and other financial metrics.

Many leading construction firms use proprietary historical data databases to improve their control estimates' accuracy.

By analysing the cost data of similar projects, they can anticipate price fluctuations and market trends better than relying solely on industry averages.

 

Benefits of a Control Estimate

A control estimate offers numerous benefits beyond the initial project budgeting phase.

When done correctly, it becomes a powerful tool that supports the project's financial health from start to finish.

Cost Control

A control estimate helps project managers control costs by providing a clear framework for tracking expenses against budgeted amounts.

Since the control estimate outlines detailed costs for every aspect of the project, it becomes easier to identify where overspending may occur and take corrective action in real time.

Risk Mitigation

Unexpected costs can sink a project, but a control estimate is a risk mitigation tool.

By building contingencies into the estimate, project managers can plan for the unexpected and ensure the project stays financially viable, even if certain costs exceed initial projections.

Performance Monitoring

Project teams can continuously monitor financial performance throughout the construction process with a control estimate.

This allows for constant comparisons between estimated costs and actual expenditures, giving project managers valuable insights into where they might need adjustments.

Building Client Confidence

A lesser-known benefit of a control estimate is that it fosters trust between the contractor and the client.

When clients see that a detailed, data-driven financial plan is in place, they feel more confident that the project will be completed on time and within budget.

Transparency in estimating builds client relationships, often leading to repeat business and referrals.

Consider a scenario where a developer is managing a significant mixed-use development.

Regular updates on how actual costs are tracked against the control estimate ensure the client remains informed and confident, knowing that the project’s financial health is well managed.

 

Control Estimate vs. Cost Baseline

A common question in construction projects is the difference between a control estimate and a cost baseline.

While the two are closely related, they serve different functions within project management.

What is a Cost Baseline?

A cost baseline is the approved version of the budget, including all contingency reserves but excluding management reserves.

It’s essentially the financial roadmap that project managers use to measure project performance.

Conversely, the control estimate provides the data and structure that helps define this cost baseline.

How Control Estimates Influence Project Adjustments

Once a control estimate is in place, it becomes a tool for making informed decisions.

For instance, if actual costs diverge significantly from the baseline, project managers can return to the control estimate to understand the underlying issues and make necessary adjustments.

The estimate acts as a safeguard against excessive spending.

In a recent high-profile infrastructure project, the control estimate prevented the project from running significantly over budget.

During the initial phases, material costs began rising due to unexpected supply chain disruptions.

Thanks to the detailed risk assessments and contingencies built into the control estimate, the project managers could adjust the budget without affecting the overall financial health of the project.

 

Common Challenges in Preparing a Control Estimate

As useful as control estimates are, they are not without challenges. Construction projects are dynamic, and creating a perfectly accurate estimate can be difficult.

Variability in Material Prices and Labor Costs

The construction industry is subject to the whims of the global market.

Fluctuations in the price of steel, concrete, and other materials can significantly impact the accuracy of a control estimate.

Labour costs are also subject to change, especially when skilled workers are in high demand.

Unforeseen Site Conditions or Design Changes

While the control estimate is developed based on the best information available at the time, unforeseen conditions can still arise.

For example, during site excavation, unexpected soil conditions could require additional foundation work, which would significantly increase costs.

Overcoming Challenges

Regular updates and revisions to the control estimate are the key to overcoming these challenges.

Project managers can maintain financial control by constantly revisiting the estimate and adjusting it to reflect current market conditions and project realities.

Experienced estimators often build in extra buffers for projects in areas prone to high market volatility or supply chain disruptions.

This proactive approach ensures that minor market fluctuations won’t derail the project.

 

Why Control Estimates are Crucial for Project Success

A control estimate is more than just a financial document. It’s a strategic tool that ensures the project stays on course, financially and operationally.

Maintaining Profitability

By carefully managing costs, a control estimate helps maintain the project's profitability.

Construction companies that consistently use control estimates are better equipped to deliver projects on time and within budget, resulting in satisfied clients and repeat business.

Minimising Disputes

Disputes over costs can derail a project, but with a detailed control estimate in place, there’s less room for confusion or disagreement.

The estimate sets clear expectations for all parties, reducing the likelihood of financial disputes during the project.

 

Tools and Software for Developing Control Estimates

With advances in technology, there are now many tools and software solutions available that can assist in developing accurate control estimates.

Popular Estimating Software

Software like ProEst, PlanSwift, and Buildertrend offer robust tools for creating and managing control estimates.

These platforms allow for real-time collaboration, making it easier for all stakeholders to stay updated on the project's financial health.

Benefits of Using Technology

Digital tools enhance the accuracy of control estimates by allowing estimators to use real-time data, historical cost records, and automated calculations.

These tools also offer the flexibility to update estimates quickly as market conditions change.

 

Conclusion

A control estimate in construction is the cornerstone of successful project management.

By providing a detailed financial roadmap, it helps project managers stay on track, mitigate risks, and maintain profitability.

As the construction industry continues to evolve, the importance of an accurate control estimate will only grow.

For businesses looking to thrive in a competitive environment, mastering the art of control estimation is crucial.

Investing in accurate control estimates can mean the difference between a successful project and a financial disaster, whether you're a contractor, developer, or project manager.

Ready to elevate your construction cost management and ensure your project's success?

Contact DG Jones & Partners today to see how we can help you succeed with comprehensive and precise construction cost management solutions.

 

FAQs

What is a Control Estimate in Construction?

A control estimate is a detailed, accurate cost estimate produced during the design phase of a construction project. It provides a baseline budget for the project and is used to track costs throughout the build process.

Why is a Control Estimate Important?

A control estimate is vital for effective project management. It helps identify potential cost overruns, enables informed decision-making, and ensures the project stays within budget.

How is a Control Estimate Developed?

A control estimate is developed by breaking down the project into smaller work packages and estimating the cost of each package based on historical data, current market prices, and detailed design drawings.

When is a Control Estimate Prepared?

A control estimate is typically prepared during the design development phase of a project once the design is sufficiently detailed to allow for accurate cost estimation.

How is a Control Estimate Used Throughout the Project?

The control estimate is used to track actual costs against the estimated costs. Any significant deviations from the estimate are flagged and investigated to identify the root cause and take corrective action.