Practice and Challenges of Project Cost Estimate in selected Grade One Building Construction Companies in Addis Ababa
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Date
2020-06
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Addis Ababa University
Abstract
Reasonable cost estimate is a key to success of project. Estimate, which considers all the costs
that are required to deliver a project, not only insures the completion of project successfully but
also ensures the long-term profitability of the company. Assessment on practice and challenges
of project cost estimate in selected grade one building contractors was made to identify the major
challenges of preparing reasonable cost estimate and understand the impact of unreasonable cost
estimate in the company‟s overall performance. Cost estimate is prepared by using well-known
cost estimate approaches to calculate the overall cost of a project. There are many challenges
while preparing a good or reasonable cost estimate. To identify the major practices and
challenges of cost estimate, the research design used is descriptive design. Forty-five grade one
building construction companies were selected to understand the practice and challenges of cost
estimation. Of the one hundred eight sample size, ninety six respondents working in forty one
Grade one construction companies were involved in responding to the questionnaire and
interview questions. The collected data was analyzed by using SPSS and results suggest that
most local building construction companies do not use specific cost estimation approach and
most of them use traditional ways of estimating the cost of the project. Major costs like overhead
cost, depreciation cost, risk and opportunity costs are not well considered as they are just
calculated as some percentage of the direct cost. This is a major challenge in creating an accurate
cost estimate as each and every cost related to the project are not identified and their impact is
not well managed. This project work proposes adopting a suitable cost estimation approach,
considering overhead, risk and opportunity costs, clients having their own cost estimators that
evaluate company‟s estimation and companies training cost estimators.
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Keywords
Project cost estimate, Challenges of cost estimate, ways of overcoming challenges, practice of cost estimate, factors considered in estimation process