![]() Labor: The labor costs of all people that the estimating party is responsible for paying.This section identifies and describes costs that the person performing the estimate is likely to incur in handling the project and is expected to be the most extensive section of an estimate. Some estimation methods are specific to the construction industry. The most common estimate methodologies include top-down, bottom-up, expert judgment, analogous or comparative, parametric, and three-point. It should include an overview of how the work will proceed, commonly called a work breakdown structure or WBS. This section is sometimes known as a Basis of Estimate or BOE. There are dozens of possible methods for arriving at an estimate deciding on the right one will depend on the type of work or good being provided and the amount of information available when the estimate is due. The document should make clear how it arrived at the figure it provides. This is typically expressed as a percentage of the entire project’s cost. The estimate should also make clear how much the risk factors identified could potentially affect the final price charged to the customer, a process known as a sensitivity analysis. Still, along with clarifying that the final price invoiced may be different from the figure offered in the estimate, there should be a section describing which factors in the estimate rely on necessarily incomplete information-what parts of the estimate are known and what are assumptions. Parties offering estimates are not punished for this. Construction costs, for example, can be significantly impacted by weather, which can be challenging to predict the time horizon necessary for an estimate. Assumptions and RisksĮvery project comes with unknowns. It is mainly if the estimate is for a project composed of multiple, interdependent tasks because other participants may use or rely on the information provided here. While the customer is already familiar with this information, including this section can help make things easier for the person reviewing the estimate. This is a statement of what the project is. The following sections are considered standard components of any complete estimate. The components of any estimate will depend on the kind of project the forecast is for. In other words, the main difference between an invoice and an estimate is finality: The price quoted in an estimate can change, while the price quoted in an invoice will not. While an estimate is provided before a good or service is delivered and reflects an approximation of what the customer will likely owe, an invoice usually comes afterward and reflects what the customer owes. But because estimates are provided before work on a project begins, the figures they present are generally not considered final prices, which should be clarified in the document. #Make an invoicer professional#Still, in the professional world, an estimate is expected to have a significant amount of research and analysis to make it as accurate as possible. When used colloquially, “estimate” often means to guess with little preparation. An estimate provides a supported hypothesis of how much a project will cost. ![]()
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