Calculating construction costs necessitates addition of material types, quality and costs, local labor averages and square footage. It also incorporates construction site conditions and scheduling restraints. Additionally, it is recommended that builders inflate their prospective budget by at least 10 percent to form a contingency reserve if unforeseen challenges arise.
In addition to the aforementioned concerns, construction costs can also be affected by both regulatory and insurance requirements that apply to a specific industry or location. For example, regulatory entities may require permit carrying fees, whereas insurance may demand coverage of specific machines, workers or equipment, along with various bonds or liability coverage. The proximity of supplies to a construction site also affects ultimate construction cost, as the further materials need to travel, the higher fuel, transportation and other logistical expenses are.
Calculation of construction costs should also account for the skills and reputation of the project's leading engineer. While engineers with better reputations may increase costs at the outset, the comfort and confidence generated by able leadership increases the speed and ultimate cost-efficiency of a project. Additionally, the sounder construction plans are before building starts, the likelier it is that the job runs smoothly, thus saving contingency costs. Finally, analysts must examine the proposed duration of a specific project with regard to inflation to establish a reasonable, accurate cost estimate.