Cost Estimation and Normative Pricing in Construction
Building the estimated cost
Normative estimating rests on elemental estimate norms that describe the resources needed for a unit of work (labour hours, machine hours, material quantities), multiplied by unit prices valid at a base price level. The estimated cost is assembled as direct costs (materials, labour, machines) plus overhead costs (վերադիր ծախսեր) plus estimated profit (շահույթ), then indexed to the current price level using the appropriate index, and finally increased by value-added tax where applicable. The resource method, which builds the price from actual quantities and current market rates, is used increasingly alongside the normative method.
What the estimate is not
The estimate is a document for the client and for state expertise of public investment. It is not automatically the contract price, which is the outcome of procurement and negotiation, and it is not the market value of the finished building.
Traps
- Applying the index to costs already expressed in current prices, which double-counts inflation.
- Confusing overhead with profit: overhead covers site and head-office running costs, profit is the contractor's margin, and each has its own calculation base.
- Taking profit before overhead, or applying both to different bases from those in the norm.
- Forgetting VAT, or applying it to a base that already includes it.
- Missing the contingency allowance in early-stage estimates and then treating the estimate as a guaranteed ceiling.
Worked example
Direct costs 100 units; overhead 15% of direct costs = 15; profit 8% of direct plus overhead = 8% of 115 = 9.2; base-level total = 124.2. Apply a cost index of 1.35: 124.2 × 1.35 = 167.67. Add 20% VAT: 167.67 × 1.20 = 201.2 units.
Rule of thumb
Write the calculation base next to every percentage. Almost every estimating error is a percentage applied to the wrong base, second only to an index applied twice.
Technical Supervision, Project Management and Occupational Safety
Three different supervisions
Questions deliberately blur three roles. Designer's supervision (հեղինակային հսկողություն) is performed by the design organisation to confirm that the works follow the approved design and to issue solutions to site deviations. Technical supervision (տեխնիկական հսկողություն) is performed by a licensed engineer or firm engaged by the client to control quality, conformity of materials, hidden works, testing and documentation, independent of the contractor. State supervision is exercised by the authorised state inspection, with enforcement powers. None of the three replaces the acceptance procedure.
Project management
The client's project manager controls scope, schedule, cost, quality, contracts, risk and communication. Practical tools the examiner expects: a work breakdown structure, a critical-path schedule with float identified, a procurement plan aligned to the schedule, a document register, a change-control procedure, and risk register with mitigating actions. Progress is measured by earned value; claims succeed or fail on the quality of contemporaneous site records.
Occupational safety
Site safety rests on a documented risk assessment, safe systems of work, competent supervision and training, and the Labour Code and occupational safety legislation. Typical controls: edge protection and fall arrest for work at height, shoring and inspection of excavation sides, scaffold design and tagging, safe electrical supply and earthing, lifting plans with certified equipment, confined-space procedures, dust and noise control, first aid and accident notification. Duties are shared: the client provides information and a safe site, the contractor organises the work, and each worker must follow the rules.
Traps
- Presenting designer's supervision as a quality-control substitute for technical supervision.
- Assuming technical supervision signs off the building for occupancy.
- Treating accident investigation as optional paperwork.
Rule of thumb
Safety follows the hierarchy of control: eliminate, substitute, engineer out, then administer, and use personal protective equipment last, never as the only measure.