Project estimation refers to the process of forecasting the coststhe costs, resources, and time required to complete a project. It forms a is critical part of to project planning and financial management in contracting, serving as the basis for calculating expected costs and profit when submitting a proposal. Estimates can be created directly from the project or by going to Project Costing → Project Costing Documents → Project Estimates.
This process includes:
Estimating direct costs (such as labor, materials, subcontractors, and equipment)
Estimating overhead costsexpenses (such as administration, supervision, and utilities)
Adding markups to ensure profitability
To manage estimates in the system:
Create Estimate – used to generate a new estimate based on current project data. This is typically done when preparing a proposal or starting a new phase of planning.
- Edit Estimate – used to open and modify the most recent existing estimate. This option allows updates or corrections to previously saved data but does not create a new estimate.
Project Estimation Method
The calculation method for project estimates is set in Administration → Project Costing → Default Method of Project Estimate Calculation.
There are two budgeting methods:
Independent Calculation of Costs and Revenues
In this method, revenue and cost estimates are entered separately and independently. Revenue figures are manually set and do not depend on cost data. This approach is typically used when revenue is fixed or predetermined, such as in fixed-price contracts, while costs are estimated separately for budgeting and tracking purposes.
2. Calculation of Revenues Based on Costs
Revenue is automatically calculated by applying a markup percentage to the estimated costs. Costs such as labor, materials, and overhead are entered first, and revenue is derived based on these figures plus the markup. This method is ideal when pricing is closely tied to the actual or expected cost structure and when profitability depends on managing costs effectively.
If time-based planning is enabled, the Estimates by Period tab appears. It splits revenue, cost, and overhead estimates across specific planning periods to help track the budget over time.
Ways to Create Project Estimates
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a) From within the project
Open the relevant project Project → Click Create/Edit Current Estimate or use Generate → Project Estimate to create an estimate based on the project data.
b) From the document list
Go to Project Costing → Project Costing Documents → Project Estimates → Click Create to start a new estimation document.
Creating a Project Estimate document. The Main tab
On this tab, you can enter general information about the project's estimate: the project, customer, project type, entity, and the employee who is responsible for the project. Also, you can specify whether you need to split estimates by planning period.
Depending on the selected method of estimate calculation, the form has different tabs:
- If the Independent Calculation of Revenues and Costs method is selected, there are the following tabs: Main, Costs, and Revenues.
- If the Calculation of Revenues Based on Costs method is selected, there are the following tabs: Main, Revenues and Costs, and Overheads
If for any method, the Estimates by Period check box is selected, one more tab, Estimates by Period, appears.
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This tab is used to build the project budget using the Calculation of Revenue Based on Costs method. It includes two main sections:
- Revenues (upper pane)
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- Costs (lower pane)
This section is used to enter and manage the cost lines linked to each revenue item.Both panes work together to calculate the total project cost and the resulting markup and revenue.
Revenues Pane (Upper Pane)
This pane is used to define revenue items (BOQ lines) for the project. Each revenue line can be linked to one or more cost lines in the Costs pane.
Project Task: Select the task the revenue is related to.
Item: Choose the revenue item or service.
Content: A description field; auto-filled from the item but can be edited.
Quantity: Enter the number of units for the item.
UOM: Unit of Measure, filled based on the selected item.
Amount: You can enter the estimated revenue amount directly if not using items or markups.
Overhead: Shows other costs related to this item, usually filled from the Overheads tab.
Total Cost: Displays the total cost (including overhead) for the quantity entered.
Markup, %: Enter a percentage to apply a profit margin on the cost.
Markup Amount: Shows the markup value based on the percentage or can be entered manually.
Amount: Shows the calculated revenue amount.
VAT, %: Auto-filled VAT rate based on the item.
VAT Amount: Displays the calculated VAT amount.
Price: Price per unit of the revenue item after applying the markup.
Total Amount: Final revenue amount, including VAT if applicable.
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Costs Pane (Lower Pane)
This section is used to add and manage the costs associated with the selected revenue item.
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