{"id":45670,"date":"2021-11-08T08:00:56","date_gmt":"2021-11-07T23:00:56","guid":{"rendered":"https:\/\/norimen.net\/wordpress\/?p=45670"},"modified":"2026-06-07T23:23:21","modified_gmt":"2026-06-07T14:23:21","slug":"cost-estimation-kamino","status":"publish","type":"post","link":"https:\/\/norimen.net\/en\/cost-estimation-purpose-kamino\/","title":{"rendered":"What Is Cost Estimation? Let\u2019s Learn About the Purpose of Cost Estimation (From the Kamino Blog)"},"content":{"rendered":"

\"Introduction<\/p>\n

Hello, I'm Kamino, a civil engineer and government employee who writes a blog.<\/p>\n

Is everyone doing cost estimates?<\/p>\n

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These are essential skills for civil engineering government employees\"Cost Estimation\"<\/strong>But how well do you all really understand it? Especially since the cost estimation process has been streamlined for those who joined the agency in recent years, I think there are actually cases where people are doing cost estimates without fully understanding them. That\u2019s just how it is for everyone.<\/p>\n

In this blog series, titled \u201cAn Introduction to Cost Estimation for Civil Engineering Civil Servants,\u201d we will provide a detailed explanation of the overall process of cost estimation over several installments. Here,First, I\u2019ll explain what cost estimation is and what its purpose is.<\/strong>\u3002<\/span><\/p>\n

Once you've read through it, I think the vague concept of \"cost estimation\" will become much clearer.<\/p>\n

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Since administrative staff often handle project budgets just as technical staff do, it might be important to understand what \u201ccost estimation\u201d is and what it involves.<\/h5>\n<\/div>\n<\/div>\n

What Is Cost Estimation?<\/span><\/h2>\n

\"Cost estimation\" is a technical term used in the construction industry.<\/p>\n

Cost estimation is,Calculating the cost of construction or contracted services based on design documents such as drawings and specifications.<\/strong><\/span>means.<\/p>\n

We explain design documents in this article.<\/p>\n

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Design documents (drawings, specifications, and design specifications) are required to place an order.<\/div>\n
Design documents refer to the \u201cdrawings\u201d and \u201cspecifications\u201d created to present the details of a construction project (or contract) to contractors. Hello, I\u2019m Kamino, a civil engineer and government employee blogger. Today, I\u2019ll explain the three types of documents you need to prepare when awarding a construction contract or outsourcing a project. This might seem obvious, but\u2026<\/div>\n<\/div>\n
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Kamino's Blog<\/div><\/div>
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Design documents (drawings, specifications, and design specifications) are required to place an order.<\/div>
https:\/\/kamino.blog\/specification\/<\/div>
\"Design documents\" refer to the \"drawings\" and \"specifications\" prepared to present the details of a construction project (or contract) to contractors. Hello, I\u2019m Kamino, a civil engineer and blogger. Today, I\u2019ll explain the three documents you need to prepare when placing an order for construction work or a contract. It goes without saying, but when placing an order, you must disclose<\/div><\/div>
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In this section, we will focus specifically on contract construction work\u2014particularly general civil engineering projects\u2014but the principles apply almost identically to other types of construction work and outsourced services.<\/p>\n

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I\u2019ll explain public works projects from a civil servant\u2019s perspective.<\/h5>\n<\/div>\n<\/div>\n

Cost Estimation and Quotations<\/span><\/h2>\n

Words similar to \"cost estimation\" include\"Estimate\"<\/strong>There are some. Some have okurigana, like \u201cestimate.\u201d<\/p>\n

The process of calculating an amount is called \u201ccost estimation,\u201d but \u201cestimate\u201d has the same meaning, right?<\/p>\n

Definitions vary, but in my view,<\/p>\n

The process by which a client calculates construction costs (estimated price) is called cost estimation, and the document in which a contractor presents to the client the costs required for actual construction, including a reasonable profit margin, is called a bid.<\/strong><\/span>It seems that distinctions like this are made in usage.<\/p>\n

We also refer to simply having someone provide us with prices for materials and the like as a \u201cquote.\u201d<\/p>\n

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Client \u2192 Cost Estimation \u2192 Calculate the Estimated Price (Generally not disclosed)<\/span><\/strong><\/p>\n

Contractor \u2192 Cost Estimation \u2192 Submit a Quote<\/span><\/strong><\/span><\/p>\n<\/div>\n

Although both government agencies and contractors perform cost estimates in the same way, contractors must not only estimate the projected price but also base their estimates on their own company\u2019s construction unit rates and factor in the company\u2019s profit margin.<\/p>\n

And if there is an intention to place an order, we will submit a \u201cquote.\u201d<\/p>\n

This is the general process by which subcontractors and manufacturers calculate costs and submit quotes.<\/p>\n

Why Do We Perform Cost Estimation?<\/span><\/h2>\n

When performing cost estimates, it is important to clearly understand the reasons and objectives behind them.<\/p>\n

For example, if you\u2019re thinking of doing a small-scale home renovation, you\u2019d ask a contractor for an estimate, right? If you\u2019re satisfied with the quote, you\u2019d sign a contract. It\u2019s not the client\u2019s job to calculate the cost.<\/p>\n

So, why do contracting authorities perform cost estimates for public works projects? Why do they calculate the construction costs?<\/p>\n

To put it in my own words,To calculate appropriate construction costs, conduct fair competitive bidding, and ensure that contractors are able to earn a reasonable profit while carrying out the work<\/strong><\/span>That's it.<\/p>\n

This is the purpose for which civil engineering officials perform cost estimates; if they lose sight of this purpose, they will end up making incorrect estimates.<\/p>\n

What Is a \"Reasonable\" Profit?<\/span><\/h3>\n

\"A reasonable profit\" refers to a profit that allows the company to continue operating under normal business conditions, and a situation where profits increase in proportion to the company's efforts. (This is my personal opinion.)<\/p>\n

If you could rake in huge profits just by slacking off at work, no one would make an effort anymore; and if prices were unreasonably high, we wouldn\u2019t be able to allocate funds to where they\u2019re truly needed. Citizens would get angry, calling it a waste of tax dollars, wouldn\u2019t they? In a world where contracts are awarded based solely on the contractor\u2019s asking price\u2014without any cost estimates\u2014that\u2019s probably exactly what would happen.<\/p>\n

If construction costs are too low, it can lead to failed bids, substandard work, and a lack of profit, ultimately causing the construction industry to decline.<\/p>\n

Therefore, we calculate the appropriate construction cost (known as the estimated price) and conduct a competitive bidding process with this amount as the upper limit.<\/p>\n

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Estimated construction cost = projected price<\/span><\/strong><\/p>\n<\/div>\n

Well, if you can\u2019t calculate construction costs, you can\u2019t draw up a budget, you won\u2019t know the construction schedule, and you won\u2019t be able to start the project\u2014so, in fact, cost estimation for building construction has existed since ancient times.<\/p>\n

In public works projects funded by taxpayer money, we want to keep construction costs as low as possible, but if that causes contractors to operate at a loss and go out of business, it defeats the whole purpose.<\/p>\n

As public servants, we are required to strike the perfect balance and calculate a \u201cfair price\u201d that yields just the right amount of profit.<\/p>\n

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I don't usually think about things this deeply, though (;\u00b4\uff65\u03c9\uff65)<\/h5>\n<\/div>\n<\/div>\n

Laws and Regulations Concerning Estimated Prices<\/span><\/h3>\n

By the way, I\u2019ll highlight two key points you should know from the laws and regulations regarding estimated prices and bidding.<\/p>\n

The Preliminary Decision Order and the Product Quality Assurance Act.<\/p>\n

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Ordinance on Budget, Settlement of Accounts, and Accounting (commonly known as the Budget and Settlement Ordinance)<\/strong><\/span>
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\n2. The estimated price must be determined appropriately for the goods or services that are the subject of the contract, taking into account actual transaction prices, supply and demand conditions, the difficulty of performance, the quantity involved, and the duration of performance.<\/span><\/p>\n

Act on the Promotion of Quality Assurance in Public Works (commonly known as the Quality Assurance Act)<\/strong><\/span>
\nArticle 7
\n(1) To ensure that entities undertaking public works projects, etc., can secure a reasonable profit necessary for the medium- to long-term development and retention of personnel responsible for ensuring the quality of public works, such entities shall, based on appropriately prepared specifications and design documents and taking into account changes in economic and social conditions, set prices for labor, materials, and other items in the market, insurance premiums that employers are obligated to pay under the Health Insurance Act and other relevant laws; insurance premiums for policies necessary to secure compensation for work-related injuries and other incidents suffered by persons engaged in public works projects; the construction period; and other factors accurately reflecting the actual circumstances of the public works project, in order to ensure that the estimated price is set appropriately.<\/span><\/p>\n<\/div>\n

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The phrase in the Quality Assurance Act\u2014\"reasonable profits necessary to foster and secure personnel responsible for ensuring the quality of public works projects over the medium to long term\"\u2014is what I meant by \"just the right amount of profit,\" isn't it?<\/p>\n

In addition, regarding the bidding process,For a country, the Accounting Act<\/strong>\u3001For local governments, laws such as the Local Autonomy Act, etc.<\/strong>There is a reference to the source.<\/p>\n

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It\u2019s important to be aware that the Housing Quality Assurance Act is subject to amendments in response to changes in social conditions.<\/h5>\n<\/div>\n<\/div>\n

What is a standard?<\/span><\/h2>\n

The term \u201cstandard\u201d is often used to calculate an appropriate estimated price.<\/p>\n

It\u2019s used frequently in government offices, and you often see responses like \u201cWe\u2019re using standard cost estimates\u201d in reply to questions from contractors, don\u2019t you?<\/p>\n

Even the publication of the \u201cMinistry of Land, Infrastructure, Transport and Tourism Civil Engineering Cost Estimation Standards\u201d\u2014which serve as the foundation\u2014is described as establishing guidelines for estimating \u201cstandard\u201d construction costs for projects under the Ministry\u2019s direct jurisdiction.<\/p>\n

Hmm... What exactly does \"standard\" mean? (\u00b4\uff65\u03c9\uff65)?<\/p>\n

According to the Digital Daijisen, \u201cstandard\u201d is often used to mean \u201caverage\u201d or \u201cthe most common type.\u201d<\/p>\n

In other words, standard cost estimation criteria are based on the assumption that it is standard for most materials to be traded at that price (something like an average) and for most contractors to perform work at that labor rate.<\/p>\n

In my view, if 80 to 90 percent of the contractors in the city can do the work at that rate, then I consider that to be standard. Since about 10 percent of contractors do work that\u2019s hard to figure out, there\u2019s no need to aim for 100 percent\u201480 to 90 percent is fine.<\/p>\n

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Bugakari<\/strong>This refers to a combination of unit prices for labor, materials, and machinery.
\nA quantity schedule showing the number of laborers, materials, and pieces of equipment required for a specific construction project.<\/p>\n<\/div>\n

Therefore, if you ask five materials manufacturers in the city and more than half say, \u201cWe can\u2019t supply it at that price,\u201d then that price isn\u2019t a standard unit price; similarly, if you ask five contractors and more than half say, \u201cThat labor rate won\u2019t work for us (we\u2019d be operating at a loss),\u201d then that labor rate isn\u2019t standard.<\/p>\n

Even if you calculate using the estimating system in accordance with the estimating guidelines, the results may not match on-site conditions. Therefore, carefully consider the actual circumstances, obtain estimates for labor rates and materials if necessary, and aim for a \u201cstandard\u201d estimate as much as possible.<\/p>\n

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Contractors will try to get you to increase the design budget to boost their profits, so you need to determine whether their suggestions are actually valid.<\/h5>\n<\/div>\n<\/div>\n

Be sure to read the Cost Estimation Guidelines carefully<\/span><\/h3>\n

As I mentioned earlier, when it comes to calculating the total cost,\"Civil Engineering Cost Estimation Standards\"<\/strong>There is a rulebook called...<\/p>\n

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