Large number of construction projects in Iran, and the huge budget assigned to them, show the importance of these projects for scientific researches. Researches should focus on reducing the cost, increasing the value and improving the quality. In this direction, efforts for reducing the costs in construction and erection phases have been popular, but there has not been much attention to the early phases of the projects such as conceptual or detailed design phases. We call design and bidding stages in this project as the upstream of the project. Presently, the cost for the upstream stages is less than 1% of the total cost of a construction project; whereas only a correct cost estimate while preparing the bidding documents can decrease costs considerably. Noteworthy is that most of these activities can just indicate cost reduction and do not take of care of value increase and quality improvement. In this direction, this thesis discusses the issue of reducing the cost of construction projects through development of cost estimation criteria in the design and bidding phases. For this purpose, cost and time analysis are carried out in some construction projects and cost estimation criteria are developed in the early stages of project, especially design and estimation stages; criteria which help value increasing and quality improving of projects, in addition to reducing their cost. Hence procedures for cost estimation are discussed. Then a systematic approach for reducing the cost of construction projects in the upstream stages is developed. Finally, some real life cases are discussed to support the ideas presented in this research. The results indicate that employing the value engineering, concurrent engineering, modular architecture, prefabrication, and EPC (Engineering-Procurement-Construction) bidding can reduce the cost of construction projects enormously. The important note is that using only the value engineering may cause reduction in the estimated costs based on the formal price lists in construction projects but it does not necessarily result in the reduction of the contract price. The reason lies behind this fact that the items in the price list published nationally are measured based on tonnage or square meters. Any effort to reduce the tonnage does not necessarily reduce the total cost which is defined by the factor the winning contractor proposes for the contract. The contractor considers all difficulties to produce the project, deliver it and install it. Therefore, to reduce the cost practically all procedures of production and erection must be taken into account. In practice, this is scientifically done through concurrent engineering and pragmatically by integrating the contractors into the design stages. This research is based on a wide range of real life information which supports the ideas of integrating value engineering and concurrent engineering. However, there is almost no information about the EPC projects in Iran. To benefit from the results of this research needs to shift from the traditional bidding methods to rather recent ones which integrate the design into the bidding. This means consulting offices should be chosen by the client when the client calls for the consulting, only if they have joint contractors.