Construction cost estimates play an essential role in the field of construction. It leads the contractors to bid on projects according to their budget and helps them check their capability to complete the project within the deadline without any restrictions. In this guide you learn how to estimate construction costs accurately with these essential tips and tools to keep your project on budget and on track.

What is Construction Estimating?

Calculating the cost estimates is done by a process called construction estimating, which includes the project’s direct costs (material, quantity, and labor costs) as well as the indirect costs (equipment mobilization, permit, fees). This crucial step is performed by the expert cost estimators in the pre-construction phase, which enables the contractors to complete the project in a timely and profitable percentage. 

A precise construction cost estimate requires a deep understanding of several factors, such as profound knowledge of construction materials, specifications, strategies, building codes, and market cost fluctuations. We’ll go through the steps that a construction estimator follows to ensure the provision of an accurate cost estimate.

Significance Of Precise Cost Estimating

Accurate and reliable cost estimating is crucial to the success of any construction project. Both owners and contractors lean on the cost estimates to make the project dynamic from the pre-construction phase to a complete project. Without an in-depth knowledge of the project cost, one can’t be sure whether the project will be able to complete within the allocated resources or not. This is what a construction estimator brings for you. 

After a pre-construction estimate, some changes need to be made to adjust the project’s allocated budget in the designation phase. Furthermore, contractors rely on accurate cost estimates to bid on the projects. 

In case of underestimating the project costs, they might even need to shrink their profit margin in order to cover the hidden and over-hanging expenses of the project. In another case of overestimation, they might submit bids with too high to be selected. So a balance needs to be maintained between the owner’s budget and the contractor’s margin.

Steps Of How To Estimate Construction Costs 

Construction estimators follow the same fundamental steps regardless of whether they work for the contractor, a particular contractor, or an owner. Following is the list of steps they follow:

Evaluate the bid package

The bid package comprises all the comprehensive knowledge and details about the project plan. It entails a list of all the specifications anticipated by the client, papers of the project’s contract, and the accountability of the material and costs involved. It helps them to evaluate the tender thoroughly. It assures them that all the specifications mentioned in the bid are present. They review all the structural needs of the project and check the presence of any sub-standard material.

They generally follow a standard process:

• Ensure that all drawing plans and specifications are present in the package.
• Get a review of the project.
• Analyze structural requirements and specifications.
• Evaluate the electrical, plumbing, and mechanical (MEP) requirements.
• Look out for any non-standard item.

After reviewing the bid package, the construction cost estimating services may subdivide the project into more than one work package. Occasionally, the construction estimators may create one tender package that covers all the installation costs, including the materials and labor. 

Execute a visit to the site

Sometimes, conducting a site visit is necessary before tender submission. It’s better and advisable for the estimating companies to visit the site rather than merely depending upon the architectural drawings and blueprints of the projects. The type of site can highly influence the cost estimations. 

For example:

• A site with poor drainage
• Tough soil conditions
• Adjoining buildings
• Lack of access to construction materials and equipment
• Poor utilities

All these factors would add more costs and complexity to the construction plan. Therefore, a construction estimator will take notes and photographs during site visits to consider all these factors carefully.

Perform a quantity takeoff

A precise construction cost estimate requires a quantity take-off (material take-off) by considering the count of each item involved in the project. It includes measuring;

• Number (e.g., windows, doors)
• Length (e.g., wires, iron ores)
• Area (e.g., flooring, ceiling)
• Volume ( e.g., concrete, cement)

After completing a takeoff, the construction estimators have a comprehensive list of materials and quantities needed to complete the project. The estimators may perform a manual takeoff using paper sheets and colored pencils or a digital takeoff using cutting-edge software and technology.

Solicit Pricing from market vendors

When the quantities are determined according to the tender and budget, construction estimators ask for prices of each item from market suppliers and vendors. While going for price fixing, several things need to be considered in the cost estimate:

• The mass proportion of orders may direct low prices
• Some estimates may have a restricted lifespan due to fluctuating prices.
• If there is inevitable material waste, extra materials must be ordered. 

Review labor requirements

A reliable and accurate cost estimate will be required to assess all the labor needs. They will specify the labor roles, how many hours will be necessary, and the labor staff’s past experience. They will analyze the cost associated with the labor, including medical insurance, transport, housing, and meals for the day. 

The construction estimators must include an encompassing range of labor costs like:

• Wages
• Taxes
• Insurance
• Retirement contributions
• Union charges
• Medical or vacation leave 

Figure out the overhead costs

The indirect and overhanging costs should be well-described in the tender package. The indirect costs may include;

• Permit fees
• Taxes
• License fees
• Site cleaning
• Hiring other professionals
• Costs on equipment (ordering, mobilizing, replacing)
• Software costs

A precise cost estimate enables the contractors to identify indirect costs and determine how to distribute them. It also guarantees that all the costs will be included in the bid package.

Look for profit and contingency

After adjusting all the costs, construction estimators look for profit margin and contingency while concluding the estimating process. Profit is the amount given to the construction company after completion, and they can consider investing it in some other venture. On the other hand, contingency is the amount kept aside for the reworks and time overruns that usually happen on the construction project. 

Each construction business usually sets up a minimal profit margin and a contingency of up to 10%. At the end of the process, after calculating the direct costs, overhanging costs, labor, equipment, material, and contingency amounts, construction estimators return a healthy profit to the businesses. 

Conclusion

Precise and accurate cost estimates are crucial to the success of any construction trade and project. Taking the steps mentioned earlier into consideration will make you distinctive among others in the construction field. We hope this guide, “How To Estimate Construction Costs”, is useful. Please comment or share your views too. We would love to hear from you in the comment section. Thanks.