By: Kaiya Barrett on May 20th, 2022
Construction Cost Estimating: What Is It & How Do You Calculate It
The goal is clear, win the bid. The road toward this goal is full of twists and turns and may include a detour or two and it begins with an estimate. As a construction cost estimator, the ability to pivot and adjust to unexpected changes is a necessary skill.
Regardless of how much effort you put into studying the possible outcomes, it may still rain on your parade if there is a shift in the forecast. And, when you’re talking about projects with dollar amounts in the millions along with tons of resources and jobs on the line, the pressure mounts quickly to deliver cost estimates that are pretty close to perfect.
So where do you start and how do you ensure your takeoffs and estimates are complete, precise, and see beyond the scope of the project to avoid unwanted surprises? Understanding the elements of cost estimating is the first step.
What is Construction Cost Estimating?
Construction cost estimating is a comprehensive calculation to determine the total budget needed to complete a project. As important as any other phase, your preconstruction estimate directly affects the goal to make money at the end. But there are no shortcuts to a profitable endgame. The total scope of the project must be factored into the estimate and mistakes can be costly even after construction is complete.
Many decisions must be made, and an accurate estimate is the starting line to delivering your project on time and on budget. It is worth the time and resources to ensure the highest profit is earned on your next construction project. If you become familiar with the basic structure behind cost estimating and back it up with an estimation software to do the heavy lifting, the quicker you can get to submitting bids and turning profits.
Types of Cost Estimates
Cost estimates are broken down into levels to ensure accuracy at every phase of the project. The different types of estimates include:
- Preliminary – At the start of the process this estimate purely serves as a rough idea of the cost based on limited information.
- Plinth Area – Covers the external dimensions of the structure and includes factors like the foundation type, roof construction, materials, and finishes.
- Cube Rate – Covers the total volume of the building and is normally the strategy used when calculating estimates for multistory structures.
- Elemental – With the use of drawings and specifications, this estimate paints a more accurate view of the total cost down to the structural frames, floor finishes, and more.
- Detailed Estimate – A detailed estimate is exactly how it sounds. Every detail and stage should be drawn up to get the most comprehensive cost estimate possible. Put together an itemized list of costs divided by trade with accurate estimates for all labor, materials, equipment, etc.
How Do You Calculate Construction Costs?
Once you have the big picture overview, it’s time to gather every small detail and make some calculations. This is where you start punching numbers and by collecting these elements of information:
- Direct Costs – Cost of materials, labor, and equipment
- Indirect Costs – Cost of utilities, legal fees, permits, etc.
- Labor Costs – Cost of paying your team including wages, taxes, and overtime
- Subcontractor Costs – Cost of work contracted out including labor, materials, and equipment
Common Cost Estimation Problems
Issues with your cost estimate are bound to happen, but you can catch common problems before they occur, including:
- Not Reviewing Your Work – Something as simple as taking your time and double-checking your work could spell big problems for your bid and your bottom line. Do not let this simple, but critical step cause you to lose time and most importantly, a bid.
- Staying Up on Material & Supply Costs – Since the pandemic, the price of everything has seen a spike and the impact has made your job of estimating more difficult.
- Labor Costs - While looking at the cost of materials, you should never underestimate the cost of labor. Prepare to pay a higher salary for workers with more experience. Estimate labor costs based on how many man-hours it will take to perform a task.
These obstacles are just a handful of what you may face as you navigate the steps toward a final estimate. Save yourself the trouble and learn more common construction estimating mistakes.
Why Use Construction Cost Estimating Software?
Cost estimating has the potential to be stressful, but it’s important to keep an open mind and work smarter, not harder. Manual takeoffs take so much time and have a higher risk for error. Using Construction cost estimating software will put you ahead of the game when it comes to accuracy, organizing, and time-saving. When you use Quick Bid by ConstructConnect it compiles itemized costs, labor rates, change orders, and materials, to precisely predict the cost of a job and avoid bidding too low or too high.
Using this software will import your data into a spreadsheet that is easy to read and distribute. The portal gives you a workspace to customize and save your work, providing access to a network where you can submit more bids and win more profitable projects.
It is true that cost estimating your construction project will have several moving parts. All of which must be precise and cross-referenced to ensure total accuracy. Don’t let the seemingly heavy lift keep you from your goal. Remember to think through each stage of the project and calculate the obvious as well as the not so obvious. Help eliminate unwanted surprises in your estimate by studying common mistakes and stay organized and cut down on time spent by using an estimating software like Quick Bid. You’re one accurate cost estimate away from winning a successful bid and getting to work!
Make the most of your time and improve your takeoff and estimating process with ConstructConnect bidding tools. Explore Our Takeoff Software Offerings and Schedule Your Free Demo!