Construction estimating is a crucial step in construction projects. Typically the cost estimate will the deciding factor for who wins a job.
Having an accurate estimate is critical, and it can help contractors ensure that they won't lose money performing the project.
Another reason a construction estimate is important is because it can identify any problem areas. Knowing what these problem areas could be allows project managers and stakeholders to take preventative steps to ensure that the project goes smoothly.
Now that we can see why an estimate is important, let's take a look at some of the steps involved in the construction estimating process.
The Estimating Process in Construction
Review the Bid Package: The bid package contains a list of requirements expected by the client, including construction specifications, contract documents, and steps to account for known costs. Reviewing the bid package entails ensuring that all drawings and specifications are present, getting an overview of the project, evaluating structural requirements, and identifying any nonstandard items.
Conduct a Site Visit: It is important for estimators to visit the site to consider the conditions of it. Site conditions may influence the project costs if work needs to be done to amend the natural environment, access limitations, and local regulations.
Construction Takeoff: Calculating the quantities of materials, labor, and equipment required for the project is done to lay the groundwork for estimates. Quantity takeoff requires four key types of measurement: count, length, area, and volume. Estimators will need to gain a comprehensive understanding of what needs to be quantified.
Solicit Pricing: With the quantities determined, each item must then be assigned specific and accurate prices. Pricing everything accurately involves determining the cost of each material, any labor required, and equipment items based on current market rates and supplier quotes.
Evaluate Labor Requirements: An estimator will need to determine all the labor necessary for a project by specifying which roles are required for a project, how many hours will be necessary, and how productive the crew is based on past projects. All the costs associated with workers, including wages, overtime, taxes, insurance, retirement, union, or leave, must be budgeted into the estimate.
Determine Bonds and Insurance Costs: Both bonds and insurance cost money for contractors and, therefore, must be covered. Typically, these items are annual costs; however, if a contractor needs to secure additional bonding capacity or insurance coverage, it will need to be factored into the estimate.
Calculate Overhead Costs: Overhead and indirect costs are typically not clearly laid out in the bid package. Any expense associated with operating a business can make or break the accuracy of an estimate. Estimators must establish a method for distributing overhead costs, direct costs, and indirect costs to guarantee all expenses are included in the estimate.
Account for Profit and Contingency: After calculating all the costs for a construction project, the estimator will adjust the total to account for profit and contingency. The profit refers to the fee contractors earn for the contract, and a contingency refers to a portion, typically between 5-10% of the total project cost, that is set aside for overruns and waste.
As an estimator moves through this process, they will continuously update their initial estimates. Every estimate is different, however the requirements defined within the process are similar across every trade.
Take Your Estimates To The Next Level With Construction Estimating Software
To win more profitable jobs, it’s essential to create more accurate estimates.
However, before you start adjusting your estimating process, take the time to analyze your current system.
- How efficiently are you completing estimates?
- Historically, how precise are your cost projections?
- Where are the consistent inaccuracies?
By providing some answers to these questions, you’ll have a place to start.
If you choose to purchase new software or upgrade to different construction estimating software, find a solution that directly solves the problems you’ve identified. As you implement new ways to estimate, always keep track of your estimating success rate.
Overall, whether it’s understanding the estimating process, knowing the common mistakes and implementing solutions to mitigate errors, or finding a different estimation method, knowing all the different aspects of estimating is important for any type of construction project.
