# Construction Estimating 101

Construction estimating is one of the most important skills a contractor can develop. Accurate estimates are essential for securing bids, avoiding cash flow issues, and ensuring clients get the construction they want.

Developing accurate estimates is a complex process, but there are some common practices that estimators should follow. These tips will help you create more reliable estimates and improve your overall estimating process.

## Quantity Takeoff

Construction estimating is a complex and time-consuming process. It requires extensive planning and knowledge about building processes to deliver an accurate forecast of the project cost. Quantity takeoff is the first step in this process, as it provides the necessary details for a reliable estimate.

In construction, a quantity takeoff is the process of taking measurements from drawings and plans in order to create an estimate of the materials that will be needed for a project. It is often used as a pre-bidding step and is often performed by the estimator on the job site.

A quantity takeoff can be conducted manually or digitally. Manual takeoffs involve taking measurements of individual items by hand and recording them in a list. In digital takeoffs, drawings are scanned and input into computer programs.

The takeoff process involves analyzing the project plans and identifying which physical materials the architect, engineer or draftsperson specified. These material specifications are then used to build an estimate of the total costs for the required materials.

Typically, quantity takeoffs are material-specific and exclude other needs, such as labor, permits, insurance, equipment and incidentals. Whether you do it by hand or digitally, the takeoff is a key part of the estimating process.

When calculating the total quantity of materials, you need to know how much each individual item weighs. This information is vital to calculating transportation costs. Additionally, you need to count items by length and width.

You also need to make sure that you count the exact number of lights, pipes and electrical wires. Once you have all the measurements, multiply them together for an accurate unit total.

Once you have the unit totals, you can then use them to calculate other factors. For example, you can measure the length of the circuits and determine how many fuses or switches you need to complete the job.

Performing the takeoff process is a crucial aspect of any construction project. It is essential to the bidding process, and it should be done by everyone involved in the front end of a building project.

## Cost Estimates

Whether you’re a builder or contractor, getting cost estimates right is crucial to the success of your business. When you don’t have an accurate estimate, you could lose jobs, undercut your competitors and damage your reputation.

Accurate construction estimates are particularly important when it comes to projects with tight budgets or deadlines. They can make or break the project, especially if public money is involved.

When preparing cost estimates, you need to consider a wide range of factors. These include the client’s vision, input from the design team, material availability and all of the necessary budget requirements.

As a contractor, you may also need to factor in the local economy. Labor costs, for example, are constantly changing depending on demand and skill level. In addition, you’ll need to adjust historical labor data to account for inflation.

The next step in creating a construction estimate is to compile the materials needed for the project. This process is known as quantity takeoff. The material list you create will include every type of material that’s needed for the construction project and its expected price at the time of purchase.

A quantity takeoff is an essential part of the cost estimating process. This is because it allows you to determine the exact materials you’ll need to complete a project.

During this stage, you’ll also need to include your estimated equipment and overhead costs. These can include fuel, maintenance and facilities.

Another vital element of a cost estimate is peer review. This involves performing spot checks to verify quantities and costs, as well as checking the scope of work to ensure that everything is covered in the estimate.

You can do a cost estimate on your own, but it’s usually better to use a professional to prepare one for you. They’ll be able to take advantage of their experience with similar projects and help you avoid errors and potential mistakes that could lead to extra costs down the road.

Cost estimations are used in a variety of ways, from sketching out a project during the pre-construction phase to bidding on a project. They’re also used to ensure that the final costs don’t exceed the client’s expectations. Whether you’re a builder, consultant or a contractor, getting your cost estimates right is essential to the success of your business.

## Contract Negotiations

Negotiation is an important process in construction estimating. It involves negotiating with the owner or subcontractor about project terms, including contract price, payment amount, work scope, and schedule. The success of these negotiations depends on the skill of the negotiators and how well they can communicate with one another.

A key component of negotiating in the construction industry is understanding the constraints and objectives of each party. For example, a general contractor wants to obtain a construction contract that meets its budget and schedule requirements while a subcontractor needs a competitive payment arrangement that allows them to perform the required work on time.

The negotiation process can be effective when parties focus on their own interests, brainstorm possible solutions, and base their agreements on objective criteria. Using the principles of Pareto optimal agreements, they can develop a range of possible options that best satisfy both parties’ interests.

When a contractor submits a bid for a project, it is based on a number of factors that include an estimate of the direct job cost, general overhead, and the confidence that management has in this estimate. Those factors, combined with the propensity to risk greater profit versus the possibility of not getting a contract, determine the contractor’s decision to submit a bid.

In addition to the direct job cost, other factors that may influence a bid include the risk of inaccurate estimation of quantities for some key tasks and the contractor’s propensity to raise or lower its unit price when a task is underestimated. These effects can vary significantly from contractor to contractor and are dependent on the contractor’s confidence in its estimates of these factors as well as its propensity to risk.

These effects are sometimes exploited by contractors to gain a higher price for the estimated job cost by raising its unit prices when some tasks are underestimated and lowering its unit price when others are overestimated. In some cases, this strategy can increase the contractor’s profits, while in other instances, it can reduce the contractor’s profits.

Another issue that can be exploited by contractors is a conflicting clause in the contract relating to changed work. A contract may allow a contractor to proceed with changed work without an agreement for compensation if the changes are approved by the owner in a Change Order. However, this language can also provide the owner with the right to order the contractor to complete extra work if the change is not approved in a Change Order. This can have significant consequences for a contractor, because the additional work may be subject to a reduced payment or no payment.

## Subcontracting

Subcontracting is the practice of hiring a third-party company to complete a specific job function on a construction project. It is a common practice in the industry and can be beneficial for both parties involved.

Subcontractors may specialise in various types of work, from installing artificial turf to cable splicing to leather crafting. They also have the option to work on a freelance basis, which gives them more control over their career and enables them to choose projects that will help grow their skill set.

The best subcontractors have strong time management skills, organisational capabilities and confidence. They can easily create a schedule that fits their own needs and allows them to complete the job on time.

One of the most important things to remember when subcontracting is to have proper insurance in place. This will protect you from legal liability, particularly if you are injured on the job or damage someone’s property.

Many prime contractors will require you to carry a policy that covers your business as a subcontractor. In addition, they will want to ensure that you have an up-to-date tax file with the Internal Revenue Service.

Another thing that clients will want to know about subcontractors is their experience. Having extensive knowledge in your field will allow you to provide value engineering services that will increase the overall value of the project.

In addition, you should have a good understanding of the client’s budget and goals for the project. Using this information in your estimate will allow you to prepare a competitive bid that is in the client’s best interest.

A properly completed estimating process will help you determine what materials are needed to complete the job. It will also give you an accurate idea of how much labor and equipment will be needed.

You should also factor in soft costs such as permits and inspections when building your estimates. These are not included in the base price of your estimates, but can have a significant impact on your bottom line.

Always make sure you fully assess the risks of each project and build in contingencies to avoid overspending on your estimates. Failure to do so can lead to costly losses when unexpected issues arise.