Providing a well-thought-out construction cost estimate can reduce risk to project owners, making the process more efficient. But if an estimator rushes through the preparation process, the quality of the result can suffer.
Parametric estimating relies on a linear relationship between cost and units such as square foot or volume. This type of estimating works best when the design is in the early stages and has a low level of complexity.
1. Conduct a Site Visit
Site visits are essential to a successful construction estimate. Without one, it is easy to miss important issues that could impact your project’s final cost. The best way to identify these factors is to tour the job site and meet with your customer.
Meeting with the community can also help you identify local concerns and potential sources of information that may be overlooked from remote observations or secondary data. For example, a health assessment at a former sand mine petitioned for environmental remediation discovered that children often played nearby and ingested contaminants from contaminated soil and water. A subsequent site visit and discussions with community members revealed that this was an ongoing problem.
The quality of the data collected during a site visit is typically rich and contextual, making it highly valuable in research, planning, or decision-making processes. For example, the data gathered by health assessment researchers or visitors at a site scoping visit might reveal information that would have otherwise been missed, such as the presence of toys in a drainage ditch connected to a wood treatment lagoon, or that the site is located near schools, daycares, playgrounds, and retirement centers where people might be exposed to contaminant levels.
Building material costs are another of the most difficult construction estimates to prepare, due in part to a lack of reliable and current pricing data. In addition, the prices of many materials depend on demand and supply, which in turn can be affected by market and economic conditions. Because of this, it is important to establish relationships with building product suppliers and manufacturers early in the process. This will help you establish accurate pricing and lock in pricing for your project.
2. Perform a Material Takeoff
Material takeoff is a crucial part of the estimating process, because it ensures that you have all the materials needed to complete your project. This step helps avoid costly suprises down the road by giving you an accurate picture of how much materials are required. In addition, it also makes sure that you are bidding on the right amount of materials, which is critical to staying within your budget.
The first step in preparing a material takeoff is to calculate the total quantity of each construction item using your blueprints and other project documents. You can either perform a manual takeoff by counting the items by hand or use digital takeoff tools to save time and effort. Regardless of how you perform your takeoff, it is important to use the same method every time so that the results are consistent and accurate.
Once you have your total quantity of each construction item, you can then begin to assign cost estimates to each material. This step is usually done by referencing a database that provides information on material costs in your area or by looking at the price of raw materials from local suppliers.
The last step in preparing your material takeoff is to compile the quantified data into a structured format. You can do this manually with spreadsheets or automatically using digital takeoff software tools. It is important to organize the data by material type, location and other categories so that you can easily reference it in your estimating process.
3. Create a Schedule of Work
Creating a schedule of work, an itemized list of the labor, materials, and equipment required for a construction project, is a critical step in the estimation process. This is the basis for a contractor’s bid, and it ensures that all necessary costs have been included. It also helps prevent cost overruns down the road.
This list is often called a bill of quantities and may be prepared by a number of methods, depending on the level of detail needed and how accurate an estimate is to be. For example, unit cost estimating associates unit costs with the assemblies of each stage of construction, while activity-based estimating uses bottom-up calculations to estimate resource and equipment requirements. Model-based estimates use a 3D computer model to perform quantity takeoff, which improves accuracy.
Estimators must adjust standardized cost data to local economies, and they should account for material costs that vary by season or region. They should also factor in inflation, and many rely on building product manufacturers and suppliers for pricing information.
It is also important to create a work package for each construction element, so there are no gaps in your estimate. This allows for the inclusion of indirect field costs, smaller types of equipment, temporary structures, design fees, and legal fees. Additionally, most estimators add a margin for profit and a contingency amount, which is an allowance set aside for unanticipated costs. These figures can include factors such as unforeseen material wastage or weather-related delays.
4. Submit a Bid
A final step in the construction cost estimating process is to submit a bid. Once the project design is finished, the architect or engineer will release the scope of work to contractors so they can prepare their bids. The contractor with the lowest bid will be awarded the contract.
When preparing a bid, it’s important to follow industry norms and standards for measuring units and following cost-recording procedures. This will ensure that the estimate is verifiable and can be easily handed off to another estimator if necessary. Additionally, the estimator should use either an analogous or parametric approach to forecast costs for materials and labor. Both models offer advantages and disadvantages based on the type of information available, how much time is available, and the level of accuracy needed.
In order to accurately predict the costs of a project, it’s also essential to understand the risks that could increase or decrease costs and build those into the estimates. One of the biggest risks is unpredictable material prices, which can significantly impact the overall cost of a project. To combat this issue, the estimating team should consider using software that offers dealer integration, which provides real-time material data.
It’s also important to keep in mind that the cost of a project includes not only hard costs, such as building products and labor, but soft costs as well, including design fees, permits, legal fees, and temporary structures. Estimators should also factor in a profit margin to account for their personal and business expenses.