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Construction Cost Estimator – How to Make an Accurate Construction Estimate

There are several ways to make a construction estimate, and the choice of method depends on what you need it for. The level of accuracy you expect and the effort required to prepare it also affects your choice.

Cost estimates must factor in bonding and insurance costs. These costs add up and can ruin a project’s profitability if not included in the estimate.


Cost estimators are an important part of any construction project, but they face unique challenges. They must create estimates that are accurate to current market costs while predicting future prices and supply availability. They must also be able to make adjustments quickly in response to changes in scope. These factors can make estimating costly and time-consuming. Fortunately, new software has made the process faster and easier.

Whether they are working for a general contractor or a specialty contracting company, construction cost estimators use similar processes to prepare a building estimate. They begin by reviewing a set of technical specifications and construction documents. They then divide the project into work packages that can be assigned to a specific specialty contractor or trade. Then they calculate the labor hours for each installation item using a man-hour rate times the take-off quantity. This is known as an empirical construction cost estimate.

After calculating the costs of materials, equipment, indirect field costs, and overhead costs, estimators adjust the total to account for profit margin and contingency. This is a standard procedure that ensures the project will be profitable and allow contractors to return a healthy profit to their business. Each construction business determines its own minimum attractive profit margin based on growth goals, market conditions, and other factors. Many companies also include contingency, which is a buffer to cover cost overruns and waste.


A lot of time is involved in construction cost estimation. It is often an arduous process that requires a great deal of patience. This is because the estimator has to go through various processes and factors in order to come up with an accurate estimate. Some experts even recommend working with multiple construction cost estimators to reduce the chance of errors.

The first step in preparing a construction cost estimate is to identify the project components that require work. This process is called quantity takeoff. It includes measuring and cataloguing each piece of equipment, materials, and labour required for the project. The result is a list of quantities that are then compiled into a comprehensive cost estimate.

These estimates include direct, indirect, and overhead costs. Direct costs are accountable expenses that directly link the product, facility, or function to its completion. Indirect costs include administrative, travel, security, and overhead costs. Overhead costs are calculated as a percentage of total direct and indirect costs.

A cost estimate should also factor in the risks and backup plans. This step is crucial in ensuring that the project is on track to meet its goals. It should also incorporate the costs of insurance and bonds, which are essential for contractors to operate legally. If these costs are not included in the estimate, they may be passed on to the contractor during the bidding process.


In construction, materials are the foundation of building projects. Often, the project cost will vary depending on the type of materials used and their availability. Using local materials and taking advantage of discount rates can help reduce costs. However, estimating the proper amount of materials isn’t easy. It’s essential to understand the project’s scope and budget before determining the total cost.

Professional construction estimators use a number of techniques to create accurate estimates. They start by reviewing the bid package and analyzing the construction specifications. They also consider labor, equipment and insurance costs and add markups for profit and contingency. This process takes time and expertise, and a level 5 estimate is not finished until construction begins.

Another technique is bottom-up estimating, which identifies each input on a project and calculates the cost of each component. This method is used in estimating projects that require detailed engineering, such as commercial buildings and power plants. The resulting estimate is more accurate and can be compared to other projects with similar components.

In addition to these methods, it is important for those who prepare estimates to visit the proposed site and know the local market. It is also helpful to use an annual cost book that contains the latest pricing data for different types of projects and trades. Several print titles are available, or you can use RSMeans Data Online for cloud-based access to the same data.


Construction estimating is an important part of the project life cycle and requires a variety of skill sets. Estimators must be able to communicate with people from different disciplines and understand the complexities of construction projects. They also need to be able to make decisions that will impact the project’s overall budget. Estimators often work with other professionals in the office, including project managers, designers, and engineers. They must be able to coordinate these efforts and provide consistent information on projects.

The first step in constructing a cost estimate is to review the project documents, including design drawings and specifications. The estimator will use this information to evaluate the material and equipment needs for the project. For example, he or she will evaluate the structural requirements of the building and take into account the mechanical, electrical, and plumbing (MEP) requirements.

Next, the estimator will divide the project into work packages. These work packages will be assigned to specialty contractors later in the process. The estimator will also ensure that no work is duplicated in the work packages. Otherwise, the contractor’s bid will be too high.

The estimator can use a variety of resources for preparing an estimate, such as RSMeans’ annual cost books or the online version of CostWorks. These cost databases contain pricing for many types of projects and trades.