Building services estimating calculates the anticipated cost of a project based on specifications. This allows companies to provide precise bids that could attract more customers.
An estimate can help contractors establish a realistic budget for a construction project by creating work packages. This improves the efficiency of the construction process while safeguarding profit margins.
Scope of Work
An effective construction project starts with a clear scope of work. A scope of work (SOW) is a detailed description of all the activities necessary to complete a construction project, including the necessary materials and labor. It sets client expectations, helps prevent misunderstandings and ensures the project is completed on time and within budget.
Scopes of work are typically prepared by the contractor preparing the bid estimate, with input from the architect or engineer and building team members. They include a complete breakdown of all the construction activities with cost per square foot models and detailed listing of construction equipment. They also may contain information unique to the construction site, such as soil testing requirements, temporary utility services, daily clean-up, builders’ risk insurance and on-site supervision.
Once a thorough SOW is written, it’s used to prepare a bid estimate that will be the basis for a contract. The bid price will incorporate direct costs for building materials, labor and equipment, as well as indirect costs like transportation and smaller types of equipment and a profit margin for the contractor.
Developing a scope of work takes time, effort and collaboration with all parties involved in the project. But the extra effort is worth it to avoid costly misunderstandings, construction payment disputes and lost business opportunities down the road.
Material Takeoff
The material takeoff process is critical to the construction estimating procedure, generating the list of raw and prefabricated items that will be used in a project. This is a distinct step from the estimation process, which figures out present material pricing and other costs like equipment, labor, overhead, etc.
The takeoff can be done manually or digitally, and it must be accurate for a successful construction estimate. A poor takeoff can cost contractors a lot of money if they miscalculate and order too many materials or too few. The cost of additional workers and the price of wasted materials can quickly add up, reducing profit margins.
Regardless of the method of takeoff, there are four units that must be considered for an effective result: surface area, length, volume, and count. Surface area measurements are common for items like drywall, flooring, and paint; length is required for plumbing, electrical, and site water reticulation; and volume is measured for concrete, sand, gravel, and similar projects.
During the takeoff process, estimators must carefully review the blueprints or construction drawings for the project and reference a database of material costs to create an itemized list of needed materials. They should also build in a margin for price fluctuations to avoid surprises on the jobsite and ensure that they have enough material to complete the scope of work within budget.
Bid Documents
When construction companies are invited to bid on a building project they are often sent a tender package. Usually this document will contain the construction specifications (specs) of the project. This document will explain the grade of materials, the type of installation methods and other aspects of the work to be performed. It may also describe any other parameters that could affect costs.
These spec documents are the basis for cost estimates which can be based on quantity takeoffs or constructed from commercial reference manuals such as Means Cost Data, Dodge Manual for Building Construction and digests of actual project costs by project type. Alternatively construction estimates can be decomposed into contract items such as footings, elevator pits and formwork that can then be priced by subcontractors. This method is often used in government construction.
Contractors that prepare cost estimates for projects are usually given a deadline within which to submit their bid. Many are required to follow highly regulated submission procedures. This can make it difficult to find time for accurate estimating. Moreover the cost estimates are generally reviewed by others to ensure they are comprehensive and competitive. The review process may involve asking questions and comparing the cost estimate to the other bids. If the cost is significantly higher or lower than the average it could indicate that the estimate has errors. Errors should be corrected before the final bidding stage.
Subcontractor Bids
Construction bidding is a crucial step in the construction process. The contractor’s ability to bid well can make or break the project. Contractors can improve their bidding skills by developing a check system that they use with every estimate, attending pre-bid meetings, doing site visits and getting clarification wherever there’s doubt. Also, they can do their best to review CSI codes and specifications, putting in the time to get them right the first time, which can save time in the long run.
Once the contractors have a good understanding of the scope and the material quantities, they are ready to create construction cost estimates. These estimates are then used to generate work proposals called project bids. The bids are based on a series of estimates of all the costs related to the construction of the project including hard and soft costs, overhead and profit.
Estimators use various sources of cost data to prepare the estimates. The most commonly used sources are commercial reference manuals that contain unit prices for the construction items (e.g., Means Construction Cost Data and Dodge Manual for Building Construction). Additionally, they may also utilize published construction methods that have been analyzed by engineering professionals to determine the expected cost to construct a specific design.
There are several different construction estimating software programs available to help with the bidding, takeoff and estimation processes. Buildertrend is one such program that offers a complete suite of software tools that covers bidding, estimating, project management and field service.