Construction estimators prepare cost estimates of probable project costs for materials, equipment and labor. They typically work closely with design specialists to review the blueprints.
Estimators determine a sales price that covers all direct field costs, overhead costs, and contingency while leaving a healthy profit. They also evaluate the cost of bonding and insurance coverage.
The Estimating Process
Estimators use a thorough, step-by-step process to build accurate project estimates. First, they review the bid package to get an overview of the requirements and to see if the contractor has accounted for all known costs. Then, estimators perform quantity takeoff to lay the groundwork for an estimate by measuring dimensions and quantifying materials, labor and equipment. This includes double-checking measurement accuracy and identifying nonstandard items.
Next, estimators determine indirect field costs by combining direct costs and calculating overhead rates and other project-specific expenses. This can include a variety of items, including general and administrative (G&A) expenses, management fees, project insurance, legal and financial costs, and contingency. Once the indirect field costs are determined, estimators then combine and add direct and indirect field costs to arrive at a total estimated cost.
This total is then adjusted to account for profit margin and contingency. The profit margin is based on the size of the business and growth goals, while the contingency number varies across construction businesses, depending on the amount of risk involved in specific projects. Once the profit and contingency are added to the estimated cost, estimators have a sales price that covers all material, labor, equipment and overhead costs and returns a healthy profit. This estimate is then communicated to stakeholders to begin a bidding process.
Creating Work Packages
The creation of work packages is the next step for estimators. Contractors will review these work packages as part of the bid process, so it is important that the details are accurate. This means calculating what materials will be needed, how much inventory is required and what manpower is expected to be on site at what time.
In order to make these calculations, estimators must first perform a takeoff of the project. This can be done manually or digitally. It involves examining construction drawings, taking measurements and creating a list of required materials. This includes everything from the number of nails that will need to be used on a roof, to the amount of tin coil flashing that will be necessary.
Once the work package is complete, it must be reviewed by both general and specialty contractors to ensure that all of the required components are included. This also allows for a discussion about project schedules and any potential issues that may arise. It is essential that the final work package includes all of the costs that will be incurred, including indirect expenses such as travel and a host of other costs that are not often included in estimates. Finally, the work package should clearly state a timeframe or timeline for how long it will take to complete.
Creating Bids
When the estimate is complete, it is time to turn it into a bid. This will involve a few important tasks, including reviewing the tender package, determining how to price each aspect of the project, evaluating potential risks and creating a contingency.
To create a cost estimate, estimators will need to use data from the design estimate, subcontractor quotes, quantity takeoffs, material costs, construction processes, direct and indirect expenses and their own profit margin. Using this information, estimators can make an accurate estimate of all the materials and labor needed to complete the project. They will also need to calculate their markup for the job, which is the amount they will be adding to the final cost of the project.
Another major part of creating a bid is figuring out how to price each piece of equipment and material. This will involve determining their unit rates and then multiplying that number with the amount of each material required to get an estimated cost. This process can be made much easier with the help of digital estimating software.
Lastly, contractors will need to factor in their bond and insurance costs. These costs aren’t always clearly laid out in the tender package but are necessary for the contractor to operate their business. Estimators will determine how to allocate these costs across their entire business annually and then apply those amounts to the specific projects they are bidding on.
Creating Construction Proposals
Once the estimator has a clear understanding of the scope of work and the project specifications, they can begin to create a construction proposal. The proposal is a document that summarizes the estimated costs for materials, labor and equipment needed to complete the job. The proposal also includes any miscellaneous fees, like permit charges. The cost estimate is presented in a separate section of the proposal from the Scope of Work, which can help to build trust and transparency with clients.
The construction estimate also includes a breakdown of the materials that will be used in the building, based on information from the drawings and quantity takeoffs. It is a good idea to visit the site before creating an estimate as it can help the estimator identify any materials that may be overlooked in the quantity takeoff.
In addition to material costs, the cost estimate will include labor and equipment costs, as well as any indirect costs, like overheads and profits. It is important to be honest about these costs, as a lack of profitability could hurt a business in the long run.
Using a cloud-based estimating software can help to streamline this process and get proposals out quickly when there are deadlines to meet. This helps to increase the chances of winning bids and builds a strong reputation for the company.