Inaccurate estimates result in costly projects that lose money and could potentially put a construction company out of business. It only takes one bad estimate to sink a project.
Estimators must work with shifting costs for materials, equipment and labor. These prices can change dramatically between the time an estimator starts a bid and the start of construction.
Materials
The first step of creating a cost estimate is determining the required materials for a project. Estimators use the blueprints of a construction project to determine quantities and types of materials. Then, they calculate the total cost of materials and labor by multiplying the materials and labor costs by a number that represents the time it takes to complete each task. Using this calculation, the estimator can then present a bid that reflects the estimated cost of materials and labor.
The biggest challenge for a contractor during the estimation process is predicting material prices. This is because the prices of building supplies can change drastically between the time an estimator begins to compile a bid and the project starts construction. This is why a construction estimator needs to establish relationships with suppliers and manufacturers that can help them lock in prices during the estimating phase.
Labor is another one of the most difficult costs to accurately estimate. This is because workers can vary in their skill level and experience, making it hard to know how much they will charge for a specific job. Some contractors may even employ an in-house estimating department that can calculate labor rates for them. However, it’s important for estimators to keep records of past jobs, so they can compare the actual cost of labor versus their estimates and identify areas where they can improve their accuracy.
Creating a list of equipment that is needed for the project is another key aspect of construction estimating. This includes everything from cranes and forklifts to electrical tape and threading oils. It is also important to consider the rental cost of any equipment that will be used on the project. Once the estimator has a comprehensive list of equipment, they can start working with supply companies and manufacturers to get pricing information that will be used in their bids.
Creating a construction estimate can be a long and complicated process. It is essential that the contractor does their research and uses a reliable software program to ensure that they are providing an accurate estimate. This will save the project owner money and will also help them make informed decisions about hiring a construction contractor for their project.
Labor
A good construction estimator has the skills and knowledge to look at technical documentation and blueprints to determine estimates on time, cost and material. They also work with a wide variety of people to review those estimates and make changes. The result is an estimate that is accurate and on target.
A key aspect of the job is a detailed quantity takeoff, which includes line-by-line costs for the types and amount of materials needed to build a structure. This requires a keen attention to detail, including a thorough count of each item, because even one miscount can throw off an entire estimate. The estimator must be familiar with the local market, too, so they know which materials are available at what price. And they need to be aware of any factors that may impact the time and cost of building a project, such as weather and site conditions.
Labor is a large portion of a construction budget, so any miscalculation can have a significant impact on the overall project cost. The estimator needs to provide a complete breakdown of man-hours and include wiggle room in case extra workers are needed due to change orders or unexpected challenges on the project.
Miscellaneous expenses are another big part of the overall estimate. These can include items such as quality control, security, utilities, administrative fees and permit costs. The estimator needs to consider these as well as the labor burden costs mentioned earlier, including payroll taxes and overtime.
Finally, there are the indirect costs. These are the costs that aren’t directly associated with construction activities, but are still necessary to run a business. These can include insurance, office space, utilities and janitorial services. The estimator needs to be aware of these costs as well as the other hidden costs that can creep up on a project, such as delays and change orders.
Construction estimating is a highly complex and often time-consuming process. It requires a lot of knowledge, skill and experience to do well. And it’s important for estimators to stay up-to-date on industry trends and practices. If they don’t, their estimates can be off by a huge margin and it could cost them a project or a business opportunity.
Equipment
Whether it’s cement mixers, cranes or anything in between, the equipment used in construction projects can have a major impact on total project costs. Construction estimators need to understand how much these equipment items cost and be able to factor them into the overall estimate.
The estimating process requires a lot of time and effort, but it can be streamlined by using specialized software. This software allows estimators to create estimates more quickly and with greater accuracy. This helps them stay within budget and complete the project on time. It also helps them save money on labor and materials, which is a win-win for everyone involved.
When creating an estimate, a contractor will start by reviewing the project plans and specifications. These documents help establish the scope of work and provide a framework for pricing. The technical specifications, which come in various divisions such as concrete, masonry, metals, and finishes, are generally laid out in the MasterFormat created by the Construction Specifications Institute. Taking a walk through the job site, where necessary, will also help the estimator determine the required materials for each project.
Next, the estimator will develop a bill of quantities. The bill of quantities is an itemized list of work that must be completed, a document that is prepared prior to bidding for a construction project. It is usually a four-step process, which includes preparing an inventory of the project’s scope, doing a quantity take-off, abstracting and ordering the squared dimensions of each item, and making deductions for voids and openings. The resulting estimate provides an accurate representation of the work and materials that must be provided for the project.
Finally, the estimator will contact the project’s suppliers to establish pricing for materials and equipment. The estimator will typically ask for quotes from several vendors and use their average costs to calculate the final estimate. The resulting estimate will also include soft costs, such as accounting fees, legal charges, insurance and permits, as well as the hard costs of materials and labor.
Having an accurate estimate for a construction project is important to ensure that it stays on budget. Budget overruns are a reality in construction, but keeping the project on budget is possible with proper planning and careful estimates.
Subcontractors
Many projects require the use of trade contractors, and the estimator needs to determine how much each contractor is going to charge for their work. They do this by reviewing the technical specifications, which are broken down into divisions such as concrete, masonry, metals, finishes, and dozens of others. The estimator will also subdivide the work into individual “work packages” and assign them to specialized subcontractors. This process helps ensure that every item in the project scope is accounted for, and that no one gets overcharged for work they’re not required to do.
Labor is another difficult cost to estimate. Experienced workers may be able to get more done in the same time as a worker with less training, so it’s important that the estimator takes into account the skill level of the crew they are working with. In addition to the labor rates, the estimator must take into consideration payroll taxes, worker’s compensation insurance, and unemployment costs.
Depending on the location of the project, material prices can vary. For example, dense urban areas can lead to higher material prices due to traffic and site storage limitations, while rural locations can have lower material costs as a result of lower wage rates. Also, if the equipment needed for a specific project is not already in the contractor’s inventory, they will need to contact the equipment vendors to learn about their pricing for renting or leasing this gear for the duration of the project.
Once all the necessary information is collected, the contractor will put together a construction estimate for submission to the owner or design team. For projects in the early stages of development, this may just be a rough estimate to see whether the project is feasible within a budget. Estimators often prepare these estimates using costs from comparable projects to help establish realistic expectations for a client.
Once the estimate is complete, it’s reviewed by the general contractor and the design team to make sure that everything is included in the bid price. Keeping the estimating process organized by building it around the CSI format helps to make it easier for all parties to understand what’s included in the bid price. Additionally, the process of preparing change orders is typically built into the construction estimate to help with any unexpected changes that occur during construction.