What is a Construction Estimate?
When working with a contractor, an important consideration will at some point come to mind: expenses, especially how budget-friendly they may or may not be. A client will want transparency from their contractor and expectations set for construction costs. Conversely, a contractor would want to be forthright about how much could be spent and how expenses account for the grand total of construction costs.
There are three words that address and resolve the above: construction cost estimating. It’s a pretty straightforward concept as all it boils down to assessing the cost of a construction project, factoring in things like materials, labor, the different means of getting to the same end product, and so on.
Simple enough, but easier said than done. It’s critical to the planning stage of a project, and necessary to have in place for understanding and trust.
How to Estimate Construction Costs
Construction cost estimating begins well before any tangible work goes toward the project in question. It’s best to think of this as a step-by-step process leading up to the actual building, making sure every step builds off the last and an overview of the financial impact is better understood.
What steps there are and what each entail are fairly consistent from project to project, each addressing a fundamental part of the construction planning process. Here’s a breakdown:
Steps in the Cost Estimate Process
1. Scope of Project
First is getting an idea of what is expected and necessary in order to meet those expectations. This is about more than getting to know wants and needs; it’s about having full awareness of the scale, complexity, and difficulty involved so as to anticipate and prepare for them. With the scope of the project in mind, not only can an estimate for costs be developed but potential costs down the road as well
2. Determining Details
After gaining an understanding of the project scope, the team can begin putting together a construction cost estimate. The degree of precision will correlate with the stage and completeness of the project’s drawings. To start, the team takes the information learned about the project scope and determines the materials, equipment, and crew needed. Costs for each are evaluated and included. Subcontractors are solicited to provide cost estimates for various trades.
Now that the team has an estimate of construction costs, they can put together the individual pieces and determine a grand total. The precision of this amount is dependent upon the level of completeness of the drawings from architectural, civil, and engineering designers.
4. Value Engineering
Value engineering is an analysis of the different elements of construction like building materials, equipment, methods used, etc, based on info gathered from the Details and Development phases. By the end of this step, there should be a clear picture of how to obtain optimal performance and quality with the least necessary amount of resources or capital expended.
5. Final Bid
This is where costs are addressed one last time, but now including markups to provide an understanding of construction costs in full with the added value of labor, administrative overhead, and profit margins. This is for the sake of both transparency and competition with other contractors to measure against their own added costs of doing business.
Construction Costs to Consider
Even a step-by-step methodology is not enough to simplify the process of construction cost estimating. There remain some big cost factors for consideration. Here are the major ones:
What are the costs of the materials that would be necessary for the completion of the construction project? Different materials can be subject to increases or decreases in price depending on the market. These factors should be considered in planning construction.
Like the price of materials, the cost of labor can be dependent on what competitive pay is standard for the market. Shortage of labor and overtime hours are also potential factors to consider when forecasting the duration and cost of a given project.
When there is a working idea of what will be built what follows is an inventory of the machinery and equipment that will be necessary to complete the project. Thinking strategically will be key here. Factors like site access, anticipated weather, and other logistics must be considered.