Your Construction Estimating Fundamental Questions, Answered

Construction estimating is the process of calculating the likely cost of completing a building or civil engineering project. It involves assessing the drawings, specifications and scope of works to establish the quantities of materials, labour, plant, equipment and subcontractor services required, before applying appropriate costs.

A reliable estimate is essential for both contractors and clients. Contractors need to know what a project will cost before committing to a tender price, while clients need confidence that their budget is realistic. An estimate that is too low can quickly turn a profitable job into a loss. An estimate that is unnecessarily high can make a contractor uncompetitive.

Good estimating is not simply about arriving at a final figure. It provides a breakdown of where money will be spent, identifies potential risks and allows different construction methods or specifications to be compared.

Specialist software such as Cubit Estimating, supplied by BSS Software, brings quantity measurement and cost estimating together, allowing estimators to develop their estimates directly from construction drawings rather than managing separate manual calculations and spreadsheets.

Although the approach varies depending on the type and size of project, most construction estimates follow a similar process.

Review the project information. Examine the drawings, specifications, schedules and tender documents to understand what is included in the works and identify any missing information.

Measure the quantities. Carry out a quantity takeoff to establish the amount of work involved. This might include measuring areas, lengths, volumes and individual components.

Build up the costs. Apply material, labour, plant and subcontractor rates to the measured quantities. Where necessary, obtain current quotations from suppliers and specialist subcontractors.

Allow for project-specific costs. Include preliminaries, site establishment, supervision, temporary works, access requirements and other costs that may not be covered by individual trade rates.

Review risk, overheads and profit. Consider the uncertainties involved in delivering the project and establish the appropriate commercial allowances.

Check and finalise the estimate. Review quantities, rates, exclusions and assumptions before producing the final estimate or tender submission.

The final review is particularly important. Even with accurate measurements, an overlooked specification requirement or an incorrect rate can have a significant effect on the project price.

The terms estimate, quotation and tender are often used interchangeably in construction, but they serve different purposes.

An estimate is an assessment of what a project or particular element of work is expected to cost. It may be prepared during early design, for budgeting purposes or as part of a contractor's internal pricing process. Its accuracy depends on the information available and the level of detail used.

A quotation is generally a price offered to carry out a defined scope of work or supply specified materials or services. It will normally include terms, conditions, exclusions and a period of validity. Whether the quoted price is binding depends on those terms and the contractual circumstances.

A tender is a formal offer submitted in response to an invitation to tender. It is usually based on a defined set of documents and may include a priced Bill of Quantities, programme, qualifications and other information requested by the client.

For example, a contractor might prepare an internal estimate of £450,000, obtain quotations from subcontractors to support that figure and ultimately submit a tender price of £485,000 after considering preliminaries, overheads, risk and profit.

Understanding these differences helps ensure that costs are properly assessed before a commercial commitment is made.

Construction estimating and quantity surveying are closely related, but they are not the same thing.

Estimating is primarily concerned with determining the likely cost of carrying out construction work. An estimator measures quantities, builds up rates, obtains supplier and subcontractor prices, and prepares cost estimates or tender submissions.

Quantity surveying covers a broader range of commercial and cost management responsibilities throughout the life of a construction project. Depending on the role, a quantity surveyor may prepare cost plans and Bills of Quantities, advise on procurement, value completed work, assess variations, manage contractual payments and agree final accounts.

There is considerable overlap between the two professions. Many quantity surveyors carry out detailed estimating work, particularly during pre-construction, while experienced estimators may also be involved in cost planning and tender analysis.

Both rely on accurate measurement and well-structured cost information. Cubit Estimating, available through BSS Software, is used by estimators and quantity surveyors to measure drawings, prepare estimates and, with the appropriate product version, produce Bills of Quantities.

A preliminary construction cost estimate is an early assessment of the likely cost of a project, usually prepared before the design and specification have been fully developed.

At this stage, there may not be enough information to measure every building element in detail. Instead, the estimator may use floor areas, building volumes, elemental cost allowances, benchmark rates from similar projects or historical cost data.

For example, an initial estimate for a proposed office building might be based on its gross internal floor area and an appropriate cost per square metre. Adjustments would then be made for factors such as location, building specification, site conditions, external works and project complexity.

Preliminary estimates are particularly useful for feasibility studies, early budgeting and comparing design options. They help clients establish whether a proposed scheme is financially viable before committing to detailed design work.

The important point is that a preliminary estimate should clearly state its assumptions, exclusions and level of uncertainty. As the design progresses and more information becomes available, the estimate can be developed into a more detailed cost plan.

A detailed construction cost estimate is a comprehensive breakdown of the anticipated costs of carrying out a construction project, based on sufficiently developed drawings, specifications and other project information.

Unlike a preliminary estimate, which may rely heavily on benchmark rates or approximate quantities, a detailed estimate involves measuring individual elements of work and applying specific rates to each item.

These costs are normally organised by trade, work section or element. For example, a detailed estimate might separately identify excavation, foundations, concrete, reinforcement, masonry, structural steelwork, roofing, internal finishes and mechanical and electrical installations.

Labour, materials, plant and subcontractor costs are assessed alongside preliminaries and other project-specific allowances.

The result is a structured estimate that can be checked, revised and used to support tender preparation, procurement and cost control.

Using digital takeoff and estimating software such as Cubit Estimating allows the measured quantities to remain connected to the estimate. This is particularly useful when drawings are revised or alternative specifications need to be priced.

The quality of a construction estimate depends heavily on the information available at the outset. The more complete and coordinated the project documentation, the easier it is to establish accurate quantities and realistic costs.

For a detailed estimate, the main documents normally include:

• Architectural drawings, including plans, elevations, sections and details.
• Structural and civil engineering drawings.
• Mechanical and electrical drawings and specifications, where applicable.
• Specifications, schedules and descriptions of the required work.
• A Bill of Quantities or schedule of works, if provided.
• Site information, including ground conditions, access restrictions and existing services.
• The proposed construction programme and any phasing requirements.
• Tender instructions, contract conditions and other commercial requirements.

It is also important to confirm the drawing revisions being used. Pricing an outdated drawing can result in substantial omissions or incorrect quantities.

Where information is missing, the estimator should raise queries and record any assumptions made. An estimate should never give the impression of certainty where important design decisions have yet to be made.

Digital estimating systems can help organise the measurement and pricing process, but they do not remove the need for a thorough review of the project documentation.

Construction labour costs are generally estimated by establishing how much work needs to be carried out, how long that work is expected to take and the cost of the labour required.

One common approach is to use a labour productivity rate. For example, if a two-person team can install 40 m² of a particular floor finish in an eight-hour working day, the labour requirement is 16 person-hours for 40 m², or 0.4 person-hours per m².

If the fully burdened labour cost is £25 per person-hour, the estimated labour cost would be £10 per m².

EXAMPLE LABOUR RATE BUILD-UP

Labour hours per m² : 0.4 hoursCost per person-hour: £25Labour cost per m²: £10.00

Illustrative figures only, not current market labour rates.

The hourly labour cost should reflect the actual cost to the business, including relevant employer contributions, holiday pay and other employment costs.

Productivity also needs careful consideration. Restricted access, working at height, complex detailing, weather conditions and site congestion can all affect how much work a team can complete.

Historical records from completed projects are particularly useful when developing labour rates, provided they are adjusted for the conditions of the new project.

Material quantities are calculated by measuring the relevant elements of a building from drawings, schedules or digital models. This process is known as quantity takeoff.

The method of measurement depends on the material involved. Concrete is normally calculated by volume, brickwork and plasterboard by area, pipework by length, and items such as doors, windows and sanitary fittings by number.

For example, a concrete slab measuring 10 metres long, 6 metres wide and 200 mm thick would require a net concrete volume of:

[ 10 times 6 times 0.20 = 12text{ m}^3 ]

This establishes the geometric quantity. Any additional allowance for ordering, waste or site conditions should be considered separately.

Similar calculations are carried out for the other elements of the building, taking account of openings, deductions and the relevant measurement rules.

Traditionally, estimators measured drawings using scale rulers and recorded quantities manually. Today, digital takeoff software allows measurements to be made directly from PDF, CAD and other supported drawing formats.

BSS Software supplies Cubit Estimating, which allows users to measure lengths, areas, volumes and item counts on screen and use those quantities directly within the estimating process. Its 3D visualisation tools can also help estimators check their measurements.

A unit rate is the cost of carrying out a defined quantity of construction work, expressed against a unit of measurement such as a square metre, cubic metre, linear metre, tonne or individual item.

Unit rates are used to price measured quantities in construction estimates and Bills of Quantities.

For example, a rate for laying blockwork might be expressed as £65 per m². If the measured quantity is 150 m², the estimated cost would be £9,750.

A unit rate may include materials, labour, plant, waste and other direct costs associated with completing the work. Depending on the estimating method, it may also include allowances for overheads and profit, although these can be added separately.

The estimator needs to understand exactly what is included in a rate. A rate for supplying concrete, for instance, is not the same as a rate for supplying, placing, compacting and finishing concrete.

Maintaining an up-to-date library of unit rates can save considerable time, particularly for contractors pricing similar types of work regularly.

Cubit Estimating includes price list and template facilities that allow estimators to build up and reuse pricing information across projects, while retaining control over the rates applied to each estimate.

Overheads and profit are important parts of a construction tender price, but they represent different things.

Overheads are the costs of running the business that cannot always be attributed directly to an individual construction activity. They may include office accommodation, administration, insurance, IT systems, vehicles, management salaries and other business expenses.

Profit is the return the contractor aims to make after covering the costs of delivering the project and the relevant business overheads.

A common approach is to calculate the estimated direct project costs and preliminaries, then apply an allowance for company overheads and a separate profit margin or markup.

For example:

ILLUSTRATIVE TENDER PRICE BUILD-UP

Direct costs and preliminaries: £200,000Overheads at 8%: £16,000Subtotal: £216,000

Profit markup at 10%: £21,600Tender price excluding VAT: £237,600

Illustrative percentages only. A 10% markup on cost is not the same as a 10% profit margin on the selling price.

There is no single overhead or profit percentage suitable for every contractor or project. The appropriate allowances depend on business operating costs, market conditions, competition, project complexity and commercial risk.

It is also important to avoid double-counting costs already included in labour rates, preliminaries or subcontractor prices.

Many estimating errors are caused by relatively straightforward issues rather than complicated calculations. Small omissions or incorrect assumptions can have a significant effect when repeated across a large project.

One of the most common problems is missing items from the estimate. This can happen when drawings are not reviewed thoroughly, when specification requirements are overlooked or when an estimator assumes that a particular element is covered elsewhere.

Other frequent mistakes include using outdated drawings, measuring quantities incorrectly, applying unsuitable unit rates, failing to obtain current subcontractor prices and underestimating labour requirements.

Preliminaries are another area where costs can be missed. Site accommodation, supervision, temporary services, scaffolding, access equipment and waste management all need to be considered where applicable.

Changes during the tender period can also create problems. If revised drawings are issued and the estimate is not updated consistently, the final price may be based on a mixture of old and new information.

A structured checking procedure is one of the best safeguards. Quantities, rates, assumptions and exclusions should be reviewed before a tender is submitted.

Digital takeoff software such as Cubit Estimating can help reduce manual transcription and calculation errors by keeping measured quantities connected to the estimate. However, the accuracy of the result still depends on the estimator's understanding of the drawings, specification and scope of work.

Improving estimating accuracy starts with having a consistent process. Contractors who use a standard approach to measuring, pricing and reviewing work are generally better placed to identify omissions and understand how their tender prices have been built up.

One of the most useful improvements is to maintain reliable historical cost information. Comparing estimated costs against actual labour, material and subcontractor expenditure on completed projects helps identify rates and productivity assumptions that need adjusting.

Contractors should also make sure they are working from the latest drawings, use current supplier quotations and record any assumptions made where the design information is incomplete.

Separating material, labour, plant and subcontractor costs can make an estimate easier to analyse and update. It also helps when reviewing alternative specifications or investigating why a particular item appears expensive.

A second-person review can be especially valuable on larger tenders. Someone who has not been involved in preparing the estimate may spot omissions or inconsistencies that the original estimator has overlooked.

Estimating the cost of a construction project starts with understanding exactly what is being built. The estimator reviews the architectural and engineering drawings, specifications, schedules and any other tender documentation to establish the scope of work.

The next step is to measure the quantities required. This is known as quantity takeoff and typically includes measuring concrete, brickwork, plasterboard, finishes, roofing and other building elements. Labour, plant and subcontractor requirements are then assessed.

Once the quantities have been established, rates are applied to calculate the direct cost of each item. These rates may come from previous projects, supplier quotations, subcontractor prices or an established company rate library.

The estimator must also allow for preliminaries, site management, temporary works, overheads, risk and profit, as appropriate.

For example, if a project requires 200 m² of blockwork and the estimated installed cost is £65 per m², the direct cost of that element would be £13,000. The same process is repeated across the various trades to build up the overall estimate.

BSS Software's Cubit Estimating allows quantities to be measured directly from PDF and CAD drawings and linked to the estimate, making it easier to check measurements, apply rates and review the overall project cost.

The right software can support these procedures. Cubit Estimating, supplied by BSS Software, combines digital quantity takeoff and estimating, with facilities for reusable templates, price lists and drawing-based measurement. This allows estimators to spend less time transferring figures between systems and more time checking the scope and pricing of the work.

Accurate estimating will always require professional judgement. Software is most effective when it supports a sound estimating method rather than replacing it.

The time needed to prepare a construction estimate depends on the size and complexity of the project, the quality of the information provided and the level of detail required.

A preliminary budget estimate for a relatively straightforward building may take only a few hours if suitable benchmark cost information is available. A detailed estimate for a small residential project might take a day or several days, depending on the drawings and scope of work.

Larger commercial projects can require several weeks of estimating work, particularly where detailed measurement, specialist subcontractor quotations, tender queries and multiple design revisions are involved.

It is not simply the value of a project that determines how long estimating takes. A small refurbishment with complicated existing conditions can be more time-consuming to measure and price than a larger building with repetitive construction details.

Digital takeoff and estimating software can reduce the time spent on repetitive measurement and transferring quantities between documents.

Cubit Estimating, available from BSS Software, allows estimators to measure directly from PDF and CAD drawings and develop their estimates within the same application. Reusable templates and price lists can also reduce the work involved in pricing similar projects.

However, allowing sufficient time for checking is just as important as measuring quickly. A rushed estimate that overlooks a significant item of work can be far more costly than the additional time required to review it properly.