From remodelling to building new structures, construction projects often have timelines and budgets. Therefore, construction estimating is a crucial part of the entire construction process, from bidding to the final stage of project completion.
But what is construction estimating and why is it of the most important component of a construction project?
As a contractor, you have to submit bids for projects if you want to grow your business. However, your bids must strike that critical balance where you bid low enough to beat other competing contractors and high enough to cover all your costs or overheads, including sufficient profit margins for you to grow your construction business.
Construction estimating is therefore an attempt to determine, with as much accuracy as possible, the likely costs and overheads associated with a construction project. As a contractor, it’s the most important exercise before considering or submitting any bid. Construction estimating will not only analyse the immediate requirements of a construction project, but also the latent expected costs throughout the life of the project.
Key Elements of Construction Estimating
Many of the costs associated with a construction project are anything but consistent. They are influenced by a wide range of factors, including building sites, geological formations, types of soils, permits, proximity to natural heritage sites, the weather, and several other factors. This only means that every construction project is unique and therefore must be approached accordingly.
However, some of the key elements of construction estimating include:
Take-off: an estimate of the materials and amount of labour required to complete a construction project.
Equipment costs: the costs of running, including renting, of heavy machinery (cement mixers, cranes, etc) that may be required to complete the project. Note that the use of certain machines may significantly shorten the completion timelines of certain projects and therefore, help reduce other costs.
Material prices: this is the expected cost of materials for the entire project. Contractors must take into account such factors as market conditions and seasonal variations, both of which significantly influence the cost of materials. Cost estimators usually begin with historical cost data and buying cycles, and then make the necessary estimates.
Labour hours: a labour hour is a unit of work, often referred to as a ‘man hour.’ It represents the output of a single person working for one hour on the construction project.
Labour rates: a labour rate on the other hand is the compensation you pay per hour of work for a skilled craftsman working on the construction project. It also includes other factors such as overtime, payroll benefits, worker compensation, and insurance.
Contingencies: even the most accurate construction estimates must factor in unforeseeable factors such as wastage of materials. Contingencies will usually take the form of a predetermined amount of money set aside for such costs.
Indirect costs: a construction project also comes with added costs not directly associated with the actual construction work. They include administrative costs, transport costs, temporary structures, legal fees, special permits, and other costs that may arise for specific projects.
Subcontractor costs: depending on the type of project, you may require one or more specialist subcontractors to handle certain parts of the project. You must factor in the total costs of engaging them into the final construction estimate.
There are, of course, other cost aspects that go into the final estimate, many of which would depend on the nature of the construction project.
Avoid These 4 Construction Estimating Mistakes
Construction estimating is a delicate process that significantly impacts the outcome of a project. To increase your chances of success, avoid the following common mistakes:
1. Not visiting the construction site
Site visits are often mandatory when it comes to bidding or most pre-bid meetings. Jobsite visits are absolutely critical for contractors before placing bids for construction projects. As a contractor, you should also bring along any subcontractors you intend to use for the project.
2. Not conducting a risk assessment and allowing for contingencies
A risk assessment should be a core component of your construction estimate. Other than the fact that it helps you immediately determine whether or not you should bid for a project, a risk assessment also helps you determine how much you should factor in for contingencies.
3. Making guesstimates
All the cost estimates associated with a construction project must be based on the most current data. Don’t make your construction estimates on uninformed or uneducated estimates because any slight fluctuations can eat up or completely wipe out all your profits.
4. Inaccurate take-offs
Incomplete or inaccurate take-offs can mess up your entire estimate. Accurate take-offs help to estimate the quantities and materials you’ll require for the construction project, which in turn determines the amount of labour and the equipment you’ll need.
Therefore, an inaccurate take-off sets you up for failure right from the start. Consider using take-off software such as Cubit Estimating which provides powerful, capabilities for both take-off and estimating in one seamless package.
