How to Estimate Construction Costs

How to Estimate Construction Costs

The cost estimate is crucial in determining the viability or profitability of any building project. Estimating building prices may be difficult for novices, which is why the number of cost estimator positions increased by 11.5% between 2018 and 2019.

But wouldn’t you be relieved to learn that you don’t have to hire a cost construction estimate for your next project? Here’s a detailed DIY approach to estimating the cost of a building job. You should be able to generate professional cost estimates and bid swiftly at the conclusion of this blog.

What is Estimating in Construction?

Building cost estimation is essentially predicting the resources required to finish a construction project. This covers material expenses, labour charges, equipment rental, transportation, and the contractor’s profit margin. After the plan/design is complete, the following stage is to estimate construction costs.

Estimating is a time-consuming and difficult task, thus most construction professionals utilise estimating applications to speed up computations. Every contractor must estimate building costs for a variety of reasons, which leads us to the following topic.

Why is Estimation Important in Construction?

The most important phase in a building project is an estimation. Before beginning real construction, cost estimation is required to identify the proper project budget, manage resources, plan work, and analyze project viability.

As previously stated, the cost-estimating method serves several functions. So, let’s go through the main reasons why predicting building prices is essential.

Project Suitability

The cost estimate of a project affects its viability. Who hasn’t fantasized about constructing their own Taj Mahal? It must be the only one of its kind for a reason. The reason for this is that it is feasible. Not every project is feasible. And one of the most important characteristics to measure is cost estimate.

Assume a customer requests that you build a house with marble stones in a difficult-to-find location. Even if the customer is willing to spend whatever it takes, you must assess the needs and determine whether to accept or reject the project.

Profitability of the project

Construction is a very profit-driven sector. As a building contractor, you should only embark on lucrative projects, which is why project expenses must be precisely estimated before invoicing the customer. If the real building cost exceeds what your customer can afford, you should decline the deal.

Obtaining Finances

Contractors frequently require startup funding for projects. This is why they use cost estimators to assess how much funding they will require to begin the project.

Making a Budget

If you are starting a construction project, you must regularly monitor your spending to ensure that you do not go over budget. Creating an estimate aids in determining the expenses connected with any project.

Bidding Process

A precise cost estimate allows you to bid fairly and win a project bid. Contractors are sometimes required to offer lower pricing than the competitors for the same job in order to maintain their profitability. This is only achievable if you have made an accurate cost estimate for the job.

Essential Elements of Construction Cost Estimation

You should now understand the significance of calculating building costs. Aside from that, you should be familiar with house-building construction software, which aids in the completion of the most time-consuming chores. But first, let’s go through the most significant parts of building cost assessment.

Takeoffs in Quantities This refers to the total amount of materials and labor required to finish a project.

Hours and costs of labor This is the total number of hours of work and the accompanying cost necessary to perform an activity.

Material Prices This is the total material cost borne by the project financier.

Material costs are the costs of leasing or acquiring the gear needed to perform the project.

Subcontractor Estimates Subcontractors are often hired at various phases of a project by construction companies. 

The subcontractor quotation provides the subcontractor with an estimated cost as well as a breakdown of the labour and raw materials required to complete a project.

Takeoffs in Quantities This refers to the total amount of materials and labor required to finish a project.

Hours and costs of labor This is the total number of hours of work and the accompanying cost necessary to perform an activity.

Material Prices This is the total material cost borne by the project financier.

Material costs are the costs of leasing or acquiring the gear needed to perform the project.

Subcontractor Estimates Subcontractors are often hired at various phases of a project by construction companies. 

The subcontractor quotation provides the subcontractor with an estimated cost as well as a breakdown of the labor and raw materials required to complete a project.

Costs are shared. In construction, joint costs are expenses that serve more than one project goal.

Indirect expenses are those that do not directly affect the project costs, such as administrative and overhead expenditures.

These are the key things that a good construction estimate should cover. However, estimating software allows you to automate tedious and monotonous procedures and make professional estimates more quickly and correctly. 

Here is a selection of construction estimating software that can assist you in creating estimates and invoices.

Costs shared Joint costs in construction are expenses that assist more than one project goal.

Indirect Costs Administrative and overhead costs are examples of indirect costs.

These are the key aspects that a building contractor should include in a professional estimate. 

However, using estimating software, you can automate repetitive and monotonous procedures and generate professional estimates more quickly and precisely. Here is a collection of construction estimating software that may help you develop estimates and invoices.

All building and repair projects include a number of steps. These operations necessitate specialized construction cost estimate requirements in accordance with optimal construction management standards. The American Society of Professional Estimators defines five tiers of building cost estimates.

To prevent losing the customer’s confidence, most professional estimating software allows you to amend your estimates or bills while keeping the client on the same page. However, it is usually preferable to provide clients with precise building cost estimates in order to generate a good first impression.

Method of Pricing by Units

This is the most popular way of calculating building costs. Unit pricing is accomplished by determining the total project cost based on unit costs.

What exactly is a unit cost estimate? Assume you are a painter who charges $1 per square foot. Your estimated unit cost is $1/SF.

To bill for the entire construction project, you must estimate all direct and indirect costs. The proper method is to first list the direct costs before including the indirect costs such as supervision, overruns, hiring subcontractors, fencing the project site, and other similar expenses.