In the construction industry, construction cost estimating holds significant importance. It is a highly crucial process that shapes the trajectory of your construction. Estimating the construction costs before starting a construction project is similar to navigating a course. Without the cost estimations, you may end up grappling with hidden surprises and cost overruns.

Hence, the construction estimating is a process of estimating the required elements used in the construction project, including the direct and indirect costs. The step is usually performed at the pre-construction stage, helping the contractors and owners to build their projects profitably. It is pertinent to understand that estimating the costs demands skills, professionalism, and knowledge about the steps and potential advantages. This blog will explore all the details that one needs to know before embarking on the journey the construction projects.

What is Construction Cost Estimating?

Construction Cost Estimating is the process of determining the costs associated with construction projects. It also involves analyzing the costs required to complete the project within the defined scope and timeline.

It is not just the method to evaluate the costs. It requires a great deal of attention to understand construction materials methods, specifications, local codes, regulations, and pricing trends, allowing you to complete the construction project profitably.

The Importance of Construction Cost Estimating

The construction cost estimation plays an important role in unleashing project efficiency and profitability. Whether you are planning to construct a small house or build a large complex, accurate cost estimations can help turn your dream into a tangible reality.

Cornerstone of Budget Planning

Accurate cost estimation is a bedrock of budget planning for construction projects. Before starting any project, it is necessary to calculate all the costs to avoid hidden surprises. Hence, without the realistic estimates, it is difficult to make financial plans and control cost overruns.

Improving Decision-making

When you prioritize the cost estimation before starting a project, you improve your financial decision-making. Precise estimations allow the contractors to decide whether the project is feasible or not.

Supporting Resource Allocation

Attention-to-detail estimates also help in allocating the resources tailored to one’s requirements. By cutting down the unnecessary expenses of labor, material, and equipment, one can reduce wastage and increase project efficiency.

Ensuring Competitive Bidding

In the bidding phase, the contractors must submit detailed cost estimates to win more projects and bid confidently.

Minimizing the Risks of Cost Overruns

Accurate cost estimating not only improves project scheduling but also minimizes the risks of cost overruns, protecting both owners and contractors from claims and disputes.

Types of Construction Cost Estimates

There are several types of construction cost estimates according to different phases of the project. Here is the list of types based on the scope and nature of construction projects.

Preliminary Estimate

Preliminary estimating is based on early-stage estimation, used to set the initial project budget.

It is used during the schematic and conceptual phase. The accuracy range usually revolves around ±30% to ±50%.

Detailed Estimate

Such estimates are based on quantities and unit rates to develop accurate budgeting and construction planning. Such kinds of estimates are based on complete drawings, specifications, and scope. It is used for contractor bidding and project financing. It could be time-consuming and requires experienced estimators or quantity surveyors to determine precise estimates. The accuracy range of these estimates is ±5% to ±10%.

Quantity Takoeff Estimates

Quantity takeoff estimation is a process of measuring and listing the quantities of all materials and components based on the project drawings or blueprints.

Bid Estimate

Bid Estimates, also known as Tender estimates, are prepared by contractors to support their bids for construction projects. Here are some characteristics of the bid estimates

These estimates are highly detailed and project-specific

These are based on final construction drawings

It includes supplier quotes, actual data, subcontractor bids, and other costs.

Control Estimate

It is also called a baseline estimate. It is prepared after the design completion and before starting the construction. It acts as a benchmark against which actual construction costs and performance can be controlled and tracked during the project.

Key Components of a Construction Cost Estimate

Construction cost estimates consist of the necessary key components, helping the contractors and owners in calculating the costs accurately.

Number	Components	Examples/Description	Description
1	Material Costs	Including the costs of raw materials used in the construction projects	In the case of inaccurate material rates, the costs will be impacted
2	Labour Costs	Including the expenses related to the workforce that is needed to complete the project	Critical for determining accurate project timelines and productivity.
3	Equipment & Machinery costs	Charges for construction equipment such as Excavators, cranes, scaffolding, tools	If neglected, these machinery costs can affect your project productivity
4	Indirect Costs	Overhead and administrative expenses.	Supporting the execution of the project without any overruns
5	Profit Margins	Desired return on investment for the contractor or construction firm.	It reflects the firm’s financial goals and the project’s costs.
6	Overhead costs	Expenses related to company operations and project management	Necessary for keeping the project functional and efficient
7	Contingency Plans	Budget allowance to cover unforeseen circumstances or risks.	It mitigates the risk stemming from unexpected issues.
8	Permit and fees	Costs for the required legal permissions and local building codes	It is mandatory for compliance, and it varies according to regional location.
9	Project Schedule	It includes the impact of the project timeline through working hours and labour availability.	It significantly delays increased labor and overhead costs.
10	Allownaces	Pre-estimated amounts for uncertain or undefined scope items	It provides flexibility when final decisions are not yet confirmed.

How to Estimate Construction Costs: Step-by-Step

Creating accurate construction estimates requires a systematic approach based on several steps.

Define & Understand Project Scope!

The first step depends on a clear understanding of the project and its goals and objectives. Therefore, before embarking on the journey of construction, you must collect and study all the available documents. One must review architectural drawings and blueprints and understand the material requirements according to the type of construction project (residential, commercial, and industrial). It is also important to identify clients’ expectations and demands for the project.

Conduct a Site Visit

In some scenarios, a site visit is also recommended before drafting accurate cost estimates for your project. Sometimes, poor site conditions weigh heavily on the project. The main purpose of the site visit is for the project managers to get the correct idea of conditions and costs that can influence your project’s financial planning.

Moreover, walking the job-site will help identify challenges to equipment delivery, the conditions and operations of the existing facility, and even a look at potential risks. The site visit also reveals in-depth knowledge that can be used to ensure everything is accounted for when preparing a cost estimate for the construction project.

Perform A Quantity Takeoff

Quantity takeoff is the process in which the estimator prepares a comprehensive list of every material, piece of equipment, and workforce that is needed to complete the project. For some projects, like repairs and replacements, the takeoff list might be relatively short. But for larger projects and new construction, the list can be tough to tackle because of hefty requirements.

While performing quantity takeoffs, you must understand architectural drawings carefully and make the lists of materials, equipment, and labour requirements that would be needed in the project.

For top-notch precision, you can use different software such as Bluebeam and PlanSwift.

Assign Unit Costs

After performing a quantity takeoff, one must find current market rates for each material, labor, and equipment item. You can find the rates by analyzing historical data, vendor quotes, and cost databases.

Add Indirect Costs

For better cost clarity, it is also important to add indirect costs to the estimating list. The indirect costs include site offices, temporary utilities, supervision, project management, permits, and building codes.

Include Profit & Overhead

It is also important to add profit and overhead expenses. Overhead may include accounting, marketing, and office rent.

Review & Validate

After adding all direct and indirect costs, you must review the calculations and make necessary changes if needed. You must compare against similar projects and adjust for market trends and client preferences.

Present an Estimate

The last part consists of presenting the estimate by calculating all the costs and submitting the takeoff summary in the form of Excel, PDF, or cost estimating software. 

Popular Tools and Software for Cost Estimating

The cost estimating tools are important for project planning, financial forecasting, and budgeting. With the help of advanced software, the estimators can predict project costs accurately, optimize the resources, and track expenses. Here is a detailed overview of popular tools and software for accurate estimations.

Bluebeam

Bluebeam is a PDF-based collaboration and markup software that is widely used in the architecture, engineering, and construction industries. It also includes powerful takeoff and measurement tools to estimate the costs. With the help of Bluebeam software, the estimators can estimate quantity takeoffs for architectural and structural designs. One can also generate the material lists and share annotated drawings with contractors, project managers, and estimators.

Pros

• Easy to use and learn
• Saves time on manual takeoffs
• Flexible and can be customized for different types of trades
• Works directly on the drawing PDFs

Cons

• Bluebeam is primarily a PDF markup tool, not a cost estimating platform.
• It does not have in-built databases of material costs, automatic price updates, and bid management.
• Limited reporting is available.
• It is a paid tool based on subscription.

PlanSwift

PlanSwift is a desktop-based takeoff and estimating tool designed to measure and calculate material quantities and costs from provided digital blueprints.  It is often used for digital takeoffs, cost estimating, and integration. This tool is popular among contractors, subcontractors, and estimators needed to prepare competitive bids.

Pros

• Speed and accuracy save time compared to manual takeoffs.
• User-friendly interface
• Custom templates and assemblies for common tasks
• Help standardize estimating across projects
• Support integration with Excel
• Works with PDFs, CAD files, and image files.
• Only one-time purchase license option

Cons

• It is primarily a desktop-based version, so collaboration can be limited
• It possesses limited project management features
• To handle more complex estimating tasks, additional plug-ins or customization might be required.

RSMeans

RSMeans is one of the most widely used cost estimating tools in the construction industry. It provides detailed cost data, cost books, and online estimating software, helping contractors, estimators, architects, engineers, and owners.

The tool includes unit price data for thousands of construction tasks, location cost indices, historical cost data, assemblies, and seamless integration.

RSMeans can be used through;

• Printed cost books
• RSMeans Data Online
• CostWorks

Pros

• Comprehensive data coverage
• Location factors for accurate regional estimates
• Reliable and standardized data
• Supports multiple estimate levels
• It can also work alongside BIM and other tools
• Widely trusted and recognized

Cons

• Expensive subscription
• Manual input is required
• Generalized data is available
• No real-time pricing

Xactimate

Xactimate is a software platform that enables professionals to create detailed and accurate estimates for construction and insurance claims. It is dominant in property insurance claims, contractor services, adjusters, and estimators.

The software also includes;

• A large, regularly updated price database based on local market costs
• Sketch tools for creating 2D/3D models of structures
• Integration with aerial measurement
• Tools for documentation and reporting

Pros

• Widely accepted by professionals due to its precision
• Provides comprehensive, updated local market pricing
• Ability to develop accurate cost estimates
• Time-saving features
• Powerful sketching tools that are useful for modeling complex structures
• Seamless integration with other tools

Cons

• Requires training to use the software
• Subscription fees can be costly for small businesses
• It is a resource-intensive process, requiring a powerful computer and stable cloud features

Common Mistakes to Avoid in Cost Estimation

Inaccurate numbers and cost estimations could be overwhelming. A slight mistake in the cost estimation could derail your budget management and increase cost overruns. Here is the detail of what common mistakes you must avoid while estimating the costs for your construction project.

• Estimating costs on vague and incomplete scope could lead to inaccuracy. Hence, always try to estimate the costs based on a clear and well-defined project scope.
• Overlooking indirect costs can also bring discrepancies in your financial planning. So, neglecting the indirect costs such as profit margins, overhead expenses, permit and regulatory fees can lead to inaccurate estimates.
• Using old cost data, outdated market trends, and previous histories will create cost gaps due to the constant flux in market conditions. Always use updated data for precision.
• Estimating the project costs without assessing the potential risks can also cause overestimating and underestimating contingencies and budget misalignments.
• Ignoring site constraints and limited access can also amplify the safety issues. It is important to include constructability reviews during the cost estimation.

Are You Looking to Hire a Professional Cost Estimator?

Are you planning to build a new home and are worried about how to calculate the costs associated with a new construction project? Look no further than Cost Bidding. We are among the renowned estimating companies in the USA. We specialize in delivering precise and affordable cost estimations under the aegis of professional cost estimators. Our experts possess years of knowledge and hands-on experience to deliver accurate cost estimating services. We understand the complete dynamics of cost estimating. By using the advanced tools and software, we deliver top-notch and reliable estimates. Our estimators calculate the house-build costs by using real-time data based on market-driven analytics. We also take pride in delivering estimating services for all kinds of projects, such as commercial, industrial, and residential. If you are looking to build a new house and are clueless about how to determine these costs, consult with our estimators. We have mastered the art of calculating the costs, so you can save money and manage your budget according to the timeline. Contact us now for detailed and precise cost estimating services.

Conclusion

To conclude, this blog explores all the aspects of cost estimation. Given the importance of cost estimating for your construction project, no one can ignore it. If you are worried about how to estimate construction costs, look no further. Contact to professional estimating company and hire professional estimators to calculate the costs for your construction project. To explore further services, visit our website now!

FAQS

1. What is construction cost estimating?

Construction cost estimating is a process that revolves around forecasting the total expenses involved in a construction project. It involves calculating material, labor, and equipment charges.

2. What factors affect the construction cost estimates?

Various factors influence the estimation, such as

• Project size and complexity
• Material prices
• Labor rates and location
• Site conditions
• Permits and building codes

3. Should I hire a professional estimator for my project?

Yes, you must hire a professional estimator for your project. These professionals ensure budget management, avoid cost overruns, optimize resource allocation, and save money.