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What Is Construction Estimating: A Guide to Accurate Project Planning

what is construction estimating

Construction Estimating is the process of planning and budgeting the process for any type of construction. Every industry requires a comprehensive planning and structured outline of objectives before executing a production process to ensure output efficiency.

Estimation is a well integrated process of evaluating all costs, which are a combination of direct and indirect costs, planning them and allocating them to the respective resources. Professional construction estimators perform all this extensive procedure. These construction estimators design a full-fledged project budget that is supposed to be followed.

Construction industry is not just part of the manufacturing industry, it also falls in the tertiary sector because we have to service clients in the end by bidding the project. So we have to curate all kinds of possible costs properly; monetary or non-monetary and draft a scope of work for our construction project.

We also use important organizing tools such as construction scheduling to help us organize all our tasks and activities in an assorted manner; just similar to how typically a calendar works!

The Construction Estimating: The Process

This whole construction estimating process is an extremely important aspect of executing a construction project for a client at a site. We need to go through design development estimates step by step so everything can be managed effectively and the contractor also knows how much a project will incur.

Out of the many steps required in the budgeting process, in a crux of construction estimator, 3 key steps are part of the estimating process that we will now discuss.

First and foremost, we have to review all overhead costs by checking past construction projects and their financial records. This will substantially help us make close to accurate estimates about the annual costs of the building project. Overhead costs also help us assess our bid package. We can carry a cross-analysis to conclude a competitive bid to our client.

Moving forward, we will evaluate our direct costs, such as material and equipment vendors‘ costs, and perform an entire estimate of the construction specifications and material requirements. This basically means the general contractor will calculate the number of labors and raw materials that will be used.

We will also calculate the time contracts of every labor’s contribution to estimate construction costs. This process is called ‘material takeoff’ and is one of the key steps in construction cost estimation.

After assessing all costs, we could move on to calculating other important costs like the legal fees, quality assurance estimates, risk estimates by studying market trends. All these important factors can help us account for any provisional risks that we can any time amend during the estimation period.

This collectively gives us a thorough idea of what basically construction estimating is and what are the key steps in performing construction estimators and an accurate cost estimate structure.

Construction Cost Estimating

Construction cost estimating is a very prevalent part of the construction estimating process. Perhaps so crucial, the estimation process is incomplete without performing extensive research based on the costs the construction project will withhold.

A lot of time is also spent on gathering the appropriate cost information and data analysis, which is done with great intricacy and detail. Important measures like market research, current labor rates and technology which helps to harness data from estimation soft wares is extensively used.

Of course, speaking about the costs, we can definitely not ignore the margins we will make after deducting all the costs. Hence, carefully budgeting those costs by efficiently allocating all the materials in appropriate cost departments to accumulate desired and/or reasonable profit margins is extremely important too.

Types of Cost Estimates

Companies consider choosing from various ways of doing estimation. There are four main types of costs estimates that general contractors often times consider for a building project. We will hereon discuss the key estimate types.

The factors that determine that type of cost estimate that is chosen depend on things like current project demand, budget, scale and of course risk factor.

There are several other conditions that are taken into account and every skilled person designated to those respective departments, study those conditions, chip in their contributions to give us the final output.

The type of cost estimates being used in the construction project is not just important information for the client or the owner, but also for the construction designers. This is so they can effectively carry out the production process aligning with the budget.

Four types are:

Preliminary estimate

Detailed estimate

Bid estimate

Quantity takeoff estimate

Preliminary estimate

It is a cost estimate that you do in the beginning of starting the process to make the project budget. It basically is a rough idea of the amount of costs the project will incur and create estimates either based on past projects or the general contractor’s own expertise as a studies the whole project lifecycle.

It primarily is only used to aid the process of building a project and helps determine the price that will be used to bid the project.

Detailed estimate

Quite contrary to the aforementioned way of costing; the detailed estimate approach analyses all costs of the business from every aspect in the landscape of the industry in a comprehensive manner. A detailed data study insurance cost money is done.

Data is collected not only on a micro level, but macro level to avoid maximum errors and conclude the project in the mutually advantageous way. Of course, this approach also allows room for changes and amendments as and when they are realized. This is one of the major consequences of the preliminary approach.

Quantity takeoff estimate

This approach is fairly straightforward. The total cost of building materials in the project is solely assessed on the quantity of the construction materials being used. We also extensively evaluate labor requirements and construct the trend of labor productivity put in the construction project.

Hence, the sum of labor costs and material prices help us evaluate the whole budget of the project by using this approach. The only possible way we can make changes using this approach is by either rectifying material prices with changes in inflation or changes in amount. So essentially volume matters more than cost.

Bid estimate

Bid estimating, as the name suggests is when the general contractor has to prepare a final bid price for the owner that is not only competitive with the market but also covers all the costs enough to accommodate room for profitability. The bid price information is mentioned in the contract documents which determine material prices are negotiated in a way, such that it is mutually beneficial for both parties.

Creating a Construction Estimate Template

Just like every business prepares a financial statement, which shows the profit and loss information along with the total assets and liabilities held in the company, businesses like the construction ones use more than just one auditing reports. One of them is a construction estimate template. It basically works similar to an income statement, except that in construction estimate, it shows a breakdown of all construction costs department wise.

To understand it in more detail, it is pertinent for us to understand the nature of a construction project. An entire project is split into different activity departments. Some common activity departments include; roofing, painting, electric, re modelling. These are some common construction costs that are always part of the construction estimate.

Essentially we prepare a different report or template for every activity department, just to further simplify the estimating process. We may also use appropriate soft wares to organize the template in a spreadsheet form which may also include relevant graphics like construction drawings.

Best Practices for Accurate Estimating

Doing and planning an entire construction estimate is in itself, as discussed, an extremely crucial execution step in any construction business. It is a task that requires a team of committed professionals like the general contractors.

In order to ensure an always accurate price estimate and a seamless bidding process, there are certain practices that the contractor ought to follow. If you are busy and do not have time you can hire a construction estimating company who actually can do accurate cost estimating services for you. This includes having contacts with suppliers who give you the best material prices as well as having knowledge of past project costs.

We will now look at practices that can help us structure an accurate construction estimate, which, if incorporated, can substantially increase efficiency.

Supplier Relations and Quote Research

Most accurate cost estimates are a result of substantial preparation and planning. The project manager must figure out the materials needed and connect with the best suppliers to get the best prices. Hence, obtaining different quotes from various until we come at the most reasonable quote is the most well known cost effective strategy.

This will not only ensure profitability but also long term benefits because of good producer and supplier relations.

Location Assessment

The construction site is another very important factor to consider in the estimating process. The location can be a make or break in ascertaining a valuable quote for the project. There are so many things associated with the location that a project manager must be mindful of.

We have to consider the environment and neighborhood that will largely determine the demand, the accessibility to measure more indirect costs associated with the project. Moreover, the regulations must be properly read in the construction documents in order to avoid any lawsuit in future. All these things must be fully mentioned in the contract documents.

Getting Expert Advice and Reviewing Past Projects

The previous projects bring in the knowledge of a lot of known costs which can incredibly ease the scheduling and cost planning process of the construction project. This can help with setting the base of the estimating process for construction projects.

However, if we lack the resources of any past or historical data, we can also seek advice from some industry experts who can consult us with strategically creating us estimation plan for that particular project.

Keep Accounting for Mistakes

Accurate cost estimates can only be guaranteed if and when we regularly keep updating our cost template. Of course the changes in schematic design estimate the over all project costs are inevitable. There will be mistakes in the cost structure, there may be some new costs that can incur or that there can be some redundant costs that may need to be eliminated.

Hence, keeping a consistent check and balance on your construction project is essential to clinch onto accuracy in estimation and thus a fair bid proposal.

Time Management and Assessment

For more accurate construction estimates however, a detailed research on the time prospects for a project is extremely imperative, as it can greatly help us determine off season construction costs and make changes accordingly.

Moreover, we can also adjust for changes in inflation, interest rates and material price fluctuations over time to conclude the bid at a real value quote.

Use of Technology

Harnessing technology in its true essence will not only cut the time of production and construction process short but also add so much efficiency in the output of the construction project. Not only data collection soft wares can be used to extract information about the design language and cost patterns of the project but also a variety of market trends can be forecasted easily.

To add on, the process of estimation itself can be fully automated by using cloud-integrated softwares that can give real time updates and consultations for areas of error and additions.

As discussed earlier, the costs can also be formatted in a template using any appropriate scheduling tool which can help not just the project managers but also the contractors involved in the particular project.

Construction Estimating Software

Thus far, we have established that estimates serve as a guiding pathway for project managers, giving them a framed outline of information on indirect costs, direct costs, and other overhead costs. The inclusion of software and technology in the estimation process can help contractors create bids that can help them secure the most valuable clients.

The usage of technology can garner a lot of benefits for your construction project. Besides just helping to improve efficiency, it can also enhance the accuracy of the project. We will now discuss some benefits of construction estimating as we move ahead.

The most common reason why construction estimating software integration is getting so popular amongst many construction estimators is the ability to collaborate and leverage data easily. Some common estimation tools like BuilderTrend, and PlanSwift are frequently used. These tools help the team members coordinate from a single platform, allowing a seamless solution to work through a cloud-based platform.

Moreover, the use of technology and soft wares is an excellent way of cost cutting for many construction firms. It may be a one time capital heavy expenditure, but in the long term it can be a very fruitful investment.

It just does not making the extraction of data easy and quick as compared to manually assimilating complicated datasets, it also will ensure the data is secure in a trusted storage drive provided by the estimation tool itself.

Besides, cloud based soft wares are not the only tools that can be used in and for the construction project. We can use ERP systems or Project Management Integration tools that can help us administer our software and smoothly plan and execute our project.

We hereby discussed the benefits of integrating technology in the entire planning process, as well as the features of different types of soft wares and tools that can be utilized.

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