What is Estimating?

Estimating refers to the process of outlining all costs associated with establishing a construction project. Consider any work-in-progress building you see within your vicinity.

That standing structure being constructed was once an idea or aspiring project that had to be executed. Before being executed, a whole cost analysis was performed. Similarly, for any construction project, key costs and expenses are calculated before execution. 

All direct and indirect costs are thoroughly and deeply assessed to understand how massive the project can be. Direct costs include all the material and labor [subcontractor] that would be needed, and indirect costs are all costs that are not directly linked with the construction process, like legal costs, quality operational costs, security, etc.  

Now, it is not that only one course of action about cost planning is stringently followed. Amendments can be made as the construction progresses. Key data is assimilated during the process. Hence, it is very certain that the cost-estimated plan will change moving forward. 

What is Estimating in the Construction?

Estimating in construction projects refers to calculating the costs for materials, time, and labor required to complete a construction project. It’s a recommended part of project planning and management. Here’s a brief overview:

  1. Key components:
    • Material costs
    • Labor costs
    • Equipment costs
    • Overhead expenses
    • Subcontractor costs
    • Contingencies
  2. Types of estimates:
    • Preliminary (rough) estimates
    • Detailed estimates
    • Bid estimates
  3. Process:
    • Analyzing project plans and specifications
    • Quantifying materials and work items
    • Determining unit prices
    • Calculating total costs
  4. Importance:
    • Helps in decision-making
    • Aids in project feasibility assessment
    • Facilitates accurate bidding
    • Supports effective project management

Types of Estimating in Construction 

Based on the current information you have gathered about the project, you have to proceed with building cost estimation. However, there are examples of various types of estimating practices that can be used depending on the amount and data present.

The cost type breakup is split into five main components: preliminary, detailed, quantity, bid, and control. All these costs are subject to the direct and indirect costs discussed above. 

Preliminary Cost Estimate 

Preliminary costs, in its simplest terms, can be understood as costs that assist in giving the project owners a rough idea of the costs of building a project. They are like abstract costs. The first cost budget is made with the primary data gathered about the projects or similar projects you may have previously worked on. They act as a framework for future costs that can be incurred with the project. 

Detailed Cost Estimate

Detailed costs are quite the contrary to preliminary costs. Contrasting to the latter, a project owner arrives at a detailed cost estimate once proper project documentation has been performed.

The preliminary estimates are divided into subparts to assess an in-and-out cost breakdown from the most frivolous to the most outrageous prospective expenses. A detailed cost analysis may also include provisional costs, such as costs that are most likely to incur but may not incur.

Quantity Cost Estimate

Many construction firms have implemented this method to simplify and ease understanding of cost breakdown. It assesses costs by looking at countable measures in the project. So, counting the number of units of materials and hours to be worked on would give a good cost plan using this method.

This method only considers numerical methods of calculating costs. Hence, costs are measured in unit terms. So, for example, if a project owner is proposing one of their projects for sale and is using this method, they will quote a price based on the size and acre of land [quantifiable amount], no theoretical cost estimates, no external cost estimates.

Bottom-up Cost Estimate

This is a common and perhaps the most accurate way to estimate costs. This method calculates the costs of each activity and adds them up to make one cost. So no measure of cost is used, no shortcut is used, and no 1-way approach is used. It is straightforward and accurate math.

Plinth Area Cost Estimate

Like standard costing, this approach adds external physical costs to the land’s value to arrive at a final estimate.

Steps in the Estimating Process

Now that we have delved deeply into the type and form of estimating process that could be used, we must dig deeper into the process and how it is performed, regardless of which approach we choose.

Like the process of any task that we perform, the construction process also consists of primarily 5 steps.

1. Defining Project Scope

The first step is the simplest. We have to figure out and draft every task and set of responsibilities that must be a ‘job done.’ This is known as the project scope. Once we have drafted and sketched all the tasks and defined our scope, we are all set to move on to the next step!

2. Data collection and analysis

Using the task outline, we can start with data collection and research. To make the buildings more resourceful, it is important to leverage the potency of data.

According to the report’s source, construction executives spend about 12 hours extracting data on construction practices, and only about 10% of it is used. Hence, it is extremely important to consider allocating data collected sustainably amongst the available resources to deliver the desired output and achieve the project tasks.

3. Determining price and costs

After completing the most primitive yet critical steps in the process, it is important to move on to the most important step: the pricing strategy and costing method. 

Like the cost estimates discussed above, we must find an appropriate method. We then budget our costs and add markup to them accordingly to come to a verified, documented bidding price.

This process would also include binding a detailed material takeoff, wherein you evaluate a thorough report of all quantifiable material used in the construction process.

4. Reviewing and validating estimates

Once all the above steps have been successfully performed, you can patiently review all important findings and monetary figures and look for necessary corrections.

What Tools & Softwares Can be Used for Estimating?

This whole process of construction estimation can be very strenuous, tedious, and extremely time-consuming.

Software and technology can substantially simplify this process, making it much easier. Various technological tools and software are used in construction. 

The most common ones include; 

Stack

This is the most common software tool and is perhaps favored by the construction industry. It has been around for 13 years, making it one of the oldest softwares. 

It’s basically like a clod-based data analyzing solution that helps streamline data prospecting various benefits, including integrated collaborations where different bidding parties can come together to bid.

ProEast

ProEast is another common software used in the construction industry. While it is primarily similar to the former, Priest offers the key features of customization and an insanely high data and storage plan—making it unlimited. This makes it very attractive to project executives.

Hence, software essentially streamlines the estimation process into a much simpler procedure. This softwares very efficiently take over the entire data analysis and collection part of estimation, generating a systematic draft of the cost structure given that we provide them with the project layout. This helps us seize the most attractive and profitable bidding opportunity.

Approximate Calculation The Primary difference between manual estimation and software-oriented estimation

In summary, the best construction estimating software implementation has provided many benefits for bidders and project chiefs in the construction landscape. These include the advantage of a real-time inflow of data and information and the provision of data tailored to firm-specific needs, which would have been otherwise extremely time-consuming with the manual method. 

Moreover, it would have also posed a threat to accuracy. While the manual approach may replenish many construction bidders, it provides cost relief as the capital installation costs are considerably lower, which also has no impact on the company’s fixed costs. However, prospects could only be realized with the use of AI.

Suppose current software imbibes artificial intelligence by integrating smart tools into the programming construct. In that case, many unimaginable future estimates can be figured out, leading to well-planned and phased funding and execution of projects that ensure efficacy and a much more promising output. 

Common Roles and Responsibilities of an Estimator

The construction industry is embedded with analytical individuals who make decisions primarily using mathematical and arithmetic tools. Because of this industry’s research nature, a lot of problem-solving is involved.

Moving on, we will discuss the roles and responsibilities of an estimator from an estimating company across a broad spectrum. An estimator must perform ample accounting and sales tasks, like building relations and negotiations with vendors and suppliers, performing risk analysis and looking for ways to diversify the risk portfolio, monitoring the economic position by studying exchange and inflation rates, etc.

A typical day-to-day responsibility list would include visiting the industry site daily to collect data, analyzing cost structures and eliminating frivolous costs, evaluating bills, and bidding quotes to shortlist a few.

Challenges Prevailing in Construction Estimation

As discussed thus far, construction estimation is a whole process—a critical one in its true essence. While harnessing technology may have helped ease the process, some challenges remain recurring. 

1. Accuracy of data extracted

Even though technology may have been compelling and extremely fruitful to investors, it cannot guarantee the utmost accuracy. A 90% accuracy ratio is too expensive to bet on, considering the high capital installation costs of soft wares involved. For that reason, this often is a big point of consideration for the construction industry.

2. Highly Time Consuming

Of course, we have already established how tedious this whole digit-up process can be because it is complicated and time-consuming. Utilizing technological equipments can help mellow down this consequence.

3. Changes and rectifications in cost

As discussed extensively, arriving at a final quote price and bidding until the official document is thorough. First, there is a draft cost, and then we proceed to further data extractions, key judgments, and markup accounting to arrive at an official quote price. This process results in many changes, and often, the bidder may feel the need to add in the cost after all the rectifications.

Applications of estimating in different industries

Estimation, in its simplest terms, refers to cost calculation and assessment. So, the construction industry is not the only one that requires or inculcates the estimation process. Below is a brief overview of how different industries can apply estimation.

Manufacturing

The manufacturing industry is a secondary sector that incorporates mass-level output manufacturing. This industry primarily consists of textiles, automobile tools, kitchen ware, household stuff, industrial parts, etc.

Estimation in this industry can be used to determine the costs of materials and labor and also extensively analyze the demand pattern by conducting immersive market research in the B2B and B2C segments to determine how to position the product well.

Moreover, since the work is mostly factory-based, estimation can also help set targets for future goals and employee task performance metrics. 

Engineering 

Engineering has the same long-term use case as the manufacturing industry, except for risk diversification.

The risk mobility in the engineering landscape is much denser than in manufacturing. Hence, an estimation can help assess and mitigate the risk factor if the prospects are incessant.

In addition, there is abundant emphasis on quality control and safety standards for engineers because most engineered products are targeted in the B2B vertical, with the customer as their end consumer. Estimations can help assess the extent to which safety measures could be taken.

Healthcare

In the healthcare department, estimation can help determine operational capacity, patient logs, approximate number of beds required, medicinal facilities to be rendered, qualifications of doctors, etc. To sum it up, anything where data summary and research is involved comes under the matter of estimation.