Estimation Essentials: Foundations for Successful Construction Projects

Estimation Essentials: Foundations for Successful Construction Projects

The general process of estimations is of utmost importance to every construction project. This is when a feasibility study provides a proper estimation of costs and resources required, if not the project can be doomed or fail to meet the timeframes. We have been involved in this matter as a project manager, estimator, and contractor, and we have realized the importance of the fundamentals of estimation. Below are some of the most critical things that need to be kept in mind when developing construction estimates.

Define the Project Scope

The first thing project managers should do is scope out the project. This includes outlining:

  • The size and detailed specifications of the structure/building.
  • Portions of materials and finishes required.
  • Any excavation needed on-site.
  • Support tools or system-ready requirements are required.

The project scope provides flooring estimating services estimators with the required data to determine the project’s duration and the quantity of materials, equipment, labor, and other direct costs that are needed. It also helps them in calculating other expenses such as insurance fees; overheads, and taxes. Estimates will fail to capture important factors if the project scope is not defined correctly.

Understand the Design Elements

Different design elements contribute to material consumption – both overall and for particular materials – in particular ways. Important elements estimators consider include: 

  • Designing the architecture of a building.
  • Grading/topography requirements
  • The design of foundations and structural supports.
  • Openings, doors, and windows.

Electrical systems management: Plumbing and mechanical systems

Knowing the design elements allows estimators to identify the method by which various parts of a building assemble and hold in place that will be used in the number of takeoffs and cost assessments.

Create a Complete Takeoff

The electrical estimating services estimator shall take off where he estimates the number of materials required for a given project by analyzing and reviewing the plans of the said project and determining the measurements that will be used to identify the materials that are required for the project. This includes:

  • Size of the building – square footage of exterior/interior walls, floors, etc.
  • It will also entail obtaining the volume of concrete and dirt/landscaping.
  • The linear dimensions of wires and pipes, the dimensions of the timber or other materials.

Cost estimates must be 100% thorough so that no part of the project work is overlooked. Estimators use various updated master construction cost indexes and historical costs from past projects to calculate prices for quantities in their bids.

Factor in Project Location

The climate and the place where construction takes place are critical components when developing estimation. Factors such as labour wage rates, building material prices, or construction regulations may differ greatly even in restricted areas such as states, counties, or municipalities. Estimators analyze how the project location impacts the following:

  • Material quantity required and work/hour and trade rates.
  • Production costs: costs of purchasing the raw materials, logistics costs, and costs of materials storage.
  • Additional expenses of renting the equipment or its cost.
  • The permits, the surveys, the inspections, the taxes.

Charging a client’s current, local material rate changes is essential to ensure that the estimate is in tune with the actual situation contractors face in that particular area.

Account for Project Conditions

It is also very important to understand that site-specific project conditions can heavily affect the cost and time duration of completing the work. The projection should be guided by the nature of the soil in a location, the general geography of the area, and the climate/ weather patterns of the place as well as any existing structures/utilities.

Excavation to ledge bedrock or to work in cold weather demands different methods than turning soil on a simple site. Other risks that need to be provisioned for include potential negative conditions in the subsurface, poor drainage, or slow coordination with utilities. This is why the project conditions have to be balanced carefully so that such expenses and delays do not occur due to the oversight of such factors.

Determine the Direct Costs

After the scope and scale of the work to be undertaken have been quantified along with the location and site conditions, the estimators gather and compute all direct costs of the project. This includes:

  • Materials are ordered based on the amount estimated to be taken.
  • Workers: hours spent at work for tradesmen and arithmetic hourly rates.
  • Equipment rental/fuel/maintenance expenses
  • Inspection fees, survey fees, and permit fees.

By providing a way to identify all costs that are incurred directly on drywall takeoff services activities accurate project cost estimation can be achieved.

Factor in Indirect Costs

Beyond direct costs for the construction itself, estimators have to determine critical indirect costs (or non-construction costs) to incorporate in estimates:

  • Management, overseeing, and directing the project.
  • Policies, guarantees, and financing.
  • Indirects such as office space and workers’ compensation have increased.
  • Cost escalators: Concessions and escalation for cost increases over time.

Such indirect costs can account for more than 20% of the total budget. Indirects are calculated using percentages arrived at from records or established construction accounting principles depending on the size and type of the project.

It is important to do budgetary slack

Allowances and contingencies: All projects are known to be variable hence they should be provided for to accommodate for change or unpredicted expenses. Typical allowances cover aspects like:

  • Weather or events that would cause unpredictable delays.
  • Redesign of the initial project plans.
  • Varying materials costs during the constricted COT.

Reputable estimators will add at least 5-10% to the final budget estimate as a healthy contingency. This avoids situations where a company might go into a project with a budget of several millions of dollars and by the end of the project, the cost of that project will be several billions of dollars.

It is also prudent to introduce several pricing scenarios by raising or lowering the estimates. That is why the number of variables taken into consideration should be based on the individual complexity of this kind of assignment.

Establish Accurate Pricing

With overhead added to direct costs, add-ons calculated, and a profit margin/percentage applied, estimators come up with the final cost to bid or quote to the customer. This includes adding profit margin, overheads, risk premia, and cost escalation over the time of construction. It is common for margins within the industry to vary between 10-25%, depending on the market and other factors.

Such an ignorance of the margins and contingencies creates losses in finances. However high margin exposes the company to a situation where the prices are too high when compared to the competition. A good estimator knows when to include extra time and resources and when to improve efficiency by cutting back due to the specific qualities of each project.

Next, Implement Value Engineering

After initial estimates are made some estimators will have uncovered other means of adding more value to the project. When a project moves from the design stage to the execution stage consideration of other options and inputs for the project; material procurement and construction techniques into the project should be carried out through value engineering.

Estimators confer with other project team members to identify potential: 

  • New design efficiencies
  • Unlike the conventional project scheduling where activities are carried out one after another.
  • Construction with ready or prefabricated materials.
  • Differences in selected materials/systems.

Some changes in the quality of the product or the cost of the product may also be offered to the client. It is also acceptable that many of the approved value engineering efforts may necessitate the re-estimation of estimates.


Estimating construction costs is a complex and time-consuming process that relies on many factors several iterations of the process and judgmental forecasts. Implementing these four principles in these stages creates the foundation for faith in the budget and schedule estimates your firm develops and promises to the customer. By planning a bit and studying at the early stages, estimators eliminate the “gotcha” moments and ensure their clients receive professional advice that is based on a realistic number of hours for a certain budget and set of project requirements.

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