Construction Cost Estimating Process

Construction estimating is an integral facet of the construction process. Construction estimators are responsible for researching, crafting, and presenting a comprehensive cost analysis of a construction project. Creating a detailed cost estimate is a time consuming and laborious process. In this article, we’ll break down this process by showing how a construction cost estimate is created, and what a cost estimator does along each step of the way. Getting a better understanding of the construction estimating process is essential to understanding the vital role of construction estimators. Highlighting the complexity of the work that goes into construction cost estimating also reaffirms the fact that estimators need the right tools and information to do their job correctly.

Before we dive into the estimation process, it is first helpful to understand that each construction project is unique. The individual characteristics of a construction project including the client’s vision, the design team’s input, the availability of labor and materials, and budgetary considerations can all have an impact on the job of the estimator. As such, not every estimate is the same, and not every estimator does the job the same way. With this in mind, we've broken the estimation process into four different phases which we will examine in greater detail in the subsequent sections.

In the first phase, the estimator works closely with the architect or design team and the client to gain an understanding of the client’s wishes and the intended scope of the project. In the second phase, the estimator will seek to compile a comprehensive list of all of the materials required for the project, including their quantity, cost, weight, and any other considerations that may have an impact on the completion of the project. They will also attempt to determine the length of time that a project will take and weigh risk factors that may impact the project timeline. In the third phase, the estimator will work closely with the contractor and in some cases a worker’s union to determine the labor needs of the project. During this phase, the estimator and contractor may take into consideration the availability of subcontractors and conduct a bid analysis. In the last phase, the estimator will present a detailed cost analysis to the various parties involved in the project, including the client, design team, and contractor. If their bid is then secured, the estimator continues to assure that the project stays within budget throughout the construction process until the project is complete.

Phase 1

In the first phase of the construction estimating process, the estimator must work with the client and architect or design team to gain an understanding of the scope of the project. This phase usually involves first meeting with both parties to discuss the project, find out the client’s desired and expectations, and begin to go over the project’s blueprints or schematics with the architect. During the first phase of the estimate, the estimator will probably want to visit the actual building site to visualize the project as well as begin accounting for logistical concerns such as material storage, access, and shipping concerns. During this phase, estimators may also begin to assess any environmental considerations that may have an impact on the cost or length of completion time for the project. These include the presence of any protected habitats or species, environmental regulatory requirements including federal, state, and local ordinances, and even the local weather, such as large amounts of seasonal rain or snow. Each of these environmental factors can introduce significant delays for project completion, as well as influence unique requirements for storage and material transportation.

The first phase of the estimating process is primarily centered on the estimator becoming familiarized with the project and other parties they will be working with. The estimator seeks to assess the scope of the project as well as the desired timeframe that the client wants the project completed within. An essential part of the process during the first phase is building lines of open communication between the client, architect, and estimator as this will be crucial as the project progresses and challenges need to be discussed and addressed. This highlights the fact that estimators need to be effective at articulating and communicating with others, as well as be adept at understanding and working alongside the client and architect.

Phase 2

The second phase of the estimation process is where the construction cost estimator begins to dive into the nuts and bolts of the project, both literally and figuratively, to create a detailed cost analysis. The second phase revolves around creating a comprehensive list of all of the materials required for the construction project and determining a projected timeline for project completion. The list of materials necessary for a construction project is often referred to as a Material Takeoff or merely a takeoff. The takeoff is a crucial element to the estimation process that requires compiling massive amounts of information, performing complex mathematical equations, and carefully weighing many factors that could impact the necessary materials for a project.

To create a takeoff, a construction cost estimator must carefully examine the blueprints or schematics for a project to determine all of the materials needed to complete the project. This list must include everything from the concrete for the foundation to the finishing materials such as light switches and outlet covers. Any material required for cleaning up the job site after project completion is also incorporated into the takeoff. For each different material, the estimator must determine and take note of key information that will impact the overall cost of the project. This information can vary depending on the project and the materials needed, but often includes things like the number of specific materials, weight, volume, size, and storage considerations. Additionally, estimators must assign a cost to the material which requires working jointly with vendors to get quotes and to anticipate any future fluctuations in material cost that might result in going over budget.

During the second phase, the estimator will also work towards fleshing out a realistic timeline for project completion. If this timeline doesn’t align with the client’s expectations, they may work with the client and design team to address the issues that are impacting the completion date. Accurately assessing the timeline for completion is both difficult and crucial. Although it is generally recognized that construction projects regularly encounter unforeseen delays, estimators must do their best to provide a client with a firm completion date. For some projects, hitting project completion by the target date is essential to project success with a failure to do so negatively impacting the contractor’s financial future. Estimators must account for a variety of factors that can result in delays for project completion. These include accounting for possible delays resulting from inclement weather, manufacturing or shipping delays, holidays and other mandatory days off, and regulatory or environmental considerations.

Phase 3

During the third phase of the construction estimating process, the estimator will seek to determine the labor requirements and costs of the project. Determining the labor requirements for a project is very time-consuming. During this phase, the estimator will usually work closely with construction managers and subcontractors to determine precisely how many workers will be required. In some cases, estimators will also be required to work with a union representative, which may introduce additional labor considerations. When calculating labor requirements estimators must take into account the size and scope of the project, the intended timeframe for project completion, and the necessity and availability of specialized or skilled labor needed to complete the project. The estimator will need to consider local, state, and federal labor regulations, as well as union labor requirements in addition to factoring in non-work days such as holidays. Lastly, estimators will need to work with the other parties involved to accurately and comprehensively assess the labor costs for the project. This requires noting each specific position, their required time on the project, the cost of that labor, and any impact overtime or holiday pay may have. Estimators will also need to compare bids from subcontractors and select the most suitable subcontractors for the project.

Additionally, during the third phase, the estimator may apply any markups to the estimate to ensure that a profitable bid has been submitted. Some estimators may apply markups throughout the estimation process, but frequently a comprehensive cost analysis is attained and then markups are applied. Markups are an essential part of the estimation process because they ensure that the bid remains profitable for the contractor. Markups are also important because the extent of markups can have an impact on whether the client chooses a bid. Estimators that work directly for contractors must ensure that their estimates incorporate enough markups to ensure that a bid is profitable, while at the same time crafting an estimate that is competitive and likely to be chosen. Balancing these two considerations is a problematic aspect of the estimator's job, and illustrates the expertise, knowledge, and skills required of an estimator.

Phase 4

During the fourth phase of the construction cost estimating process the estimator will present the detailed estimate and cost analysis of the project to the client, architect, and project managers. The fourth phase is where all of the work that the estimator has put into crafting their estimate comes to fruition. Clients often take multiple bids from different contractors, and then compare the different estimates with an eye towards the cost, the comprehensiveness of the estimate, the quality of the contractor's past work, the timeline for completion, and the contractor’s history of completing projects on time. The level of detail and accuracy in an estimate can mean the difference between securing a bid and being rejected. Other factors can play a role in the selection process as well. The relationship between the client, architect, project management team and estimator can have a significant impact on the likelihood that a bid will be accepted.

An important and often underappreciated aspect of an estimator’s job is the need to produce high-quality reports and conduct in-depth presentations and analysis during the final phase of the estimation process. Estimators must make sure that their estimate and the data supporting it are presented clearly and can be understood by both industry professionals and the client. The estimator must be able to communicate effectively regarding the challenges that may arise during the construction process and explain how these are accounted for in their estimate. The final presentation of an estimate can be a challenging process in and of itself. Estimators must have excellent communication and social skills, and be able to work collegially with the other parties involved in the project.

It is crucial to understand that once all parties agree upon an estimate, the estimator’s job is not over. They must continue to work in an oversight capacity for the duration of the project to ensure that it stays on budget. If unexpected or unforeseen circumstances arise, the estimator may have to make adjustments to the final projected cost and communicate these changes to the other parties involved in the project. Because of this, estimators are integrally involved in the construction process from the design phase all the way to project completion.

As the detailed explanation of the estimation process illustrates, crafting a comprehensive and accurate estimate is a time-consuming process that requires a high amount of skill, knowledge, and technical expertise. One avenue of cutting down on the time it takes to create an estimate is through the use of commercial construction cost estimating software like ProEst. Construction cost estimating software doesn’t replace the estimator, but instead helps streamline their workflow and gives them the tools they need to complete their job more quickly and effectively. Construction cost estimating software can significantly reduce the time it takes to craft an estimate from beginning to end, while also allowing estimators to utilize time-saving tools like digital takeoffs and flexible markups. By streamlining the process of creating estimates, contractors can save time creating estimates and spend more time exploring further business opportunities.

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