What is Construction Cost Estimating? Process, Methods & Tools

A cost estimate is a vital part of any construction project. An accurately estimated cost is important to reduce risk factors, budget issues, and financial problems. Hence, a properly calculated cost and accurate budget summary act as the foundation of any construction process. That's why breaking down the cost into different parts is important to understand the expenses from pre-construction to bidding competitively.

What is Construction Cost Estimating?

Construction estimating is the process of calculating the estimated cost for the entire project, including all the materials, equipment, labor, and indirect costs. An accurate construction budget estimate is important to keep the budget on track and reduce the risk factor. An accurate cost estimate acts like a roadmap for the finances to envision a project.

Types of Construction Cost Estimates By Phase

Construction cost estimates are divided into different phases according to projects to improve accuracy from the start of the project to the final bid. As the project progresses, the construction cost evolves in detail and accuracy. Here are the types of estimates by phase:

• Planning phase
• Design phase
• Bidding Phase
• Construction Phase

Planning Phase & Feasibility Phase

There are four types of estimates involved in the planning or feasibility phase. These are conceptual estimates, feasibility estimates, preliminary estimates, and budget estimates.

Conceptual Estimates: It provides an initial or general idea of cost based on project details. Mostly, it is used for the early decision-making process.

Feasibility Estimate: This type of estimate is used for a pre-construction cost estimate and to check the potential of the project.

Preliminary Estimate: This type of estimate is used for projects whose plans are not ready yet. This type of estimate is important for planning the budget and making decisions.

Design Phase

In the design phase, there are two types of estimates involved. These are detailed estimates or engineered estimates.

Detailed Estimate: This type of estimate is used for calculating the cost of a project, including labor, material, equipment, and tools.

Engineered Estimate: It is a highly accurate estimate prepared by engineers to get a competitive bid report.

Bidding Phase

A bidding estimate is a part of the bidding phase in which you get a detailed cost estimate that is prepared by using the project scope and specifications.

Construction Phase

The control estimate is a part of the construction phase, where you compare the actual expenses with the planned budget to control the finances. Estimators use digital tools and tracking reports to overcome the flaws in the cost estimate.

ASPE Estimate Classification According to Accuracy Levels

The American Society of Professional Estimators (ASPE) divides the estimate into five different levels based on the accuracy level rather than on the project phase.

Contractors use ASPE standards to set clear expectations for every stage and prepare a realistic budget. Different types serve different aspects in the construction project.

• Order of Magnitude Estimate
• Schematic Design Estimate
• Design Development Estimate
• Construction Document Estimate
• Bid Estimate

Order of Magnitude Estimate

It provides an initial feasibility or an early estimate of the project. Its accuracy ranges between 20-30%.

Schematic Design Estimate

The schematic design estimate is similar to the preliminary estimate. It is used for initial budget planning. Its accuracy ranges between 15-25%.

Design Development Estimate

This type of estimate is similar to a detailed estimate, and its accuracy ranges between 10-15%. It is used for preparing a detailed budget using project details to start the construction process.

Construction Document Estimate

This type of estimate is used to create a final budget for the project before the construction process starts. Its accuracy ranges between 5-10%.

Bid Estimate

Contractors need this type of estimate to prepare the final report to submit their bid with competitive numbers. Its accuracy ranges between 3-10%, the highest in detail.

Step-by-Step Process For Estimating Cost

Many construction experts follow the same process for every project, such as data gathering, scope definition, and documenting the numbers. Use a step-by-step process rather than using a one-size-fits-all strategy. Here are the steps:

Review Details

Before calculating the numbers, make sure the bid package contains all the required documents, including project drawings and specifications. Get a detailed overview of the project and identify structural needs. Confirm the project deadlines to avoid later delays.

Visit Site

Before preparing a cost estimate, check the site in detail. Check it properly to avoid later issues. Don't rely on blueprints only because photographs don't tell the actual conditions to prevent later surprises.

Guide Clients

Clients often rely on contractors for their projects. Hold a meeting with them and guide them properly about the project scope. Help them so they can make informed decisions.

Scope Understanding

Understand the scope properly for preparing the construction cost estimate. Break down the projects into different parts. A well-defined scope prevents scope creep. It avoids misunderstanding and helps to create a real budget.

Use Local Data

Contractors must use local material and labor pricing data for preparing construction cost estimates. Get quotes from multiple suppliers to get competitive pricing and use regional rates to make your cost estimate more effective.

Select the Estimating Type

Choose the right estimating type that is suitable for your project. For those projects whose plans are not ready yet, choose a conceptual estimate for them. Choose a detailed estimate for those projects whose plans or blueprints are completed.

Measure the Quantities

Break down the project into multiple parts to calculate the exact quantities required to complete the project. Prepare a detailed list of every element to order in the right amount and avoid overordering the material to prevent waste.

Material & Labor Cost

Use blueprints to prepare a takeoff report. Use the takeoff data to calculate the cost of material, labor, and equipment required to execute the project.

Cover the Overhead & Indirect Cost

Contractors must add overhead and indirect costs, such as utilities, insurance, permits, and document costs. Indirect costs don't have a direct connection with project cost. It is important for project management.

Add Contingency Cost

Contractors must add a contingency fund of 7-12% to cover the cost required for unforeseen expenses, such as changes in material prices and an increase in rental amount due to bad weather conditions and unwanted site issues. It is important to prevent your budget from shortfalls.

Recheck the Data

Use different tools to recheck the data for accuracy. Check all the calculations and match them with local data to get market-aligned pricing data. Review every element in detail to confirm the numbers.

Prepare Final Estimate

Prepare the final report in clear formats like Excel and PDF. So clients can easily understand the numbers. Break down the cost into major categories and highlight them with different colors. Make sure the final estimate meets all the client's expectations.

Common Methods Used for Estimating the Cost

Four methods are used to estimate the cost. Cost estimating methods vary in accuracy and complexity.

• Analogous Estimating
• Parametric Estimating
• Bottom-up Estimating
• Three-point Estimating

Analogous Estimate

In the early stages of construction projects, many contractors use historical data from similar past projects to estimate the cost. It is a fast, inexpensive method, but it is less accurate and suitable for the early stages of projects.

Parametric Estimating

Contractors use statistical modeling and unit rates to calculate cost. This method of calculating the cost is highly recommended for standardized and repetitive tasks. It is less effective for systems where standard units do not apply.

Bottom-Up Estimating

It includes breaking down the project into the smallest individual tasks. It is used to develop a highly accurate cost estimate. It provides a detailed estimate for each component and sums up all the costs to deliver an exact cost projection. This type of estimating is not used in the early stages of the project.

Three-point Estimating

It is associated with the Program Evaluation and Review Technique. It accounts for uncertainty and risk factors in the process. It takes more time than a single-step estimating process. It involves three different steps for each task:

• Optimistic
• Pessimistic
• Most Likely

Tools Used For Estimating the Cost

Cost estimating tools are used to automate the calculation of prices for all materials, labor, and equipment. Contractors use these programs to get accurate results. Choosing the right estimating tool to calculate the cost totally depends on the type of industry in which you are working and your workflow. Tools combine material takeoff with cost data to deliver an accurate bid.

Here are some tools listed below:

PlanSwift

A leading digital takeoff software that accurately measures quantities. It directly takes information from construction drawings and delivers accurate results.

Bluebeam Revu

It is PDF-based estimating software that provides precise measurements. It delivers markups and quantity takeoffs for all materials.

CostX

It is advanced estimating software with 2D and 3D BIM takeoff capabilities. It is used for highly accurate quantity calculations.

Autodesk Takeoff

It integrates with BIM models to generate reliable material quantities. It is used to improve estimate accuracy.

RSMeans Data

An industry-standard cost database that provides current labor, material, and equipment pricing for dependable estimates.

Trimble WinEst

It is professional estimating software that is designed for detailed cost estimates. Contractors who work on commercial and industrial projects use these tools.

FastPIPE & FastDUCT

It is specialized estimating tools used for plumbing, piping, and HVAC systems. It delivers accurate MEP quantity takeoffs and cost estimates for MEP systems.

Sage Estimating

It is comprehensive estimating software that helps contractors prepare detailed, accurate budgets. It provides competitive bids for projects of all sizes.

Conclusion

Accurate construction cost estimating is not needed anymore. It's essential. It helps contractors to plan budgets and control costs. Accurate cost estimates reduce financial risks from construction plans. So contractors can submit competitive bids with confidence. It is necessary for both contractors who work in-house and those who outsource their estimates. Using reliable estimating methods and modern software can improve project outcomes. Investing in accurate cost estimates increases your chances of winning more contracts. It also helps to deliver projects on time. You can complete your task within your budget. So you can maintain healthy profit margins.

Frequently Asked Questions

What is the difference between a cost estimate and a budget?

A cost estimate predicts the total cost of materials, labor, and equipment for a project. A budget is the financial plan that allocates funds for the entire project, including contingencies, overhead, and profit margins.

Which estimating method is most accurate?

Bottom-up estimating is generally the most accurate method as it breaks down the project into individual tasks and calculates costs for each component. However, it requires more time and detailed project information.

What contingency percentage should I add to my estimate?

Industry standards recommend adding 7-12% contingency for unforeseen expenses. Complex projects or those in volatile markets may require 15-20% contingency.

What are the most commonly used estimating software tools?

Popular estimating tools include PlanSwift, Bluebeam Revu, CostX, Autodesk Takeoff, RSMeans Data, Trimble WinEst, and Sage Estimating. The choice depends on project type and workflow.

Why is site visit important for cost estimating?

Site visits help uncover unforeseen issues like poor soil conditions, drainage problems, hidden utilities, and access limitations that can significantly impact project costs and aren't visible in blueprints.