Effective cost estimation is the key to cost-control, increased profitability, and better project planning. Accurate construction estimating can define the project’s true scope, transform the budgeting process and ensure the financial feasibility of the project, That is why it is essential to understand the basics of construction estimation, the role of technology, and the key elements that form a robust construction estimate.
What is construction estimating?
Construction estimating is the essential process of budget preparation and forecasting for construction projects, such as buildings, skyscrapers, commercial properties, etc. Contractors leverage construction estimates to bid on projects, while project owners gain a more complete picture on the financial scope of the project. Projects with accurate construction estimates are more likely to be profitable and completed as per specified schedules and cost budgets.
Importance of construction estimating
Project owners can effectively estimate the financial impact of all projects when highly accurate construction estimates are prepared. Quality construction estimating also enables businesses to win bids for projects, enabling contractors to increase project transparency and reduce inherent risks for owners.
Different types of construction estimates may be prepared, based on the estimate objective, with varying levels of accuracy, depth, and technical details. Construction estimating formats such as, order of magnitude estimates, design estimates, preliminary estimates, and bid estimates enable project managers to gain greater clarity through different stages of project planning.
Basic elements of construction estimates
Materials – Materials are one of the most vital construction estimating elements that need to be listed accurately as per the specifications, quantity take-off, etc. This includes all material categories, such as TMT steel, ready mix concrete, cement, bricks, etc. based on the project scope. Foundation, finishing, HVAC, etc. will have their own unique material requirements, which is why preparing a highly detailed estimate is key.
Manpower, equipment, etc. – Projects must account for manpower and equipment requirements, based on the scale of the project work. Labour costs can be captured, based on the construction stages or site work they are integral to, while equipment costs can be estimated based on their types, rental, duration, etc.
Indirect costs – Indirect costs and admin costs also need to be assessed early on, which is why they need to be captured accurately within the construction estimate.
Benefits of accurate construction estimation
Highly accurate construction estimates can significantly streamline processes while ensuring cost-savings throughout the lifespan of the project.
- By integrating the right rates, materials, and equipment, construction projects can be free from budget overruns and site delays.
- Accurate construction estimating also reduces the need for constant indent fulfillment and frequent changes in material requirement.
- Accurate estimation helps in winning construction projects, as well as scheduling site work after the planning phase. Stage-wise construction work can begin, based on the accurately highlighted materials, manpower, and equipment requirements listed within the construction estimate.
- They also help project owners determine profitability levels, based on the overall costs estimated as well as the duration of the site work projected to be performed.
The role of technology in construction estimation
Technology platforms, such as construction estimating software, can streamline estimation development significantly by standardizing the process and giving 100% visibility through the project lifecycle. Construction estimating software reduces the risk of human error, miscalculations, or incorrect rates. It also provides access to historical data that can be referenced when designing construction estimates.
Online construction estimating software solutions enhance collaborative planning, integrating different stakeholders to further refine estimates. These solutions also expedite construction estimate development, which can shorten planning and approval cycles for projects as well. Users can leverage predefined templates to ensure compliance to best practices by using construction estimating software solutions.
Construction estimation is a critical process that impacts projects significantly, in terms of cost analysis, budgeting, and project forecasting. It consists of key elements involved in the completion of construction work, namely materials, manpower, and equipment, as well as other costs that need to be captured. BuildSupply Estimation Manager helps you create accurate cost estimates and professional looking bid proposals and lets you control your cost throughout the project lifecycle.