Contractors and building owners can benefit from an accurate estimate of the costs associated with a commercial construction or construction project. The purpose of a construction cost estimate is to predict how much money it will take to construct a building for commercial use. The financial impact of surpluses is an important motivating factor for contractors and clients to seek reliable estimates. Contractors must become thoroughly familiar with the construction process to understand the factors they should include in cost estimates.
Cost estimation in construction: when to do it
To provide a competitive bid, you must first fully understand the project budget. Estimating construction costs before starting a project is ideal. The estimate must be specific to avoid problems and losses. Contractors can plan, establish profit margins, schedule projects, and organize resource management efficiently with the help of accurate cost estimates.
A construction estimate must take into account both direct and indirect expenses to provide the client with an estimate that is useful to both parties. Using specialized software to estimate construction costs is essential for efficiency. Construction companies create an accurate construction estimate with CostCertified technology, which helps create competitive bids.
The elements that make up a construction cost estimate
Although each contractor, builder or project manager may use a slightly different formula, they should consider the same factors when calculating construction costs. The estimate is subject to change based on the scope and duration of the project. Because clients often choose the lowest bidder when evaluating potential contractors to hire for a project, you must prioritize your client's needs as a contractor. Some essential parts of a construction estimate are as follows:
- Direct Expenses – These are costs that directly pay for supplies and labor.
- Indirect Costs – These are not directly linked to construction activities, such as quality control, security, public services, management, legal fees, licenses, etc.
- Hourly Rate – Amount paid to each team member for each hour worked, including overtime.
- Subcontractor Costs – These are incurred for the work of subcontractors, including all resources dedicated to completing the work, such as labor, supplies, and equipment.
Considerations for Accurately Predicting Construction Costs
Several factors influence determining the final cost of a construction project estimate. Knowledge of the variables that influence construction costs allows for accurate cost estimates. Here are some things to keep in mind to help you provide a competitive offer.
The condition of a construction site
Conditions at the construction site are a possible cost factor. Preparing a cost estimate for a construction project requires a thorough inspection of the construction site to discover things like wetlands, polluted materials, neighboring rivers, traffic, and other sensitive situations.
Inflation factor
Inflation can induce fluctuations in the cost of construction inputs, such as materials, labor and machinery. Because construction can take years, you may need to take inflation into account when estimating costs to avoid going over budget.
Steps to Making an Accurate Construction Estimate
Simply put, if a contractor's budget estimates turn out to be wrong, the project will go over budget or the contractor will go bankrupt. If you follow these guidelines, you can provide a more reliable cost estimate for a construction project.
Evaluate the construction project
The first step to producing an accurate estimate is always an in-depth review of the construction project. Take a look at the website, read the documentation and talk to the client and project designer. Discuss whether any special considerations need to be made during your site visit.
Quantity of Materials and Costs
It is highly recommended to use a digital survey tool to obtain accurate numbers. Takeoff makes it easy to share information through the digital cloud. Once quantities have been established, prices can be set. Contractors can estimate cost increases based on the projected schedule and provide this data in the estimate for full disclosure. Keep in mind that the total price will also include other expenses and labor expenses, the value of which will vary depending on the scope of the project and the number of workers required.
Define potential hazards
Commercial building construction projects are no exception to the rule that every project can face dangers. Estimating risks helps ensure you and your customers are on the same page. Think about ways to avoid or mitigate the risks, including potential alternatives. Communication counts so that when risks materialize, there is a plan and budget to deal with them.
Submission
After evaluating the project and determining its scope, cost, margin and risks, the contractor must prepare the estimate for submission. For project owners to have an easy time understanding the entire estimate and selecting the best contractor, the estimate must conform to the Basis of Estimate.
Conclusion
If you're a builder, designer, or architect and you're trying to figure out how much a project will cost, you can use the above data as a starting point. The ability to provide an accurate estimate is crucial to the success of any offer. An accurate estimate is the foundation of a successful construction venture.
