Project management team
Project management team

Estimating Construction Costs: Acknowledging the Basics and Beyond


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In the construction industry, one of several vital challenges that take place is to manage building projects and make sure that requirements are complied with and unique features are intact. That is why all key elements have to be put into consideration: time schedule, the entire scope of the project, and of course the budget. Important project decisions are basically based upon on costs. Therefore, estimating construction costs is a fundamental skill for both contractors and engineering firms. During and throughout the design phase, the cost estimation and its accuracy improve while the project is specified in full detail.

It is essential to know and eventually recognize the importance of construction costs estimation. This is specifically defined as a forecasting process of costs whenever constructing physical structures. The builders and clients are expected to exert effort and time to estimate the overall costs of a particular project before proceeding to the next step. Project owners often use cost estimates in order to identify the feasibility and to allocate budgets.

For this guide, you will definitely get an in-depth look and a better understanding of cost estimating for construction projects.

Basics of Construction Costs Estimating 

There will be 3 classifications when it comes to the ownership costs of a building – operation costs, capital expenditures and lastly, maintenance costs, During the design stage, it is the capital cost tend to get more of the attention. However, first and foremost, people involved should ensure first in specifying the project in full and clear details.

  • The contractors and the engineering firms having a much broader experience in multiple projects can eventually utilize historic cost data. The main purpose of using this is to greatly improve the accuracy of initial estimates.
  • When construction documents are not yet prepared, a broad estimate is solely possible depending on the scale of the project and the facility type.
  • During the completion of the design process, the technical specifications, as well as construction drawings, allow more a room for accuracy

The Process of Construction Estimation

Understanding the estimation for construction costs requires everyone involved to have a basic grasp when it comes to the construction process. Below are the 7 basic phases for any building projects.

  1. Determining the Project’s Requirements

Realistically, the very first step in building a project is either the planning phase or the pre-design stage. The latter is where the involvement of defining the necessary project’s requirements – the function(s), the project’s costs, location, and complying of legal requirements.

  1. Designing the Structure

This step often deals with the participating architects creatively making a list of designs for the project. The architect negotiates first with the client sharing the designs. Right after, the architect will work closely to the members of the designing team in order to flesh out the chosen designs in accordance with the requirements as well.

  1. Founding the Design Team

The project owners normally contract with the chosen architect. The former will be responsible for creating and forming the design team consisting of other specialized consultants. They will be soon on board to further discuss other necessary things related to the designs meeting the specified requirements. A construction crew management is an effective way to monitor and sharply control the continuing progress of a project and also the involved individuals and project’s participants.

  1. Bidding the Project

Finalizing the construction documents is the start of releasing it to the contractors who have desires to bidding the project. Alongside the bidding, documents include the instructions about the appropriate ways and methods of submitting bids, a contract agreement sample. These documents are effectively defining the entire work scope which becomes the basis of contractors upon the preparation of their estimates.

  1. Signing the Contract

Executing a set of contract documents for the owners will be done once the contractor has been chosen. The contract documents consist of the bidding documents and other necessary files. This now effectively functions as a legal contract between the contractor and the owner.

  1. Construction

During the construction phase, the contractor is overseeing the building in accordance with the documents. Basically, the contractor will hire expert subcontractors who are intended for a variety of construction tasks. This type of task includes foundation and plumbing works. Throughout the construction period, the contractor has to engage with careful cost control. It is also a way of comparing forecasted expenditures to the actual expenditures at several viewpoints.

A project management software will really be a huge help for all the participants and involved professionals in the ongoing project. Software tool for construction management such as Pro Crew Schedule is on the top of the list. This software tool is a cloud-based scheduling software that enables the project manager to know all construction activities they have to be working on alongside his team. 

  1. Close-Outs

When the building of the project has come to close, the contractors will be then requesting the architect to perform an inspection for substantial completion. This is where the architect will be then verifying the current status of the project, be it near-complete status. At this stage also is where the contractor will providing ta document termed as a punch list and handed it down to the architect. The list will be consisting of any incomplete works or the areas needed for corrections.

The Importance of Precise Cost Estimation

Construction costs estimates usually have several purposes based upon on who are the people performing the calculation. Take the engineering firm as an example, the firm is in charge of designing yet it will be the one performing a cost estimate which will be then consider as a main reference during the construction stage and bidding. What it tries to imply is that, the contractors will provide cost estimates solely aiming for a competitive price while reaching a reasonable profit.

Most importantly, cost estimates are absolutely necessary for the applications for tracking and value engineering towards the construction process. There will also be a comparison between the completed work and the planned work to easily determine if the project is on the spot schedule. A comparison of both budgeted costs and cumulative costs is also expected.

  • Project managers can ultimately reach conclusions when they start comparing the scope of the completed work to the actual costs and planned costs.
  • If by any chance, the cumulative costs will exceed the planned costs, two possibilities may assume: (favorable assumption) the completed work is ahead of the schedule, (unfavorable assumption) the project is possibly exceeding the budget.

Project decisions are majorly based on costs. Hence, if there will be a major estimation error, prepare for serious consequences. It is clearly important that contractors and the project owners should recognize this. They better not to underestimate the issue. Generally, the party which held responsible for the errors must assume the additional costs.

Costs Associated with Constructed Buildings and Facilities 

The constructed facility and its respective costs include both the initial capital costs alongside the maintenance and operation costs. There will be costs components associated with each of the major cost categories.


The capital costs include the expenses relating to the initial construction of the facility:

  • Planning and feasibility studies
  • Field supervision
  • Testing and Thorough Inspection
  • Construction financing (materials, labor, and equipment)
  • Taxes and Insurances
  • Land Acquisition (improvements and assembly)

For maintenance and operational costs in the succeeding years throughout the entire life cycle of the project, the following expenses are included:

  • Operating staff
  • Renovations
  • Land rent (only if applicable)
  • Utilities
  • Taxes and Insurances
  • Financing Costs

Additionally, it is also vital for the project manager and design professionals to recognize all of this while the costs for construction might be the only one largest component in terms of capital costs, other cost components are considered insignificant. From the owner’s point of view, it is similarly important to estimate the maintenance costs and operation costs of each involved alternatives for analyzing the life cycle costs.

Mastering the Takeoff in Construction Estimation

Before an estimator can start a project or involved in the bidding process, he has to know first the different materials, the variety of types, and its quantities they will absolutely need in order to complete the project. 

In this way, it ensures an appropriate estimation for the requirements and costs specifically for the materials used. Additionally, it will also provide an indication of the involved labor costs when the materials will be installed and used. The construction scheduling can enable the estimators to formulate and bid estimates. Preliminary costs can also be estimated with the use of it.

Have you heard the term takeoff? Takeoff or Material Takeoff (MTO) is a vital part of the estimating process. Experienced builders must have the capacity to estimate the materials that are required. Approaching the tasks in a methodical way is a must for it helps them to acquire an almost accurate estimation. It is important to consider and to take note of the importance of takeoff.

A thorough takeoff will eventually improve the estimates as well as acknowledging the other factors taking into account as well. These factors could either be the overhead costs or the major shifts of market prices for the materials. In many cases, it was the other various expenses. Fundamentally, the takeoff must quantify all the needed materials in order to complete the project.

Below are the 4 major types of measurement essentially required for takeoff:

  • Area

Some materials basically require a standard measurement pointing to the surface area. Elements include for this part are the cladding, estimation of the paint needed, and lastly flooring. These elements are needed to be present for any given structures.

  • Count 

The estimator has to count all the required numbers for specified individual items. It can be anything ranging from the number of light fixtures from buildings to the quantity of studs essential for finishing the projects.

  • Length

Items such as the pipes and the cables are often measured generally by length. It is necessary that one has to knowledge about other dimensions. Take the diameters as one of the examples. However, it depends on the type of materials required.

  • Volume

This type of measurement is necessary for some other materials. The materials could be the amount of asphalt which is used per yard. Take also into consideration the concrete required in laying out the foundation.

Naturally, the costs which have been detailed and discussed are inconsistent from project to project. In fact, numerous factors are existing that can ultimately influence the project’s costs. By default, cost estimators are the one who recognizes that every project as distinct as to the other project.

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