Of all of the phases that exist within a construction project’s lifetime there is the construction estimation stage, one of the most important. Estimation itself of course refers to the estimation of the costs associated with commencing and completing the project. One question to ask regarding the importance of a project’s estimation is that with no idea of the costs associated, how can you have a chance at knowing the profitability of a project?
As a practice you would be interested to know that construction estimation itself dates back to the 18th century in a more primitive form than today and clearly it was a great addition to construction as a whole as it is a standard in the construction process, in fact it is a must. However, it has gone through changes and it would have naturally been refined over time, possibly making the process of estimation much smoother and more precise. What’s important is that it is effective now, as it would have been effective in the past.
Before we discuss how to do construction estimates we need to establish and understand exactly what construction estimation is. A very key component of construction projects, as it is previously mentioned, is the estimation/prediction of the expenses expected to be incurred in the duration of the construction project. It is important to note no estimate can be 100% accurate, which should be evident in the word ‘estimate’. This does not mean that the estimate should not be accurate. Quite the contrary, it should be as accurate and precise as possible and to the highest standard.
Another thing about construction estimation is that it isn’t always done by one individual, in fact, it can be done by a team of people, which can become a tiresome ordeal depending on the method of estimation being used.
Construction estimation also exists for the purposes of estimating the costs for the bid process of a construction project. The bid process in construction projects is where contractors and builders will submit a bid with an estimation of the costs to project owners which will summarise the costs they expect to incur during the whole construction of the project. However, it works a little differently when dealing with large companies or government contractors. These larger entities will of course receive numerous bids from various hopeful contractors and from there they will decide the winning contractor they want to proceed with.
When it comes to estimation and what tools are utilised by construction estimators, essentially there are several routes one can go. Either they can go the more tried and tested routes such as spreadsheets or they can utilise newer construction estimation softwares that can take their efficiency to another level.
One tool commonly utilised is spreadsheets. Using spreadsheets is a more outdated method of doing construction estimation. There are gaping holes in its efficiency which we will look at, as well as contrast it to specialised estimation softwares.
A lot of contractors utilise excel spreadsheets or similar forms of it to conduct their estimations. However, just because it may be seen as tried and tested does not mean there are far more benefits to be grabbed by those who upgrade their methods nor does it mean that it doesn’t have problems.
Spreadsheets can be used for estimation and as a means of recording all the data and portraying it for the customer in an appealing way. Data is entered into fields and you will have your own calculations and formulas for figuring out the cost.
The issues lie in the data entry aspects of estimation. These are issues that can be to the detriment of the process of construction estimation, which is to provide an accurate estimate of the expenses of a project all to ensure the profitability or the assumed profitability of a given project.
This data entry issue relates to human error. Spreadsheets are prone to human error and there is very little in the way of minimising human error and mistakes that occur, not to mention that spreadsheets are a lot more tiresome than their newer counterpart of software designed for construction estimation.
Spreadsheets also do not let you standardise your estimation process by using data from previous projects. Due to this the process is very manual and repetitive and is not very time efficient. If your estimator leaves so does their methods and calculations that leave you in a potential mess. Having a platform that enables standardisation allows other team members to participate in the estimation process and makes it more collaborative.
We advise the use of a construction estimation software as it helps to avoid the aforementioned issue of entering data incorrectly. A construction estimation software or construction management software containing estimation tools aims to help streamline the process of creating cost accurate estimates that are based on labour, materials, equipment and other cost factors with line-by-line and quantity estimates of the materials.
A specialised estimation software should allow you to easily avoid these mistakes by having an user friendly system that does a lot of the work for you, it should simply take you through the steps of the estimation. All in all construction estimation and construction takeoffs can together can be tedious but an estimation software makes it a lot easier to create an estimation, as well as link it to a construction job you want to manage within the software.
Standardisation of the estimation process should come part and parcel in an estimation software as it will allow you to create and re-use estimation templates with categories and costings as well as let you go back and edit them to your liking.
When conducting a construction estimation, you must take into account different factors as well as cost considerations for various costs that can occur. For the sake of conciseness, we will analyse some of the more important cost considerations that are central to construction estimation.
Construction estimators must accurately estimate the costs of the project as without this profits cannot be made. By knowing the costs you can add a sufficient margin on top to achieve your desired profits and hence be profitable. On the other hand, something important to note is if it is too big of a cost, you may not win the project bid and if the costs are too low you are then at a risk of a loss on your project.
Some of the costs in construction that we will discuss that would potentially make up a considerable portion of the expenses are subcontractor costs, labour costs, construction material costs and overhead costs. We will have a brief look at each of these.
Subcontractor costs usually are not as hard to come up with if you have previously worked with a particular subcontractor as you would know their costs. The costs of the subcontractor is the amount of work the subcontractor will do and how much their rates for their work are. Subcontractor examples include tilers, electricians and other professionals that will be contracted to work on parts of the project. With a construction estimation software you can have this information saved in price lists that you can link to estimations you want to create so when you are filling in pertinent information relating to those subcontractors the construction estimation/management system will automatically pre-fill those details for you saving precious time making the process a lot more standardised.
Overhead costs will differ depending on the project, but there will be constants that exist in your construction project such as rent, staff costs and utility costs. These tend to be costs that don’t fit into any of the obvious categories of construction estimation costs.
Adding these costs to a project is crucial to a project’s success as these costs can add up and an estimation must be accurate to ensure profitability.
Construction material costs
Construction materials and their quantities are found on a construction take off list. A takeoff list is conducted by looking at a aplan and according to scale measuring different areas of the proposed property and determining the materials associated as well as their quantities and detailing the unit of measurement.
Differing factors will also change the costs of the materials found on the list such as the location of the project as well as the current market for those materials which may make them more or less expensive.
In construction estimation, you will need to know how many workers are required to actually complete the project and how many hours they will need to complete it. The costs associated with this are determined based on the mandays. The mandays are an important measurement on the amount of labour needed for a project based on the number of individuals working and the number of days they will work.
Mandays can be difficult to estimate as there are different factors such as the different types of work, site conditions for the project, rates for labour for the different types of work being done etc.
To summarise, in order to conduct a construction estimation, once there is a list of materials all the costs must be determined for all the other factors such as labour, equipment and overhead costs etc. They should be put into categories appropriately for the sake of organisation and an estimate should be produced based on this.
A good construction software makes use of good project management functionality, estimate and financial/accounting tool functionality, job management, scheduling and planning and support functionalities and more. WunderBuild is a construction management software that aims to provide all of these functionalities and more to bring out the best outcomes for a project.
It is currently offering a free trial, visit here to try WunderBuild for free.