Construction Estimating Process

Whether you are a project owner, general contractor, subcontractor or an advanced DIY enthusiast, getting a good idea of what costs will be involved is the first very important step on the way to the success of your construction project. Exceeding budget, overbidding and loosing a tender or ending up with no profit is something we simply cannot afford.

Though not a rocket science, construction estimating is a fundamental discipline that  sets out a framework for predicting the building costs with  a reasonably high degree of accuracy.

There are different ways of estimating a construction job. Here, we propose a method that features the following 5 steps:

  • Preparation
  • Itemising
  • Quantifying
  • Pricing
  • Presentation

Preparation

The first thing we need to do is to collect every relevant document. That includes drawings, specifications, addenda, schedules, etc.

Carefully read the documentation to understand the scope of the enterprise.

To make it easier to concentrate on the important things and ignore irrelevant, before going any further, we recommend using coloured markers or their software analogue to highlight pieces of the source documentation depending on how they are going to be used.

Here we chose red to mark unrelated notes and yellow to indicate the ones that must be considered. That way, we won’t miss anything, no matter where it hides in design documents. We encourage you to use as many colours as practical to pre-process the information.

Itemising

Before quantifying and pricing,  we need to create a list of items to be estimated. This step-by-step approach, as opposed to doing everything in parallel, will help not miss any details, as well as keep track of working progress.

Itemising is one of the most treacherous tasks during the estimating process. It is easy to leave items behind. Let’s add green to our colour scheme and mark every piece that has been processed.

Usually, estimates have a multi-level structure with line items grouped under headings. This structure may vary depending on the nature of the project and purpose of the estimate, as well as the personal preferences of the estimator.

The most popular approach to breaking down the cost is to follow the physical composition of the building, which is inherently linked to how it was designed and how will be constructed. Below is a practical example of applying this method.

- PRELIMINARIES
    - Site Preparation
        - Remove vegetation
        - Fencing
        - Cut and fill
    - Scaffolding
        - External scaffolding
- SUBSTRUCTURE
    - Excavation
        - Excavate trenches 0.3 x 0.4m to receive foundation
    - Concrete
        - 32MPa concrete
        - Concrete pump
- SUPERSTRUCTURE
    ...
- ROOF
    ...
- ELECTRICAL
    ....

There are official classifications your work decomposition may need to comply with, such as CSI MasterFormat or NRM.

NRM proposes the Elemental Method, which divides the building into elements that can be individually priced. More expensive elements can be subdivided further to improve accuracy. Like in the above example, the structure of the elements corresponds to how the building will actually be constructed.

It is worth mentioning that the Composite Estimate the Elemental Method produces is a good way of presenting information to a client who will prefer to hear that the external walls will cost $3,000 as opposed to masonry priced at $1,000, insulation at $2,000, etc.

If the source of your rates is a price guide, you can use its items structure in the estimate.

Another useful approach worth consideration is is organising your estimate by trades, which will help with requesting bids from suppliers and subcontractors  and, once the construction has begun, sending them work orders.

Any of the structures proposed above can be split by different building zones, such as floor levels, rooms, etc.

Quantifying

On that step, we put a quantity against each item. We can retrieve it from construction documentation as a ready-to-be-used number or calculate by analysing drawings. The latter is called take-off.

During take-off, the lengths and areas are measured on the plan, scaled and converted to quantities. For example, we can measure the dimensions of a concrete slab on paper, scale them to find the real-world dimensions, and then calculate the volume of concrete required to pour the slab.

When done manually, take-off is by far the most tedious part of estimating. Luckily, there is an array of software products that can automate this task by performing so-called on-screen takeoff. Below if  a screenshot of the take-off panel from CostMiner.

All we need to do here is to select the item to be quantified and then trace an element of the blueprint to determine its length, area or volume.

Pricing

Now, we need to find out the price for each item by multiplying its quantity by rate.

If you are a subcontractor, you will have your own list of rates that you use for pricing jobs. Project owner and consultants may want to use industry-wide average rates published in various Construction Cost Guides.

Most estimating packages have a facility to prepare a list of rates for future use. In that case, pricing can be as simple as selecting a rate from a drop-down box.

If you are a contractor, you will also want to add your markups (profit margins) to the estimated costs to bid or craft a proposal for a potential customer.

Presentation

After all the work we have done, the only thing left is to double-check everything and present all the information in the final report. This can be  a quote for a customer, a bid for a tender, or the budget of a construction project.

Construction Tendering

When a project involves contractors, multiple organisations take part in the estimating process.

A quantity surveyor who works for the project owner or general contractor itemises and quantifies the job (discovers all quantities) and prepares a Bill of Quantities (BOQ). This document lists all items of work that need to be completed by the subcontractor who wins the tender.

Then potential contractors price the items in the BOQ and submit their tenders. All participants bid against the same quantities, which makes it easier for the project owner to choose the winner.

The tenderers may also be required to split the positions of the BOQ further into  labour and material items. That can help asses the ability of the bidder to complete the job with the desired quality, on time and within budget.

Estimating Software

In conclusion, I would like to briefly touch on the software tools that can help us with estimating.

Although it is possible to complete an estimate with a pen, sheet of paper, ruler and calculator, nowadays this is normally done in some sort of software. It can be an Excel spreadsheet and Adobe Reader, or a dedicated construction estimating package with all blows and whistles.

In this post we used CostMiner as an example of an estimating tool. It can handle itemising, take-off and pricing, and present the results as a report or an Excel spreadsheet. In fact, it has a dedicated screen layout for each stage of the process:

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