Ultimate Guide to Know How to Estimate Construction Jobs

how to estimate construction jobs

In the words of American novelist Charles Dudley Warner- “There is no such thing as an absolute value in this world. You can only estimate what a thing is worth to you.”

The above words hold for all types of business including construction jobs. It is difficult to quote an exact value before the initiation of the project. You can only provide a rough estimate to your construction client. Creating an estimate may seem tricky and it takes time, experience, and knowledge to provide an accurate estimate.

To create a strong business foundation you need to nail down the obstacles in creating a project-winning estimate. Check out this article to learn how to estimate construction jobs.

What is construction estimating?

Guessing the value of the project cost before initiating the work is an estimate. This is a changeable value that is provided to the clients to have an idea about the project expenses. Construction estimate is designed carefully based on project requirement and quantity available. 

Estimating is vital for both parties, as it provides a project budget that helps either side to plan out their investments. Estimating helps to take a realistic decision based on the finances and hence, maintaining accuracy is necessary for grabbing the project.

Check out the below section to understand how to estimate construction jobs.

How to estimate construction jobs?

Accomplish your target of creating a project-winning construction estimate by following the below-mentioned steps. Check out the following pointers to design an accurate estimate.

Arrange a detailed scope of the project:

You can only bid on a particular project if you have complete clarity on it. Lack of realistic idea of what the project entails will produce inaccurate estimates that would differ from the actual amount. Be thorough with the details of the project and be honest if the project is out of the scope of your company’s expertise.

Create a master checklist of equipment needs:

Once you get the detailed scope of work, create a master checklist to be on the track. This helps in completing the task without missing out on any of the necessary steps.

Estimate project cost:

Calculating the cost of the project is the most vital aspect. Depending upon your accuracy you can gain or lose your clients. There are several varieties in estimating methods. You can try out rough estimates, intermediate estimates, preliminary or final estimates, depending upon what suits you best. Some other techniques are:

Stick estimating:

This is one such estimating method that counts every single piece of material and calculates the price on the hour of labor put in each unit. This is time-consuming and accurate, but unsustainable to proceed further.

Calculate cost by hand:

This is the manual method of estimating, but not effective for high-dollar construction projects.

Unit cost estimating:

Besides the above-mentioned methods of estimation, this is the faster way of estimating the cost. But this is not the most accurate option. To make it more accurate, list out the requirements and assemble the unit cost. Lastly, add up the unit cost to get an accurate estimate.

Calculate cost of labor and material:

Add the labor and material cost to make your estimate accurate. Some factors may hinge estimate these costs like the hiring of subcontractors, supply and demand, unit cost, acquiring new property, and other legal and administrative costs. Some of the additional factors related to labor cost in a construction project are:

  • Federal income tax
  • Employee wages and benefits
  • Costs associated with specialty workers, services, or consulting
  • Payroll taxes and fees

Calculate the overhead costs:

Account for the operational cost also, as these are the vital factors in your estimate. Consider the expenses in the following section:

  • Job site offices
  • Utilities
  • Shipping
  • Legal services
  • Land acquisition costs
  • Engineering and architectural services

Determine accurate hourly rate:

List out how many workers you would need for the work. Factor the cost involved for each worker on an hourly basis. Calculate this cost beforehand, add it to your estimate to win the bid while you stay safe and prospering financially.

Determine the project risk:

Before submitting a new project estimate consider the potential risks related to it. All projects may not fit your company’s skills and services. Therefore, you must analyze it before working on it. Predicting the future is difficult but you can refer to the old projects to detect the commonalities to assume the probable risk factors and the cost associated with them.

Consider the fluctuation in pricing and product availability:

Pay close attention to the following factors before estimating the new construction project.

  • Demand for a specific material.
  • Challenges in deliveries
  • Is the material customized?
  • Seasonal limitations
  • The urgency of the specific material or product.

The above factors may create a delay in the delivery, added labor charge for installation, or any other causes that may lead to fluctuation in the price. Therefore, it is essential to keep space for these sudden changes to cope up with the expenses.

Add markup:

This is the amount that you add to earn a certain amount of profit. It should be set in such a way that it is not too high or not too low. Consider your behind-the-scenes expenses and maintain a balance while adding the markup.

What is the significance of accurate estimating?

Business estimates are generally legally binding and hence, it is essential to maintain accuracy. Certain fluctuations in prices can bring about slight differences in the actual figure, but maintaining utmost accuracy is the foremost priority as it enhances business credibility. Let’s understand why is it important to maintain estimate accuracy:

An accurate estimate can help in saving unnecessary expenses:

Clear idea of the project will certainly help you to figure out the exact expenses. This will prevent you from adding unnecessary stuff to your inventory. This would not only save your expenses but will also save the client from investing extra dollars.

Accurate estimates help win more projects:

Besides work performance and great customer satisfaction, clients also look for those professionals who offer exact and accurate estimates. This helps them to plan out their budget accordingly which ends up in minimum or no changes. Creating accurate estimates will help build a strong portfolio with positive feedback.

Honest estimates reflect the company’s values and boost professional credibility:

Besides great service, commitment to transparency is one of the most valuable things that you can offer your clients. Your aim to complete the task within the deadline with the utmost integrity will add value to your company image. Be very honest and clear while you estimate as that would be your key USP which can draw more clients with a positive impression.

Factors that affect estimating a construction job

There are certain aspects in construction estimating, which may be out of your control and would influence your estimating process. Some of the most common factors are:

Who creates the estimate?

A company’s structure decides who is responsible for estimating the construction project. Different people have different perspectives which may influence the estimate-making process.

The method implemented:

There are different approaches to estimating construction jobs. A company may implement a particular type and that would differ the outcome. Therefore, check which method is being implemented by your direct competitor. This would be beneficial for your company to survive the tough competition.

Community environment:

Availability of the goods, current demand, prices of materials, etc., are some of the factors that may fluctuate. The fluctuation rate may influence your estimate. Hence, it is essential to predict these probable instances to keep a space for future changes.

Wrapping up!

Estimating is one of the most vital steps to acquire a new business and a company cannot afford to neglect it. The ability to provide an accurate construction estimate would be beneficial for both parties. This article shares a clear insight as to how to create a construction estimate. To make your task a bit easier, get Billbooks for all your financial assistance. Check out our article on estimation techniques to get in-depth knowledge.



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