This guide will inform you about accurate estimating construction costs techniques because these are very important for the project management. For any construction company, they have to deliver the quality service and craftsmanship for a price that is providing the profits required for sustaining the business.
The construction businesses try to get fast and accurate estimates for the services and products they are providing.
Estimating A Construction Project
Below is the two-step process for a project cost estimate:
1- Determining Your Costs.
2- Applying a Markup that will be calculating the appropriate profit after expenses.
Developing a fast and accurate system for your estimating construction projects? If your answer is yes, then you should stop doing the following things:
3 Techniques Not to Use for Estimating
Following are the three techniques that you should not use for estimating:
1- Stick Estimating Construction Costs
Stick estimating refers to the counting of every piece of material and determining every hour of labor. It is an accurate way of determining your costs but the stick estimating is very inefficient. Remember that the stick estimating will lead to the oversights if the project plans are not going to complete or you are missing a scope of the item. If you need accurate and fast, then the estimates should stop stick estimating.
2- Estimating Construction Cost with Hands
The only technique that is more inefficient as compared to stick estimating is the estimating done by hand. Remember that if you are detailed with your scope, takeoffs, and notes, then you should miss something or hit the wrong button on the calculator. Doing estimating construction costs by hand will lead to errors, it is not repeatable, and a waste of your valuable time.
3- Unit Cost Estimating
If you need fast and accurate construction estimates, then you should develop a unit cost method for estimating construction projects. Combining a unit cost method for using correct estimating software is an accurate and cost-effective way of producing construction estimates for the business.
What’s the Best Construction Estimating Software?
The answer to this question is not easy. The best construction estimating software for your construction business will be the one that you will be used by your hand.
Most of the good construction estimating programs are buried within complex, bloated, and expensive project management software. These software programs will be containing many useful project management tools. Note that there is usually a steep learning curve as compared to the implementation. Dedicating the time for learning a new program is fine only if you are having the time, resources, and personnel to get the thing done.
The important part of every construction estimating program during the construction estimates is the database of costs or pricing. By developing your own database of construction pricing is not a complicated thing to do. In fact, you might be already having a database of information without even knowing it.
Creating Cost Database for Construction Estimates
Similar to developing a database for subcontractor pricing, the steps are as follows that will help you in developing a unit cost or unit price database for the construction business.
Note: A unit-based cost will not be including the markup. A unit-based price will be including the unit cost of the item along with the markup applied.
Step 1: Estimating Scheduled Based Unit Price
If your Total Revenue was $550,000 last year, then the weekly price that produced was $9,700.
Weekly Price = $550,000 / 52 per year = $10, 576
Generally, assume that your company worked on one project at a time and then they moved to the next. When you are getting a call for your next project, then you need to determine what it will take about 5 weeks according to your experience.
Scheduled Based Unit Price = Weekly Price X Estimated Schedule
$10,576/Week X 5 weeks = $52884.
If your company is having multiple crews working on the different projects multiple projects at a given time, then you should add these factors in the above calculations.
Step 2: Estimation of Assembly Based Unit Price
The stick estimating method accounts for every piece. But remember that there is no need to develop a material list or a labor takeoff until you have sold the job. If you are going to do this, then this is just a waste of time.
A unit price method will be for the assembly of units that will make up the project.
Example: Stick estimating will need that you should list labor and equipment costs for the excavation, the total number of rebar, cubic yards of concrete, labor for setting rebar, and labor for placement of concrete for a foundation.
An assembly unit price for the foundation will include all the material takeoff, labor, and markup for every linear foot of foundation or the cubic yard concrete poured.
Labor as An Assembly: Note that if you are a specialty or subcontractor and you mainly sell labor, then your labor price should be an assembly as well.
Total Labor Price = Labor Price /HR/MN X Crew Size X HR/WK X No of Weeks
Step 3: Addition of Factors to Your Unit Prices
There are different factors that will be driving the costs upon one project that will not be present in other jobs. A vital part of developing a system for the fast and accurate construction estimating is by developing a standard list of production factors that will be applied to your pricing.
You might determine certain types of jobs that will need additional time, effort and methods for proper and profitable construction. For instance, the difficult job site conditions will be adding as much as 10% to your costs. Even you specialize in high-end custom work, still, there is a particular design that is required as much as a 20% increase for your installation because of the fine level of detail that is needed for the installation.
Step 4: Comparing Unit prices for Relevant Data
Every job that you are going to selling, tracking, and performing is a data point in your construction company’s database. As you are developing the database by tracking actual job costs, then the subcontractor costs and labor budgets. With this, your pricing database will be more accurate.
It is important to note that you have to revisit your database every month if you are having less than one year’s worth of data for the actual tracking costs. Once you are having year data in different forms, then you can do quarterly analysis and update.
You have to adjust prices when it is needed according to the driven data.
How Selling of Profitable Construction Projects is Done?
The more accurate your numbers will be with the passage of time, the more confident you will in your estimating process. Having confidence in your estimating will not only increase the speed of producing your estimates, but it will also help you get more sales. It is very simple that the more accurately priced construction projects will be providing more profits for your business.
These were the quick and accurate construction cost estimate that you should keep in your mind. If you still want to get an estimate for your construction project by the experts, then contact a professional estimating company to get proper construction estimating service according to your project.