Builders often struggle establishing this winning reputation because traditional estimating demands so much time. Understandably, builders don’t want to be pinned down by paperwork. They itch to be on the job site managing their teams and solving the daily problems that go with every build.

Successful builders have learned a trick for getting more time on the job site while also writing the estimates that grow their business.

These builders use estimate templates to simplify the preconstruction phase of their projects, leaving time to work directly with their home construction project teams. Having some free nights to spend with family and friends rather than writing estimates doesn’t hurt either. 

It’s easy to get started with free templates. You’ll find abundant samples on the internet that you can download and use to write estimates. But it pays to be careful. Using confusing spreadsheets or online documents can lead to trouble down the road.

More on that to come, but first let’s review some of the basics:

The benefit of estimate templates

Whether just starting out or well-established, builders need a thorough, accurate estimate. Estimate too low, and you lose money on a project. Estimate too high, and you may not win enough jobs to generate the cash flow you need to carry your construction company forward. After all, you’re in this to make money, right? 

Making money means more than covering your expenses. It means adding some extra income to give you a fair profit. Good builders know customers will pay for their expertise, and a detailed estimate explains the entire build package to the homeowner. 

The construction estimate covers all your labor and material expenses, overhead, permits and profit margin while delivering an on-time custom home project to the customer. Accurate estimates include all the tasks required to complete the job, from site prep to site cleanup, and give the homeowner power to make informed decisions on financing their project before you turn the first shovel of dirt. 

Finally, a clear estimate prevents misunderstandings down the road as the frame goes up and your subcontractors shift to different subtasks of the build, such as electrical, plumbing and HVAC systems. Builders with complete estimates often have to deal with less change orders.

Estimate efficiency

Now that you’ve reviewed the benefits of estimating, let’s turn to how you can do it quickly. To estimate quickly, builders like you use templates to save time.

Templates prevent you from starting from scratch when working similar projects. Whether it be single or two-story houses, or specific renovating or home extension projects, you jump start the estimation process using saved templates of your most successful jobs. 

Templates can list tasks and pre-price materials to avoid repetitive data entry that wastes time and leaves you open to making needless errors. More sophisticated templates, typically offered in construction estimation software, allow you to also pre-populate custom quote letters and generate basic construction project schedules to give your client a solid idea of a project’s length. With today’s labor shortages, having an estimate of cost and length of time is critical information.

Different types of construction estimate templates 

Estimate templates can take many forms. Builders swear by anything and everything, from notebooks scribbled with pencil, all the way to the latest cloud-based software. As mentioned previously, it’s good to be aware of the pros and cons. So let’s review. 

The tried and true ways of estimating a construction project

Obviously writing an estimate on paper is the basic way to get the job done. It’s especially tempting for experienced builders who, after years of working, have all the figures in their head. Sure, it may seem faster to just write estimates down from memory, but there are hidden hassles. 

First, you have to make a copy of your customer estimate for your own records, and then you have to file that in your office so you can find it later. And even if you find it months from now to use as a template for a new job with similar specifications, you then have to rewrite and update that estimate. Do you really have time to work so inefficiently?

Today, you have too many better options to notebooks and pencils that require less time and are more accurate.

The trouble with some free construction estimate templates

Spreadsheets and word documents offer a second way to use free construction estimate templates. No doubt you’ve seen these on the internet. Typically, they offer a free download with some basic instructions. 

Yes, these are better than writing things on paper. But You should keep in mind that free offers for estimate templates are typically just a way to rope you into a sales conversation about another, fee-based tool for construction projects. Free downloads typically require you to enter contact information and answer some questions that prequalify you to speak to a sales person so they can upsell you to another product.

Even when you put off the sales pitch and stick to the free products, there are hazards to using these spreadsheets and document tables. Typically, there are formulas hidden behind the rows of numbers that you enter. As a home construction business owner, you really need to understand what those formulas are calculating. You have to be sure what others have built for you is right for your business, and that can be time-consuming.

Also, a free construction estimate template is often isolated from other parts of your work. For instance, you have to perform material takeoffs as an entirely separate process and then copy the material counts into your spreadsheet. That leaves you open to make costly errors that can cut into your profit margin.

The same holds true for material prices. You have to take time to look up pricing from your supplier and then copy those figures into your spreadsheet or table. When you think about it, it could take days of emails and phone calls just to get those material prices. That’s just added delay and frustration.

Software offers a better construction estimate template

In today’s world of fast-moving labor and material prices, construction management software offers your best option for a construction estimate template.

Yes, there is a recurring cost if you subscribe, typically paid monthly. But the best software comes with a no-obligation trial period and ongoing subscriber support and service.

And unlike with free downloads, you know exactly what you are using because it’s explained in clear language and graphical interfaces that show you how labor and material costs are calculated.

Cloud-based software also allows you to either use standard templates that are ready-to-use once you login, or you can create your own estimate templates based on your favorite jobs. All of it is stored in one central place that you can access from anywhere that has an internet connection.

Because the best software is easy-to-use, builders can rely on it no matter how detailed the estimate or the type of estimate they want to show the customer.

Multifunction software offers more than cost estimation

But software does more than offer templates. It connects those estimates to digital takeoff tools and supplier catalogs that help you accurately estimate and quote customers 5x faster than with notebooks, pencils and confusing spreadsheets.

Takeoff software that’s included in the same monthly price calculates material counts from digital plans. No more hunting for plans on a crowded desk that you rarely have time to organize. With a simple point-and-click, material counts load directly into your estimate, which eliminates the manual errors that occur when copying figures by hand. And the best software also includes options for supplier catalogs and prices that ensure you are working with the latest information.

Learn more how software meets your estimate template needs

Today, builders like you are using modern software as their go-to source for estimate templates. Buildxact offers an all-in-one platform for takeoffs, estimates, quoting and job management.

Learn more about Buildxact pricing, or begin working today with a friendly Buildxact team member. Book a demo or start working with templates right away with a 14-day trial that is free to use.

The post Custom home builders earn homeowner trust with estimating templates appeared first on Buildxact AU.

Imagine a situation where the more you work, the higher chance your business goes bust. The problem becomes even more pronounced in periods of high interest rates, slowing activity and rising construction costs.

In spite of all of this, and no matter the urgency, for many home builders construction cost forecasting proves too time consuming. Others find forecasting difficult and don’t know where to begin. This doesn’t have to be you. Today, tools exist that make forecasting a simpler, more predictable process.

What is construction cost forecasting?

A construction forecast, or construction cost estimate, lies at the foundation of a profitable construction project. It contains project design, labor and material costs, while also outlining job schedules and any indirect costs that arise.

To create an accurate construction forecast, you must break down the project into individual tasks. These tasks have associated labor and material costs that you line item based on a takeoff. Once done, you have a forward view of costings and associated milestones. From this, you can create material deliveries and schedules for tradies.

With this information in hand, you now can consider the risks and associated indirect costs that often go unseen when a project first begins. For example, often the rising cost of living, inflation and associated pay rises are forgotten when costing. Working this out in advance gives you time to prepare. Now, you have an accurate construction forecast that you can clearly communicate to your client. More upfront client communication means less surprises and less change orders.

Further benefits of construction cost forecasting

Imagine knowing the profit margin of all the jobs you have planned and have under way. This can inform you on what additional jobs to take on and the ones to avoid. Picking the right projects for your business is critical to managing long-term financial risk. Other benefits include:

Cost control, not cost spirals

Making sure your project costs are under control and on track throughout the construction process is vital to keeping a budget. With cost forecasting, you can quickly spot overspending and make immediate changes. Very often, a basic lack of planning leads to going over budget. Whether they are direct (like labor costs) or indirect costs (like insurance or rent), you need to know your limits in advance.

Plan more, react less

Having a cost estimate makes for better-informed decisions. You may determine that the project plans are too ambitious or that the client’s preferred materials prove too expensive. With construction project forecasting and risk assessment, you also can determine if specific projects need to start at a particular time of the year—perhaps due to weather or the geographic location of the job. Well-constructed cost estimates will guide you in making the best decisions for you, your clients and your employees.

Cash flows, not cash crunches

Very few construction jobs, especially for builders like you, give you an unlimited amount of money at your disposal. With real-time data, you can pinpoint potential budget blowouts quickly. By ensuring milestones are met, you can be sure projects proceed as plan and their associated revenues come in as they were planned. The last thing you need for proper cash flow is to have payments withheld from dissatisfied clients.

Digital forecasting for construction projects

By now, you probably understand why forecasting is important. Today, modern tools are making this critical step easier than ever before. Here are a few examples:

1.    Let’s say you have an estimate for a small residential community. Because all 10 of the units are the same, you can prepare one detailed estimate and multiply that by 10 to calculate the overall cost. Today, you can use modern cloud-based software to help you create that estimate. The best software on the market integrates with your favorite material suppliers who can assist you. Your suppliers can ensure no critical items are missed because, in this case, mistakes are multiplied. Imagine having an estimate where you forgot to include interior doors. With five doors to each house, that is 50 doors that haven’t been budgeted. And because you missed the order, they may not be available when you need them. With modern software, you can avoid pitfalls like this.

2.      At other times you will have a single job that actually repeats something you did months or years ago. With modern software, you can easily use historical data to quote for the new project because software allows you to create templates from past jobs. The templates save you time because you don’t have to build a forecast from lost notebooks or a faded memory. The templates also give you the flexibility to make adjustments based on current events. Say, you realize you hadn’t considered how higher fuel prices have impacted material delivery costs or that labor shortages require a shift in your material choices. With modern software, making those changes to your original template are no trouble.

With this mind, take a look at Buildxact. The software makes estimating quick, easy and accurate.

Construction management software eases cost estimating

A good platform like Buildxact offers many benefits for small builders, construction companies and tradies. In one place you can:

• Perform your cost estimation 80% faster and more accurately;
• Communicate and collaborate with suppliers;
• Centrally store all project documents, information and change orders;
• Track job progression, tradies and laborers;
•   Integrate your accounting software and manage project budgets;
•   Access your projects from anywhere that internet connection is available.

With Buildxact, you will finish your construction cost forecasting much quicker. If you are not sure how the software can help you, why not try a 14-day free trial and see how Buildxact can help you develop better forecasts?

Good data, entered into good construction estimating and management software, propels your building business into the future. Don’t waste your precious time or money and get in contact with Buildxact today.

The post Rising prices demand accurate construction cost forecasting appeared first on Buildxact AU.

The foundation of a successful home construction project lies with a detailed construction quote and resulting contract. Clarifying, via a quote to the homeowner, the project scope, specifications, costs and timeline reduces payment delays and unfortunate disagreements. The use of a building quote template leads to a higher level of customer service without becoming a time-waster for builder.

Properly defining the scope, specifications and costs requires a detailed itemization of labor costs and material charges. Custom home builders struggle finding the time to do this administrative work. This work competes with the need to be on the job site. However, smart builders have found an answer to producing the written document that the prospective client expects. They use construction management software and an associated building quote template to quote more work and win more contracts.

Moreover, it’s important to remember to charge a fair price for bidding for quoting a job. With this in mind, many builders can easily cover the cost of cloud-based construction management software. In the best cases, the software, for one monthly charge, offers a full suite of management tools. This set of tools goes beyond just offering a building quote template to include project scheduling, documentation and invoicing. So, the upfront investment benefits the entire project – from quote, contract agreement and signature to final invoice. 

Advantages of a building quote template

A powerful feature of modern, cloud-based construction management software is the ability to create home building quoting templates. These templates offer a detailed breakdown that you can use over and over again. Using easy-to-use software, you can create a building quote template for all the different home construction projects you perform.

The templates keep you consistent and organized so you miss nothing when ordering materials and scheduling labor. Creating the specifications and costs that make up your quotes becomes a simple task. Also, using top-rated software, you can customize your quotes. For example, you can offer detailed terms and conditions that best suit your prospective client and your project types.

The best software also comes with preinstalled templates. These allow you to create and customize job checklists, allowing you to add and remove material and labor items as needed. The software also includes the ability to adjust for markup and other contingencies, such as material price increases.

What to include in your building quotation process

A building quote needs to be comprehensive and complete to help you avoid the time-consuming and stressful documentation of change orders. As a builder, consider the following items:

Preconstruction costs

Preconstruction costs are fees and charges that occur before construction begins. You will want to clarify in your terms and conditions if the homeowner must pay these costs before construction begins. Preconstruction covers surveys, building permits, site preparation, utility installs and business fees, among other items. Not surprisingly, these can add up to a significant amount of money. So, it’s best you detail them in an easy-to-follow professional quote that properly informs your homeowner.

Labor and material costs

By performing a material takeoff, you arrive at the proper counts of supplies. To save significant time, you will want to use construction management software that includes digital takeoff tools. Digital tools make these calculations much quicker and more accurate than using traditional pen and paper. Digital tools also allow you to perform a material quantity takeoff by unit cost, linear length, surface area, cubic volume or weight. When software does the calculations, you greatly reduce errors, saving you time and increasing your professionalism.

Of course your quote is not complete if it only contains a material estimate. You need to also include the costs paid to your subcontractors and work crews, who are typically organized by the phases of your project (site work, foundation, framing, landscape, etc.). The best construction management software allows you to break out these costs in separate line items. The software also lets you include overhead costs associated with maintaining your payroll. You decide how detailed your quote breaks out this information for the homeowner.

Advantages of using software quote templates

The best construction management software directly flows the individual costs calculated from your material takeoff, labor estimates and markup into a building quote template. You can customize the quote template with preloaded product and material sample images as well as your business logo and letterhead.

Templates cut down on the administrative time you spend to build professionally looking quotes. Once built, you can send quotes to potential clients by email or traditional mail. It’s the kind of detail that makes your customer service an important competitive advantage in today’s ever-changing construction market.

How to find the best construction quote template software

Recently, Buildxact software ranked among the best construction management software as reported by both Gartner Digital Markets and Forbes magazine. In the case of Forbes, Buildxact topped the list. Editors considered Buildxact’s multiple quoting and job management features, affordable pricing and excellent customer reviews. 

Interested in seeing for yourself how Buildxact quoting templates can improve your business? Register here for a 14-day free trial or book a demo to see how Buildxact can help your business grow.

The post The building quote template offers builders a better way to serve homeowners appeared first on Buildxact AU.

What are preconstruction costs?

Preconstruction costs are fees and charges that occur before actual construction can begin and can amount to between one to three percent of the final build. Preconstruction costing typically is a process that requires a separate fee that needs to be paid in full before the project can move forward.

The first step in the preconstruction phase involves outlining the owner’s expectations to define the project’s scope. Surveys will need to be conducted on the land to help create environmental impact reports, architectural and engineering reports, as well as the usual site surveys required for a building permit. In some circumstances, you may also need archaeological reports and cultural impact reports if the land in question has cultural or heritage significance. All these documents are all included in the preconstruction costs.

Construction software

The builder and designer will work with the client to gather all the information they need to provide a preconstruction estimate. This is a vital step. Poor planning during preconstruction inevitably leads to issues during the building phase that can and should be avoided.

Many builders make use of a construction management software package that helps them keep track of their project from start to finish. Software best suited for the job typically are SaaS (Software as a Service), such as Buildxact, that offer at a low monthly price for a single platform that includes documentation, communications, customer details, supplier pricing, and tools for scheduling trades and engineers. The best software also integrates with financial software, simplifying cost estimating, quoting and invoicing.

At the preconstruction phase, all notes regarding the customer and the job can be stored in an integrated customer management tool that forms part of the construction management software. Online customer portals like the one offered by Buildxact help the owner stay in the loop as the project progresses.

Preconstruction costs

A preconstruction phase estimate is provided to the owner that covers all expected costs involved and helps the homeowner decide if the project should move forward. This will include:

·         Surveys and reports

·         Designs

·         Building drawings

·         Building permits

·         Utility installation

·         Contract fee

Construction estimating software is used to speed up this process, ensure accuracy and avoid missed items or incorrect figures. Templates allow builders to use repeatable construction tasks efficiently and save time wasted on duplicating the process. With estimating software and integrated customer management systems, estimation quotes can be sent directly to the customer via email, or through the online portal, customers can even choose to accept terms digitally.

Construction documents

Before applying for building permission, several reports need to be completed. These reports are concerned with safety and suitability of the site and will identify any problems that may arise in the construction phase. Surveys need to be coordinated and organized in a timely manner to ensure that this process meets all local legal requirements before construction begins.

Engineers site survey

Soil engineers test the soil to provide footing details for laying the concrete foundation slab. The preconstruction engineering report will include elements such as settling silt, dealing with rock and groundwater, fill that isn’t compacted properly, and any potential hazards or contamination on the site.

Preconstruction survey

Preconstruction surveys are conducted of adjacent properties prior to construction. This consists of checking visually for any signs of structural settlement, roof and exterior damage of the building. This report provides security for both the owner of the new development and the neighbors, providing evidence of prior conditions if damage occurs during construction. 

Site survey

The site survey is a requirement for obtaining local city or county council planning permission. Professional surveyors have useful knowledge of building rules and regulations such as height restrictions, zoning and land use. The site survey consists of establishing and marking block boundaries, calculating the shape and size of the block, noting landscape features on and around the land and marking land contours. Once this is done, a plan is drawn up and submitted to the council together with the drafter’s plan. The survey can also contribute to deciding on the safest and most sound location for the building to be constructed.

Environmental reports and documents

An environmental impact report looks at how the project will impact the natural surroundings. Attention may be given to native habitat, endangered species, age of the trees and foliage and other factors. If the block of land has had previous industry use there may be issues surrounding releasing poison substances, ground water impacts or land stability

Energy efficiency ratings

An energy efficiency report is required for all new housing to meet the National Construction Code and the minimum standard for energy performance. This report will determine whether any adjustments need to be made in the plans and that the designs meet the requirements of the building to retain warmth in the winter and keep cool in the summer.  

All documents can be filed within construction software packages, for easy accessibility by all parties, as well as being able to be formatted and emailed automatically along with permit applications and the required plans.

Designs

Before the designs are drawn up, the owner’s vision of their home is fully discussed. Details such as where furniture will go, what kind of fittings and fixtures are desired, the types of cupboards and doors, flooring, window coverings and construction, colors and appliances are all discussed. What kind of bathroom and how many, how many bedrooms, reception rooms, a garage and how many cars are all necessary decisions at this stage. The more detail an owner can provide, the more the plan will turn out to match their vision. The details can also help the builder with estimating and with obtaining better value materials, fixtures and other elements.

Drafitng plan

Drafters use information from the survey reports to design and prepare the drawings for the home. The drafting plan can include site plans, floor plans, elevations, internal elements and electrical schemes. Drafting plans can be submitted in two-dimensional and three-dimensional aspects and stored with other documents in the construction software package.

Council building permits

The next stage of preconstruction is to submit a building application to the local council. This required the payment of a Building Services Levy (BSL) which is set by the city council. The amount of the levy depends on your local council.

Assessing the construction project

The preconstruction phase is an opportunity to carry out risk analysis.  The contractor will assess all the possibilities that could go wrong, and plan for contingencies if these scenarios occur. Another element is to look for cost savings that could be found in choosing cheaper materials that have similar properties or aesthetics to the ones suggested by the supplier. It could refer to finding more reasonable subcontractors. Equipment rental can also be reduced if there is time to get quotes from a range of suppliers and schedules are properly designed. Scheduling is also available in top-rated construction management software.

Construction estimating

Preconstruction is also the period when the builder will complete a final total cost estimate. A total cost estimate is a major part of the preconstruction process and needs to include all elements of the build. Construction estimating software is used to streamline this process and can save hundreds of dollars for the budget.

The software allows the general contractor to perform a material takeoff that inputs material prices per line, per piece as preferred, and add every element of the building process for very accurate results. Automated software also can be used to request accurate pricing from suppliers for materials to boost the accuracy of the final cost estimate.

Saved templates of past similar jobs means that software speeds up the estimate process even further. The construction estimate can be automatically generated and emailed directly to the customer from the same software platform. Cloud-based software allows this process to be completed from any device or location that has internet accessibility.

The cost estimate for preconstruction often come as a surprise to new owners who are usually more focused on square footage, paint colors and shower heads than surveys and site reports. Applying building construction software is an advantageous way for both builder and owner to cut costs and speed up the process. Reports, surveys and reports can be integrated with council information and submissions for permits and sent automatically from the same platform. All customer information can be unified with project team members such as the designer and builder to ensure seamless communication throughout the project.

The post Calculating preconstruction costs: why it’s essential to the construction process appeared first on Buildxact AU.

Forbes listed Buildxact software as the best overall construction estimating software for 2022, giving it a 4.5-star rating. Forbes editors considered pricing, general features and customer reviews when compiling their list of the best construction software solutions in the market.  

Construction estimating can make or break a custom home builder’s small business. As you know, estimates must be as accurate as possible to protect profits. Estimates include labor and materials costs. Using Buildxact, you can create estimates and bids that are as close as possible to the actual prices that come in as your project progresses – critical in today’s inflationary economy. Custom home builders like you need this to ensure bills are paid on time, your family is well taken care of, and you have money left over to enjoy life when not on the job.

Forbes highlighted Buildxact simplicity as a big plus because it allows you to use one system from takeoff, to estimate, to scheduling trades and even to the final invoice.  

And our users rated us 4.6/5 on Software Advice. The reviews highlighted notable features like centralized document management, visual task scheduling and easy-to-follow progress reports. All three are essential to help a construction project progress smoothly so you can finish on time.  

A great example of how Buildxact software works for the builder is takeoffs. Takeoffs are easy with our cloud-based software. You can use the online blueprints and scales to measure square footage quickly to ensure material counts and prices are accurate. Throughout the project, Buildxact gives you more visibility on your financials by offering comparisons between estimates and actual prices. This visibility empowers you to make educated decisions that are critical during times when supply chains are uncertain and labor shortages are common. 

Buildxact also allows you to automatically link takeoffs to the item costs so that builders don’t need to input them every time manually. Because it takes more than just one builder to complete construction projects successfully, our software allows users to share information and communicate with team members, general contractors and suppliers.  

The days of messy desks covered with essential work documents are gone. Buildxact helps keep everything organized and allows you to manage all project-related documents such as photos, blueprints, and plans. You also can track and document progress with pictures at each project stage. 

And you are never on your own with Buildxact. Customer support is always just an email message, phone call, or chat message away.  

Why bother trying any of the other options available to you? Listen to Forbes and Software Advice. You won’t regret it!  

Book a demo  

The post Buildxact rated ‘Best Construction Estimating Software’ by Forbes appeared first on Buildxact AU.

“Providing accurate and detailed construction cost estimates early in the planning and design process allows you to create a roadmap for a successful project,” Marcene Taylor, president of construction estimating firm Marcene Taylor Inc., said.

There are many ways to develop a cost estimation for a project, depending on the amount of information and data you have about the project.

From preliminary estimates based on past projects, to detailed line-item estimates based on the construction bid documents, estimates can range from a ballpark figure to a well-developed proposal used to create formal bid estimates and customer contracts.

We’re going to look at the types of construction estimates, how they are developed, and how software can help you better meet your customer’s expectations.

Types of construction cost estimates

There are five main types of construction cost estimates: preliminary, detailed, quantity, bid, and control. Each is used for a different purpose at a different time in a project lifecycle.

Preliminary cost estimation

A preliminary estimate, also called an abstract cost estimate, approximate cost, or budget estimate, is used in the early phases of a project, usually before design documents have been completed.

Project owners rely on preliminary estimates to help them have a rough estimate that helps them decide whether a project is financially feasible or not. They may use the preliminary estimate to determine how much financing they’ll need or if they can afford the project with existing funds. Often a preliminary estimate helps determine if a project will be undertaken or not before they involve too much of your time.

A preliminary estimate is usually based on the costs you’ve experienced on similar projects that you have recently completed. For example, a general contractor may provide a preliminary estimate for a new office building by looking at past office buildings of similar size. This kind of estimate is prepared with the understanding that a revised estimate with more specific cost detail must be completed before construction can begin.

Detailed estimate

As its name implies, a detailed estimate involves breaking down the project scope into smaller unit prices that can be priced individually. It includes costs for the materials, equipment and labor required to complete the project. Adding these gives you a total project cost.

In order to provide a detailed estimate, you need a design that is complete so you or your estimator can quantify the exact work that has to be done.

“An estimator needs to get to know the job inside and out, fully understand scope and design requirements, in order to provide a responsible estimate on any project,” says Dave Shank, owner of Shank Glazing Solutions, which specializes in preparing construction estimates for glazing and bid consulting.

The detailed estimate is based on completed design documents and how much labor will cost the contractor to provide. It is often the basis of the contractor’s initial building construction budget.

For example, a masonry contractor breaks out the work required for a brick wall by estimating the costs for the foundation, support structure, masonry materials and labor.

Quantity cost estimate

A quantity estimate is based on the actual number of units or amount of work that needs to be provided. The project is broken down into quantifiable pieces and all costs for each piece are added up to get the overall project estimate.

A quantity estimate is based on the count or measure of the amount of work and materials needed to complete the project. It is assumed that there is a standard cost for each unit of work and for the materials purchased. This is all typically quantified in a takeoff.

“Different trades have different techniques for estimating a job. For example, roofing is determined by the square foot, plumbing by the fixture count, and electrical by the opening,” according to Bill Samuel, an Illinois real estate developer at Blue Ladder Development and general contractor.

For example, a concrete contractor bids the foundation for a project based on the square footage of the slab. He has determined how much it costs for each square foot of foundation, including forms, materials and labor. Because of these differences, it’s best to use a digital takeoff tool that can adapt to your specific needs.

Bid cost estimate

A bid estimate is the cost estimate that is submitted to a potential client in hopes of winning the job. It will include all the contractor’s costs for the project, plus allocated overhead costs and profit margin.

It’s important to factor those two items in a bid cost estimate because the bid estimate is often the definitive estimate used as the basis for the construction contract. The bid estimate is based on the contractor’s breakout of the building costs, plus markups for profit, overhead expenses and contingencies. Digital takeoff software typically allows for adding line items for markups and other expenses.

Control cost estimate

A control estimate is used for monitoring the project during construction and is comprised of three separate estimates: the budget estimate for financing, the budgeted cost after contracting but prior to construction, and the estimated cost to complete during the project. These budgets are revised on a regular basis to reflect approved customer change orders and actual costs incurred.

The different components of construction estimates

So now that you have reviewed the different types of estimates. Let’s look a little closer at how they are put together. When preparing an estimate, contractors look at three components: estimating technique, degree of accuracy and data source.

Estimating technique

There are two techniques used to create the project estimate: top-down and bottom-up. A top-down estimate is created by determining the estimated cost for the whole project and distributing costs to each task based on that estimate.

A bottom-up estimate prices each specific task individually to roll up to an actual cost for the overall project. A bottom-up estimate is the most detailed and accurate and can be completed using takeoff software.

Accuracy of cost estimates

The accuracy of a construction estimate is based on the amount of information provided in the design documents. As we’ve discussed, contractors often provide estimates at various levels of document completion.

As the project development progresses, the estimates become more accurate. There are several types of estimates that are distinguished by the level of accuracy required, including magnitude estimate, feasibility estimate, preliminary estimate and definitive estimate.

Data sources for estimated cost estimates

There are three potential sources for cost estimate data. The first is a parametric estimate, which starts with unit costs provided by third party or a contractor’s in-house data.

The unit cost is used to provide an overall estimate for the project based on the direct construction cost, which includes materials and quantity of work required.

The second is expert judgment, when a building expert provides their opinion on the cost for the project.

The third is an analogous estimate, where the project is compared to a similar project, and that cost information is used to create an estimate for the current project.

Other types of cost estimates

Historical

A historical estimate is based on costs from a project budget done in the past of similar size and scope. Often the cost is adjusted for inflation or other pricing factors.

Parametric

A parametric estimate uses simple calculations to provide a cost estimate. It is often based on standard rates from a third party or a contractor’s historical data.

Plinth area

Similar to a parametric estimate, a plinth area estimate is based on a standard rate. The plinth area of a building is the area covered by the external dimensions of a building.

The plinth area is multiplied by a standard rate for construction in that area to arrive at an estimated cost for the project.

Bottom-up

In a bottom-up estimate each activity is priced individually, then rolled up to the overall project cost. This is the most accurate way to estimate a project.

Three-point estimate

A three-point estimate is based on the average of expected costs in three scenarios: optimistic or best case, most likely or expected, and pessimistic or worst case.

The three values are added up and divided by 3 to get the average.

Equipment factored estimate

An equipment factored estimate is used for projects that involve the furnishing and installation of equipment.

The cost of the equipment is multiplied by an installation factor to arrive at the total cost. The installation factor includes subcontractors, direct labor costs, and materials.

Meeting your cost estimate effectively with SaaS tools

Creating accurate estimates is only one step in the overall construction process. Once you have developed your final construction project estimate, submitted a bid and won the job, construction management software can help you track your progress, manage subcontractors, and predict cost overages before they occur.

Costs flow in from your accounting software and are matched up to the appropriate line items in the bid estimate.

Real-time tracking allows you to see where potential cost overages will occur, so you have time to control them or submit timely revised estimates.

By taking proactive action you reduce potential budget problems and help make your client’s project a reality.

Buildxact software helps contractors create, manage, and report on their estimates. With real-time cost data you can better predict future costs and adjust your estimate as needed.

This flexibility and knowledge improves the accuracy of your estimates and can lead to more profitable projects.

Ready to try for yourself

Get started in Buildxact today with a 14-day free trial, or book a one-on-one demo with our team and they’ll take you through all the ins and outs of the software.

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The wise homeowner does not select a builder on price alone; however, it’s critical that you always submit competitive, complete bids if you are to win the amount of work required to grow your business. To do this, you must have accurate estimates of labor costs and material costs‑especially during the current economy’s upwardly spiraling prices and tough construction labor market.

Importance of construction cost estimation

As you know, many businesses offer estimating to custom home builders. Hiring someone to do your estimates may save time, but it only adds to the overhead you must cover before you can earn a profit. That’s why many builders, like you, turn to online software solutions to do their own estimates. They know it’s a great way to stay on top of all their construction costs and have greatest control of their project. 

The estimate must consider many parts, such as material, construction labor and equipment costs, and all of these are critical if you are to arrive at a fair quote that generates a reasonable profit for your business.

Estimates detail accurate construction labor costs

Estimates do more for you than just help you track profitability. The information you gather during the estimating process influences many of the business decisions you’ll make. For example, construction labor prices and the associated hourly wage will influence who and how many you employ, and material prices will direct what suppliers you use.

For instance, you may find that buying from a single supplier makes more sense than using two or three, or you may find that hiring more experienced construction labor actually saves time in the long run on both direct and indirect costs.

Estimates encourage construction business planning and organization

Once you’ve decided the budget for labor costs and material costs, you must also consider scheduling. Knowing which crews are available and when will drive a lot of decisions that must be made about the timing of a project and when the associated materials for each stage of the build must be at the proposed job site. It also helps you think about any time that should be built in for labor cost sick days, bad weather and other unforeseen events that can delay a project. These decisions need to be made well-ahead of time to ensure the homeowner approves of the timeline and that material availability is sufficient to accommodate all construction projects you have under way.

As you schedule out jobs, you may begin to wonder about the budget estimate for your total labor costs and if you have set it up properly when comparing to your construction company’s financial goals and the threat of losing money on jobs. Below are some basics to keep in mind as you work through your construction costs and labor rates.

What are construction labor costs?

Your construction company pays labor costs, generally put, for work crews to complete the specific tasks of a home build. Work and the associated hourly rates are typically divided into major stages of construction (site work, foundation, framing, exterior finishes, major system rough-ins, interior finishes, landscape, etc.). Each of these have tasks that require many subtasks to be completed by crew members made up of framers, carpenters, plumbers and other skilled labor. You will have an hourly rate or crew’s hourly rate for each.

It’s important that labor costs also cover the indirect overhead or “labor burden” of carrying employees on a payroll. The employee’s labor burden includes federal and state payroll taxes, medical insurance, time off, worker’s compensation and other items not directly related to a home build.

Different methods for construction labor cost calculation

The Square Foot Method

The Square Foot Method is used typically in the earliest stage of a project to determine the rough lump sum cost of construction and how long the build would take. At this point, the owner typically wants to know if he or she should even continue planning their home build based on how much financing is available, and you are usually prospecting for new business with the idea that an initial estimate on labor cost and material cost is subject to further adjustment. The method is done by calculating a general cost per square foot and then multiplying that amount by the total square footage of the project.

Using this method, you should base the cost on historical data from your experience on previous builds or from researching locally available information. Most likely the only documents you would be working from at this early stage are initial sketches of a floor plan and drawings of a site plan. Because of this, exact dimensions are unlikely at this point. You will calculate labor cost, but it’s likely not necessary to detail the unit cost as this stage.

The Unit Pricing Method

Unit pricing is more detailed and includes separate costing for the material and the labor needed to do the build. As a general rule, you are looking at the base rate for labor, which is typically expressed as a cost per hour for the entire crew needed to complete a specific task, and then multiplying that by the total hours needed to complete that task. The crew can be made up of individuals of different experience earning a different hourly wage. The idea is to add all team member wages together to have the unit price per hour for that crew. You then add separate line items for materials. You then repeat the process for all tasks needed to complete the home build. And be sure not to forget indirect costs such as city permits and inspections.

At this stage you might be working from architectural plans with accurate scale and dimensions, but these plans may not be complete. If plans are available, estimation software can help with unit pricing because it can perform a digital takeoff, which is much faster and more accurate than using a pen and paper to do your own calculations. It also acts as a checklist to help you ensure you miss nothing.

The best software allows you to save your estimates so that you can reuse them for future projects that are similar in size and scope. The best software gives you the ability to easily add and remove materials and other items. That’s important because as this early stage, you don’t want to get locked into something the homeowner may change.

The final construction labor cost

The final estimate is generated from the actual plans used to build the project, also referred to as the construction plans. Your local building authorities approve this set of plans, which is important because from this you will finalize your materials and labor cost budget. In your final estimate you will include much greater detail and will include estimates from any subcontractors you plan to use. Here, you should fully consider the total labor cost, which includes labor burden costs mentioned previously, like payroll taxes.

It’s important that your final estimate include markup to ensure your profit margin. The best software gives you options as to how to present this to the customer. Some builders prefer to show markup for each line item of material or labor. Some builders choose to spread these indirect costs over the entire estimate. The best software gives you the flexibility to present either way. Also, the best software gives you the ability to track subcontractor labor and markup costs using internal work orders that can compare actual costs to your initial estimate.

How construction management software can help

Increasingly, home builders like you are organizing their businesses to deal with the challenges of estimating material and labor cost using cloud-based software, and the best software covers both the cost estimating and the generating of schedules for their work teams. Because these work teams can vary widely in purpose and number, the best software saves you time because you can visually see when different jobs are being completed and lets you prioritize and sequentially order work and the associated labor costs using the drag-and-drop of a computer mouse. 

Buildxact software offers labor cost and material cost estimating features as well as simple scheduling to help you calculate labor costs and keep these costs in line with homeowner expectations. Book a demo or sign up for a 14-day free trial today.

The post How to consider labor estimate costs for construction appeared first on Buildxact AU.

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Estimating is one of the most important, yet difficult processes of construction projects for residential builders and trades. Using Buildxact, you’ll be apply to complete accurate estimates and streamline your process, helping you to complete your estimates up to 5x times faster. Build an estimate from a ready-made template or start from scratch. Connect with suppliers for live pricelists, and request quotes from trades. Once your estimate is complete, you’re ready to turn it into a professional quote, all through Buildxact.

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