“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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There’s a better way for residential builders and trades to complete their takeoffs. By using Buildxact’s online construction management software, you can complete your takeoffs up to 80% faster, with greater accuracy and efficiency. Get measurements and costs straight from your takeoffs, and manage all aspects of your project through Buildxact. Say goodbye to scale rulers, pen and paper and Excel, and hello to Buildxact, the easy-to-use software for online takeoffs.

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Lauren O’Grady runs a successful, and very busy boutique construction business with her husband Lonnie. Recommended to Buildxact by Master Builders Association, here she talks about how Buildxact has significantly reduced the time it takes to do takeoffs, and how it has cut their administration time in half; giving them back precious time to spend with the family.

Buildxact’s easy estimating software allows builders and trades to produce professional quotes in hours instead of days. When combined with Buildxact’s job management software, everything can be managed in one place, from first takeoff to final invoice. Easy to get started with, easy to use.

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“The one thing I really love about Buildxact is the takeoff. The ease in which I can have a plan uploaded and then do a full square meterage takeoff is fantastic”, says Hagen Shaw, Managing Director of Shawco Building. Buildxact has been a real game-changer for Shawco Building. Since using Buildxact Hagen has been able to reduce his takeoff time for a build to under a day, where it used to take him anything from 2-3 days, and even up to a week.

See for yourself how Buildxact can help dramatically improve the efficiency of your business, and give you back time to do the things you love.

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Getting time back was important for Peter Scalzo of Scalzo Constructions, so he turned to Buildxact to streamline his processes and be more efficient. Peter has sped up his takeoffs, and kept everything in one place, meaning he runs his jobs smoothly from end-to-end. Now he’s telling you to get out the office and quit wasting your time. “Anyone still using paper and spreadsheets to do your takeoff, what are you doing? Get out there and experience life.”

You too can get time back for the things you love using Buildxact, the number one construction management software for residential builders and trades.

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There are several ways to save money when operating a construction business. Here are some tips to help you spend wisely and save construction costs when completing your next build.

Reducing costs during the design process

Reducing construction costs during the design process could be the key to reducing the total cost of your project. Working with clients to modify design and project scope is an important part of controlling project costs and realizing savings.

During the design stage, you and your clients establish the structures, plans and guidelines you will adhere to throughout the rest of your construction project. By making cost-effective decisions early on, you create a clear budget that you both agree to follow. This is your one-way ticket to creating your client’s dream home without unnecessary financial stress.

These are some ways to reduce construction cost during the design phase of a building project.

1. Reduce scope

It’s important to always be realistic about project scope when undertaking a construction job. Setting clear and achievable expectations can enable you to plan effectively and budget realistically.

As you plan a construction project, think about the financial parameters you’ll need to work within and identify design decisions that may increase the project’s total cost. Communicate clearly with clients to identify areas where changes might be necessary to accommodate your finances. The design stage is a good opportunity to reduce project scope and eliminate costly features that could push the limits of your budget.

2. Reduce complexity

Similarly, reducing project complexity is an easy way to bring costs down during the planning and design process of a construction project. Often, overly complex design features and elements can be expensive and may also be at a greater risk of costly construction material orders and scheduling complications.

By examining your design plans closely, you can identify areas of unnecessary complexity and work to refine and simplify project demands. This will help to save you money when building commences, and it may also make for a smoother, less demanding construction job.

3. Change materials or systems

Sometimes, the best way to save money in construction is by simply changing your materials or systems. Because the most obvious answer isn’t always the right one, it’s important to always consider all of your design options before finalizing plans. This way, you can be confident that you’re making high-quality and affordable choices.

When creating designs for a construction project, think about all the possible solutions to every problem. Some materials are more expensive than others, so when you can, look for cost-saving alternative materials to use in their place. For example, could you reduce costs by choosing vinyl flooring material instead of hardwood? Consider how you can adjust your client expectations to meet the project budget without compromising on overall aesthetic or quality.

How can builders reduce construction cost?

Once designs are finalized and building commences, there are many more ways to reduce overall construction costs even further. If you think strategically, it’s possible to make budget-friendly decisions for the good of your project and your bank account.

1. Consider material alternatives

First, consider material options. Even once the design stage is complete, there are opportunities to alter your plans and accommodate more cost-effective building materials. When these are used broadly across your project, you could save a significant amount of money. Discuss any potential material usage changes with your client to ensure that they are happy with alternative options.

Before you begin work on each new phase of a building job, take a step back and consider whether your choices are the right ones. Could you maintain a standard of work while also saving some extra cash here? When looking for areas to cut costs, it’s a good idea to focus on the small things.

2. Use software to stay on budget

The secret to effective budgeting is planning ahead, and modern technology makes this easier than ever before! Using digital software to create a clear and comprehensive budget-minded plan can help you anticipate financial demands and respond to them effectively without exceeding your limits. As previously discussed, put a budget plan in place early on in your project, and prepare to keep a close eye on rising costs. While you can return and make changes, this plan should act as your guide throughout the duration of the build.

In your budget-friendly construction plan, factor in all important building considerations. What materials will be needed? Will you need to collaborate with other skilled workers? How long will each stage of the project take? Do you have a little extra cash in your budget in case something goes wrong? What labor costs are you anticipating? What is the total square footage of your project? Advanced digital takeoff software like Buildxact can help you predict the overall cost of a construction project with ease and accuracy. Keeping these things in mind will help you prepare for anything.

3. Streamline communication

Clear communication makes it much easier to understand and adhere to a construction budget. Communicate regularly with all project stakeholders, including your client any other builder or contractor working with you. This way, you can ensure that everyone remains on the same page and aware of construction expense considerations. You can make sure no important considerations are forgotten.

Throughout your building project, aim to communicate with your client and any other contractors regularly. Using software like Buildxact, you can set tasks and reminders as you build your project’s cost estimate. This makes it easy for everyone to stay on track as the job progresses.

With software as a guide, you can see how work progresses against the schedule, which can prompt you to ask questions and have your team think about construction progress, time demands, financial constraints and material availability. This can help you predict and manage building construction costs with much more accuracy and confidence.

4. Reduce excess construction waste

Waste is the enemy of saving, so if you’re wondering how to reduce construction cost, it’s important to consider ways to reduce unnecessary waste. Try to save and reuse excess construction materials whenever possible instead of throwing them away. This will enable you to make the most of all available items, which is so important during times of fluctuating material pricing and overall economic inflation.

Reducing waste also is better for the environment; so be resourceful with your materials whenever you can be. Recycled materials can often be helpful later on. If you’re left with an excess carpet square after finishing work in the living area, save it! It might be useful if you find yourself running low in one of the bedroom closets.

5. Eliminate change orders

Change orders can be a major source of construction cost, as clients alter project plans and processes over the course of the build. When these alterations are not factored to your initial budget or plan details, they can cause financial difficulties, even impacting the overall project outcome.

Reducing or eliminating change orders helps you to feel confident and secure in your construction plans. You can do this by communicating your change order processes or expectations with clients before building begins. Remember to be clear and respectful, ideally including change order permissions in a contract.

When mid-build changes are not permitted, you can get on with the construction process, not worrying that project demands could be altered at any moment. This can help you be more resourceful with your available budget and could even reduce the funds you need to set aside for problems or emergencies.

6. Properly manage subcontractors

Employing subcontractors is often an important part of construction work, but labor cost can also be expensive. While you always want to pay contractors fairly for their work, renegotiating fees can be helpful in lowering labor costs and bringing your expenses down, saving money that can better be used for other business administration or construction purposes.

Choose your contractors carefully, looking for the perfect combination of skill and affordability. Before you start work on a new build, set clear contractor prices that allow you to compensate contractors without exceeding your financial limits. You can schedule skilled contractors effectively using Buildxact software, helping you keep track of all staff working on a project. Clear schedules also prevent any miscommunication about when work crews should arrive on a job site. Poor timing can lead to work crews being unable to work, leaving a job site, and not being available later when you need them.

7. Buy dynamically

Dynamic purchasing is a well-known concept in the construction industry, providing you with opportunities to explore the most cost-effective options for your business and project. Buying dynamically allows you to procure all the materials and services you need from a wide range of suppliers, searching for the highest quality at the lowest prices.

Buildxact software offers material suppliers and dealers the ability to integrate pricing directly into the software so that builders can easily see prices as they build their cost estimates. This helps you make budget-friendly choices at a time most convenient to you.

Reducing costs using takeoff software

One of the best ways to reduce construction cost is by using advanced construction takeoff software. Once, the takeoff process involved complex manual estimating and calculations. This process was time-consuming and could result in inaccuracies, comprising the effectiveness of project plans and budgets.

Digital takeoff software now makes it much easier for builders to perform fast, effective takeoff estimates. You can accurately estimate material needs, time demands, staff requirements and budget suitability, all using efficient modern technology. This information is clear and comprehensive, allowing you to plan ahead much more easily. You’ll know exactly what you’ll need to complete a project and how much these items will cost.

By establishing clear cost expectations during the takeoff process, you can determine early on in the construction process whether the project will fit within your budget parameters. If it does, you can get started! If it doesn’t, you can make changes and adjustments to your plans so budget limitations are accommodated before you start building.

Free trial of Buildxact

If you’re looking for excellent digital takeoff and estimating software to help you reduce construction costs, try Buildxact. Book a 14-day free trial of our advanced digital software today!

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Before beginning a new construction project, it’s important to develop a clear sense of the time, material and financial demands to complete the project.

A realistic estimate is the most crucial factor in ensuring the long-term profitability of a construction project, helping to avoid project cancellations. By creating a detailed estimate ahead of time, it is possible to predict a project’s economic feasibility, prepare necessary construction materials and plan for a smooth, cost-effective build, saving time and money throughout the project.

Comprehensive conceptual estimating processes are the key to effective business in the construction industry. They help builders and their clients stay on track and on the same page.

So what really is conceptual estimating, and how do you create clear, accurate conceptual cost estimates at the conceptual stage of a building project?

What is conceptual estimating?

Conceptual estimating takes place during the early stages of a building project. These preliminary estimates are the first step in ensuring that the build aligns with budget expectations and resource availability.

Using conceptual estimating, you can use current and historical data to anticipate cost demands before beginning work on a project. This means you can plan to accommodate potential cost overruns that could occur throughout the build.

A conceptual estimate isn’t exact. It relies on preliminary sketches and project specifications along with information from past work to deliver an approximate cost forecast. This offers a guideline by which future costs are anticipated and planned for, even if final costs vary slightly from initial expectations.

There are many important benefits to conceptual estimating for construction workers and clients alike.

Conceptual estimates help clients to develop clearer, more accurate cost expectations, with this information playing an important role in budget decisions.

Clients who understand what costs may arise throughout the building process are more likely to allocate funds effectively. As they review designs, they consider possible alternatives to costly features, meaning that they are less likely to run into budget problems.

Estimates also help builders to protect their time and labor investments. By analyzing feasibility before a project begins, all parties prepare for the demands of a project before pursuing further development of the project. This reduces the likelihood that the project will be discontinued mid-build as a result of insufficient funds.

When leveraged effectively, conceptual estimating also provides a guideline for further building decisions and project timelines. Builders and clients use conceptual estimating to predict project schedules and to choose budget-friendly design features.

Conceptual estimating is an essential step in the pre-construction process; therefore, good conceptual estimating tools are among the main resources needed for any construction business.

Is conceptual estimating different from cost estimating?

Conceptual estimating and cost estimating are very similar and often work together. Both processes enable construction workers and their clients to anticipate project costs accurately and effectively.

Conceptual estimating occurs early on during the pre-construction phase of a building project and is a preliminary estimate of total construction cost. The estimate is intended to provide generalized cost information before any construction work begins. This allows for plans to be made with future costs in mind.

As the name suggests, conceptual estimating occurs during the conceptual phase of a project. A conceptual estimate draws from pre-build information, looking at concepts instead of already realized details.  These estimates rely on industry information and historical data from similar projects.

While most construction workers make every effort to ensure that estimates are as accurate as possible, pre-build conceptual estimates are subject to change and may be inexact. Still, they provide a useful basis for budget decisions and feasibility expectations.

Similarly, cost estimating is used as a strategic tool to facilitate effective financial and feasibility decision-making early on in a building project. Cost estimates involve the analysis of all relevant cost data, including labor and material expenses.

Cost estimating usually occurs later on in the process than conceptual estimating. This means that cost estimating is able to take more factors into consideration, meaning that it may produce more accurate results.

For most construction projects, it is best to pursue both conceptual estimating and cost estimating. This way, you provide clients with up-to-date information as it becomes available, helping to avoid potential financial problems.

Why is it important to do a conceptual estimate?

There are many reasons why it is important to complete a conceptual estimate for every building or construction project.

First, a preliminary estimate enables you to determine anticipated total construction costs for a building project. This is essential when it comes to informing many important project decisions and is an important component of a project’s overall cost control.

With a clear budget in mind, builders and their clients are better equipped to make informed choices, working alongside a design team. Knowing budget limitations means that clients can opt for budget-friendly materials and features where needed or for spending extra on certain items when adequate funds are available.

A good conceptual estimate takes a range of project factors into account, providing a clear and comprehensive outlook for total project costs, including both direct and indirect expenses. This helps clients to plan projects within their financial means.

In addition to this, conceptual estimating actually helps save time and money in the long run.

While conceptual cost estimating isn’t always exact, it provides a well-informed guideline for financial expectations. An approximate estimate allows builders and clients to make cost-effective decisions early on in the building process, considering project scope and financial demands alongside data from other projects with similar specifications.

Making decisions as early as possible helps to move a construction project forward quickly without wasting time or incurring unnecessary labor costs.

This may also make it possible to keep back-and-forth communications between high-cost professionals to a minimum, reducing the total price of employing skilled workers such as engineers or architects.

What is the outcome of a conceptual cost estimate?

A good conceptual cost estimate should factor in all available information relating to a construction project, using this information to conduct a comprehensive analysis of the time and financial demands that are likely to be associated with the project.

Once a conceptual cost estimate has been completed, it should be clear and easy to understand, providing extensive information relating to the anticipated costs of a project.

When used effectively, conceptual cost estimating should serve as a foundation for effective construction planning for a proposed project. Builders and their clients should use a detailed estimate and associated cost data to inform project decisions and effectively distribute project budgets.

How to do a conceptual estimate

To ensure that your conceptual estimates are as accurate as possible, it’s important to ensure that you’re using an effective estimating process and that you know how to complete a good conceptual estimate.

Start by reviewing all available project data to determine the scope of work that is likely to be required. You’ll need to consider labor demands and the materials needed to complete the project. What items will you need to use? How many staff will contribute to the project, and how many hours will they need to work?

Next, prepare to produce a cost estimate. While some construction businesses still rely on manual estimating, this method is becoming less popular. Human error means that miscalculations are much more likely, leading to under or over-pricing. Manual conceptual cost estimating processes are also more time-consuming than automated alternatives.

The best option is to ensure that you have access to good cost estimating software. This can help you save time on estimating while also maintaining a high level of estimation accuracy, avoiding common estimation mistakes.

Construction estimating software is designed to factor in pricing structures, labor demands, material needs, unit cost data and more, enabling you to produce a dependable approximate estimate.

Once all project documents have been considered, it’s time to determine the overall project scope by performing a material takeoff.

You’ll need to create a list of the materials and equipment that will be needed to complete the project. Material takeoffs can be completed manually or using digital material takeoff software.

After this, you’ll need to create an estimated project schedule, helping you determine labor and time demands. This schedule should include provisions for all subcontractors needed to complete the project and should encompass time spent both working on-site and facilitating offsite administrative processes.

Finally, using the information obtained from early steps in the estimating process, calculate a total conceptual cost estimate that considers material prices, labor rates, company experience, overhead costs and profit.

Using software to improve your conceptual estimating

Using software solutions can help you improve your conceptual estimating processes, helping you provide clearer, faster and more accurate estimates.

This can help cut down on administrative demands, leaving more time for construction work. It can also reduce the likelihood of estimate inaccuracies, giving you and your clients more confidence in cost projections.

Buildxact software offers comprehensive conceptual cost estimating tools to help you build your construction business. Book a demo or sign up for a 14-day free trial today!

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Here, we will discuss the steps in the cost estimating process and offer some strategies to help you win more tenders and bids, and greater project success.

What is construction estimating?

Basically put, a construction estimate is a cost analysis of a construction project. In reality, they are time-consuming, detailed and must consider the client’s vision, input from the design team, the availability of materials and labor, the environment and all the necessary budget requirements.

For accurate construction estimates cloud-based estimating software can save you time and make your business look more professional.

What is a construction tender?

A construction tender is an invitation to provide a formal submission, or proposal to bid on doing work on a construction project.

Types of construction tenders

There are a few types of tenders when it comes to construction projects. They include:

• Open tender – these allow anyone to submit a proposal;
• Negotiated tender – this is when a client approaches you alone;
• Selective tender – here, multiple companies are selected to offer a proposal.

An open tender, usually used for Government projects, is advertised and if you are interested in the job, then you can pick up a tender package. With other types of tenders, the packages are often presented to you.

What’s included in a tender package?

The people or agencies that have a building project they want to be constructed will put together a tender package and make it available to the construction companies they want to submit a building proposal.

A tender package will include:

• An invitation to submit;
• A form of tender;
• All preliminary documents and information;
• Pre-construction and site management data;
• The contract and conditions;
• Tender pricing;
• The specifications document;
• Information on the client/company;
• The project’s drawings and specs;
• And, a tender return slip.

This is how you begin to familiarize yourself with the project. From the information in the tender package, you will start to build your proposal or bid.

Responding to a tender request

You should take every tender request seriously and consider it an honor to participate. So, make sure you enter your response within the timeframe the tender package outlines.

Even if you don’t think you are suited to complete the project, you should respond to the client. You can explain why you are not suited, this way you leave the door open with them in case any future projects come up that are suitable to your business model. People don’t like being ignored, but they appreciate honesty.

Make your correspondence professional, timely, clear and concise.

Awarding tenders

The client may not necessarily accept the lowest bid when they award the tender. Instead, they are most likely to award it based on experience, professionalism, abilities, quality and price. If your offer is too low, they may wonder how you can provide quality work. You need to ensure your construction cost estimate is accurate and you cover all your costs as well as your intended profit.

Who should be responsible for construction estimating in a construction project?

Depending on the size of the construction business the responsibility to perform a construction estimate could belong to dedicated cost estimators, the project manager, or the business owner. In a small remodeling business, it is often the builder themselves who is responsible for performing them – taking up a lot of their valuable time.

Advantages of getting in front of your customers quickly

The quicker you can build a relationship with your prospective clients the better. Not only can you build a rapport, but you can show your professionalism and market your business.

10 vital steps in the construction estimating process

To win tenders that are profitable for you, you must ensure you produce an accurate cost estimate. If your estimate neglects to include any of the following 10 steps, then you could be losing your business money and clients.

1. Choosing the right work to bid on

Before you even start putting much time and effort into your project bid, you need to ensure the job is feasible. Are the client’s expectations attainable? Can you handle the scope of work? Is the timeframe achievable?

You may be able to answer many of these questions through your experience; otherwise, you could use an available historical construction database along with good cloud-based estimating software.

Once you have decided the project is suitable to bid on, then it’s time to move onto the next steps:

2. Reviewing construction specifications

In the tender package, you will find the construction specifications (specs). This document should explain the grade of materials to be used, the kind of installation methods, where the cost responsibilities lay, and it should outline anything else that may affect construction costs.

It should also inform you of any qualifications your team will need, the payment terms, the bonding capacity – surety for the project and the insurance requirements.

3. Reviewing construction drawings

Next, you need to read the technical details from the architectural drawings to get a thorough understanding of the build and the scope of work. This means making a 3D picture of the project in your mind, showing you the elevations and work heights, etc. You should compare the drawings with the specs to clarify any discrepancies between the two.

4. Performing a construction takeoff

From the construction drawings, you must detail every product and material required for project completion. Then from the quantity takeoff you identify the unit costs of the items, and you calculate the overall cost of the project’s materials. A profitable project depends on an accurate estimate.

5. The construction estimate

Now that you have your accurate quantity takeoff, you can add it to your construction estimate. You will also need to include:

• A realistic project timeline – don’t forget to consider any public holidays that may fall during build-time;
• Labor cost- how many workers will be needed and the labor hours? How much will be unskilled labor and how much will be done by tradies or a general contractor?
• Subcontractor costs;
• Other direct costs like equipment, transport, storage and fuel;
• A contingency fund.

Making a mistake when preparing your estimate can be costly; so be sure to check and double-check all your information and calculations.

6. Determining overhead and profit

Whether you call them soft costs, indirect costs or overhead costs, don’t forget to add them into you overall figure. Examples of these include the cost of your office lease, effort needed for estimates, book-keeping costs, sales and marketing.

Now, it’s time to think about your profit margins. Without a healthy profit margin your business won’t succeed. If you have added this to an accurate cost estimation, your profits won’t suffer.

7. Building your construction proposal

Your proposal must be professional-looking and created in a timely manner. It must be detailed, concise and accurate. Try to use similar language as the specs document and the construction drawings. Use it to showcase you and your business – tell the client why you are the right person to lead the job.

8. Construction contract basics

A contract should accompany the other construction documents in your proposal. Some common construction contract types include:

• Fixed-price contract – you assume the risk, but you can make a higher profit;
• Cost-plus contract – the client/owner assumes the risks and you receive an agreed percentage above the project costs;
• Time and materials contract – usually used for smaller projects, where the owner pays for the materials and an hourly labor rate.

The contract is your safeguard, if issues or disagreements arise, you should refer to your contract for resolution; so be sure to make it clear and concise.

9. Handling change orders

Another important safeguard is the change order document. If changes need to be made after the construction has begun, a change order must be created. Verbal agreements can change; so get them in writing.

10. Construction estimating software

The most vital tip we can give you to make more profits, save time and for accuracy, is that we recommend you use estimating and construction management software.

Why you should use estimating software during the construction estimating process

If you want to produce a bid estimate that wins, then it has to be quick, professional, accurate, clear and concise. You could spend a lot of time printing paper plans, measuring items depicted in them and then making manual calculations. Or you can save a lot of time by using estimating software.

Some of the advantages to using software:

• It can digitally read drawings, eliminating the chance of missing items;
• A preliminary estimate can be made quickly, allowing you to pick the right projects to bid;
• The software can be your cost estimator. A quantity takeoff can be done 80% faster and with the uploaded material cost lists, accurate estimates are easy;
• Uploaded databases for equipment costs, material unit costs, your indirect costs and even your general contractor costs make accurate construction cost estimating quick;
• It will aid in project management by allowing project managers to set and maintain timelines;
• Cloud-based estimating software allows you to upload your construction documents where they can be accessed from anywhere that has internet access;
• The ability to handle all communication through the one app allows your project management team, workers and contractors to keep all communication together throughout the construction process. Where it can be easily referred to, if needed;
• It can also be part of your design team, making your documents, proposals and other communication professional and personalized;
• You can also integrate it with your accounting software to make invoicing simple.

Good quality software requires simple data entry to assist you. With less time and effort, you can use software to stand out from other competing contractors with a bid price that wins jobs and profits. So, try our 14-day free trial or book a demo and get back your spare time while growing your business and making money.

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It doesn’t matter what size your project is, having accurate construction estimation can be the difference between your company growing with a good reputation or collapsing from lost profits and clients.

You can never underestimate the importance of construction cost estimating and here, we will explain how to estimate a project’s construction materials.

What is a materials estimate?

A material estimate is also known as a quantity takeoff, a construction takeoff or a material takeoff. It refers to taking off information from the blueprints about the materials and how much of them are needed for the build. The materials are all that is counted in a material takeoff as labor costs, equipment and other indirect costs are included in construction estimates separate from the material takeoff.

Who’s responsible for doing a materials estimate?

In a large company, there may be a dedicated estimator. Small builders or contractors may have to create the estimates themselves. Anyone who has any investment in the project, who produces tenders, bids or has a building budget should know the project costs and be involved with having a material estimate done.

If estimates are done by hand, then it is usually performed by someone with a lot of experience and knowledge of the construction industry, or they are performed with a lot of guesswork – making them very inaccurate, and liable to cost jobs or to lose profits. 

With the help of construction estimating software, anyone with little knowledge can perform one quickly and accurately.

When is the right time to do a materials estimate?

A building material estimate should be performed well before any construction begins. You should, at the very least, perform a rough estimate at the idea stage of the job. This can tell you whether the project is even feasible. 

Once you have decided to go ahead with the project, an accurate material estimate, or quantity takeoff, can be created from the blueprints. You can then work with your architect to ensure that you have the best building material, at the best cost, according to your construction project budget. 

When all the costs have been calculated and a contract has been signed, then construction can begin.

Different types of estimates

When it comes to construction cost estimating there are different ways to count, determine or estimate the total amount of materials required. 

The first method is used to build detailed, accurate estimates. We recommend that you use some kind of master checklist to ensure you don’t forget things. The second is used to estimate the surface area. Whereas the third type is useful for a rough estimate as it doesn’t consider actual costs.

The Unit Pricing Method

This method is where you count everything that is required that comes at a unit price. Such as a door, light bulb, door handle or stovetop. It also includes nails. They are sold, for example, in boxes of 500, which is considered one unit. 

Count each unit of every product necessary, multiply that by their unit price and you get your total estimated price. Don’t forget to consider when the project is set to begin, prices may have inflated by then. 

The Square Foot Method

To find out the area of the roof, floor and walls you need to find the square feet. You achieve this by measuring the length then multiplying it by the width. If the area is not square, then measure the longest sides. 

For example, from this, you can work out how many plywood sheets you would need to complete the overall project: divide your answer by the size of one sheet, this will tell you how many plywood sheets you need.

The Rule of Two Method

As we said before, this method doesn’t consider actual costs or unit amounts, but rather begins with how much time the project shoud take and the labor costs. It is based on the premise that labor is about half of the material costs. 

Through historical data and industry knowledge, you estimate the labor cost then multiply it by two, add 10%, and you have a basic cost estimation.

How to estimate construction materials for a project

Before beginning the takeoff process your basic cost estimation has shown you the feasibility of the project and so you’ve decided to go ahead with it. Now, the detailed estimation process begins. 

First, you need to decide the materials needed to complete the project and that will probably, for most construction projects, start with a site visit. This will help to detect any issues and any extra material needed to shore up the site. Even two jobs based on the same drawing will be different because of the worksite. Don’t forget, you need to count all the materials necessary to estimate project costs.

Decide which products to use

Part of the cost estimating process is deciding which raw materials and products to use in the house or building project that you are undertaking. Perhaps your client wants eco-friendly products, or a certain product would offer better drainage of the site. Maybe there are regulations that apply in the region or certain products are easier, or harder, to get hold of in the area. Product delivery must be considered, the same as if you need a material faster than normal. How will this impact your choice of product? Estimating software can help price the products using your supplier’s price lists.

Calculate quantity of materials

Now that you’ve decided the materials best suited to the project, it’s time to count and calculate their cost. Start with your blueprints and create a quantity takeoff.

Count

You must count every product used. For air conditioners, ovens or windows they are counted individually. For nails, lightbulbs or hinges they are counted by unit. In other words, by the box.

Length

When it comes to material like lumber, pipe or cornices they are measured by length. Although you always want to cover your project’s needs, you don’t want to have too much waste either.

Area

Products like carpet, paint or tiles that have an area to cover are calculated by length x width.

Volume

Concrete or landfill are measured by volume, length x width x depth. This gives you the cubic foot, cubic yards or cubic meter.

Calculating cost of materials

Once you understand how much material is required, the square footage etc, you need to find out the material prices. If you are creating your takeoff by hand, then you will have to research or have knowledge of prices. 

However, with software, you can have cost lists and databases at your fingertips. Once again, don’t forget to consider the impact of inflation on price if the estimate is for one of your future projects.

Digital estimate vs manual estimate

Basically, you have two ways of creating a construction materials estimate, manually or digitally. If you choose to do one manually, then you likely rough an estimate together based on your past projects, which hopefully have been a success, and hope it works out all right. Or you can take the more time-consuming manual method and count all the material required and calculate an accurate cost estimation with a calculator.

The other option is 80% faster, is less prone to error and is a lot more accurate – the digital estimate.

Using estimating software

If you have been in the industry for years or you are just starting up work, do yourself a favor and add construction estimating and management software to your business startup costs.

Not only will you build your business, your profits and your reputation, but you will take back more of your precious time. Good construction estimating and management software takes care of communication, has cost databases uploaded, offers the ability to easily add photos, manages your scheduling, stores all the project documents, and is cloud-based for easy mobile access. It also integrates with your accounting software for easy money management, and above all, it is easy to-use, accurate and makes you money. 

Book a demo of our Buildxact construction estimating and management software or try it with our 14-day free trial. Our easy-to-use software makes the estimation process a breeze. Don’t lose money on under quoted construction costs, get started and give your business the boost it needs. Create accurate estimates that lead to success with every job you undertake.

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Takeoff estimating, or a material takeoff is an integral part of the construction estimating process.

A material takeoff involves estimated counts of material supplies, material costs, labor costs and equipment by itemised prices and also can include a project completion date estimate by computing delivery times and building hours. 

A builder begins the construction takeoff process by assessing the construction site and the designs.  He or she will take into consideration elevations, drainage issues, and natural hazards in the takeoff. This information is then used to estimate costs by measuring and counting materials and deciding on equipment and contractors.  

Most builders and estimators will conduct digital construction takeoffs. Construction takeoff software such as Buildxact has transformed the time-consuming method of manual takeoffs into a more efficient digital process that allows builders to complete their own material takeoffs.

Why is a construction takeoff so important?

Accurate bids win proposals

Construction takeoffs are used to create a cost estimate as part of the bidding process.  Even though the takeoff process can be time-consuming, it is an essential part of any construction project. 

The accuracy of the construction cost estimating during takeoff will determine the profit margin after completion. If the profit margin is sufficient the builder can put a project proposal forward to the client. 

Digital takeoff software tools create a professional project proposal that will increase the chances of winning jobs. Using construction takeoff software provides an accurate estimate that gives confidence to both builder and client that costs will not blow out the budget over the length of the project.

A comprehensive materials list ensures accuracy

Construction takeoffs estimate the raw materials or prefabricated materials required to be ordered and provide certainty that the list of materials is comprehensive and materials are costed precisely. 

Digital takeoff software is used by estimators and builders to automatically produce price estimates and accurately calculate material costs. This is especially important for complex projects.

Accounting for contractors means nothing is missed 

Many jobs require specialized installations. An estimator or builder uses the construction material takeoff process to determine whether a general contractor or many subcontractors are required and can add this to the project proposal.

What’s included in a takeoff estimate?

The construction takeoff process is a list of required materials with cost estimates calculated. An estimator or builder will use digital blueprints to ascertain necessary information about the construction project before beginning the estimate. 

Construction project type

The type of construction project may be a:

• New house
• Renovation or remodel
• Extension

This information will determine types of materials required such as light fixtures, raw materials and any prefabricated components.

Site condition

An estimator or builder will assess the condition of the site to establish the complexity of the construction project. 

Steep blocks or drainage issues can affect price estimates. For example, complex projects may require a different construction takeoff process and extra takeoff data. 

A builder will use this information to decide whether construction projects require a basic takeoff or a more complex estimating process.

Measurement

Measurements are calculated on square footage or square meterage and are taken for all rooms and outdoor spaces such as decks, patios, and verandahs. 

These measurements are used to computate itemized material counts, equipment and workers.

Construction takeoff tools 

Digital takeoff tools are used to calculate a construction cost estimation. Digital takeoff software is less time-consuming and has higher accuracy than a manual construction takeoff, and its use has become standard in the industry.

Material takeoff

Takeoff software tools can be used to calculate material prices from the individual counts. 

One of the key features of construction takeoff software is the ability to save material prices for use on any estimating takeoff. 

When conducting digital takeoffs, all the materials required and suppliers’ prices are stored within the cloud-based software.  These are automatically linked and calculated per unit. 

If different resources are required, the takeoff software can source material suppliers and automatically send a request for a quote. Market fluctuations in material prices can also be accounted for within the best takeoff software packages that store suppliers’ prices.

Count

Accurate counting, and the timely ordering of materials, is essential to construction industry profits.  All material requirements, including cost of internal fittings, such as light fixtures, need to be counted in the construction takeoff. 

Takeoff process

The manual takeoff

Manual construction takeoffs are being performed less and less.  

Manual takeoffs require a range of tools, data sheets and information that must be collated and then reorganized as a quote for the customer.  Measurements are taken manually from drawings and designs, and calculations are then made to determine how much material is needed, multiplied by costs per unit.  Suppliers then need to be contacted, and materials must be ordered individually.

Disadvantages of a manual takeoff

An estimator or builder conducting a manual construction takeoff will cross-reference

prices from each supplier for all required materials, use manual input and calculation and arrange for quotes for special materials.  A digital construction takeoff, by contrast, will have this information automatically stored, linked and generated by the software.

Benefits of digital takeoff estimating

Digital takeoffs simplify the entire construction takeoff procedure. 

Adopting material takeoff software like Buildxact decreases the takeoff completion time by 80%. All tasks can be generated automatically using just one cloud-based system. 

Digital blueprints can be accessed online, complex calculations performed automatically, and estimates, quotes, project proposals and bids linked.

A key feature of digital material takeoffs compared to manual takeoffs is that the software removes the mundane tasks such as the need to cross-reference spreadsheets, calculate multiple equations, find price lists and prepare time-consuming paperwork and administrative tasks. 

Takeoff software can be used in any location where an internet connection is available.

Added benefits of digital takeoff software

Digital takeoffs tools can be set up to access your own price lists or your supplier’s price lists.  

Information relating to the construction takeoff can be customized to suit your construction project or business. 

Construction takeoff software allows faster production of quotes, and consequently, more jobs can be bid on and accepted by clients. 

Using Buildxact, you can produce a quote five times faster than a manual takeoff. The quote will then be automatically generated from the material takeoff and instantly sent to the customer.

Another feature of digital construction takeoff software like Buildxact is that it allows material quantities to be ordered in advance of job approval. Job schedules can be checked on a mobile phone at the building site, via cloud-based takeoff software such as Buildxact. 

Digital takeoffs contribute directly toward faster project completion, which is a plus for the bottom line.

Digital construction takeoff

Paid versions of construction software provide an excellent suite of features, as well as high levels of security for the construction business.  A monthly fee covers the full service, including local support. 

Construction takeoff software stores all documents in one location so information can be seamlessly and automatically shared across the construction company, improving communication between the project manager and the building team. 

Documents are able to be accessed by all parties on the same software platform and utilized by whoever requires it within the company. 

Digital takeoffs allow easy input of material required, price per square footage and calculation of quantities. 

Once a material takeoff is completed, the digital construction takeoff software allows full visibility and control of each stage of the job. 

Dashboards stay on top of the job, showing the exact point of profit in real-time. 

The construction takeoff software can also be used to send automated SMS alerts and emails to contractors and tradies. 

Buildxact construction takeoff software also makes accounting and bookkeeping easier with finance tasks performed more efficiently and accurately. 

Wages and contractor costs are accurately calculated and Xero or Quickbooks can be linked to the software.

Construction takeoff support 

Buildxact is one of the best construction takeoff software platforms on the market and offers full support. 

With the application of construction takeoff software, a highly accurate estimate can be produced in less time than it takes to manually make a rough estimate. 

Digital construction takeoffs using estimating software allow you to reliably order materials and keep your profit margin strong for all construction projects. 

Book a demo anytime to see for yourself how digital construction takeoffs can improve your business model.

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