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The Art of Construction Estimating and Its Insights

Updated: Nov 8, 2023

An estimate is a document that the contractor gives to a customer, showing how much they would like to charge for services they are going to provide. In the estimate, the contractor separates the project into stages and considers the cost of each one. Estimates could be used in many different types of construction projects, from remodeling to building brand-new structure.


Contractors can make construction estimate manually by Excel file, which is quite comfortable, or use accounting software which has the estimate feature. When you start to work, you should keep good records of any cost over-runs, along with how and why they occur. Then, you can track whether you make money or not.

In common, people prefer to send estimate to quotation. Why? Construction industry is much more different from product manufacturing or retailing in an assembly lines: each building is unique, even for groups of buildings that look similar to each other. Therefore, you can not use just 1 estimated cost for all projects.

The Foundation of Estimation in Construction

In the sphere of construction project management, an estimate stands as a pivotal instrument, predicting the potential costs tied to a building project. Such forecasts are not mere numbers; they are fundamental to budgeting, strategic planning, and ensuring the financial viability of the entire endeavor. Estimation is not a static activity but unfolds across various project stages. It initiates in the conceptual phase, drawing insights from preliminary designs and past data, and gradually refines through subsequent phases as designs crystallize. While architects and engineers often introduce the initial estimates, it's the general contractors who refine them based on detailed blueprints. Yet, it's crucial to approach these figures with discernment. Design team estimates, despite their expertise, may sometimes miss the mark when it comes to real-time market costs. Hence, integrating inputs from construction management firms often brings an added layer of accuracy and real-world relevance.

Inside into the Art of Construction Estimating

Diving into construction estimating is like stepping into a dance between logic and intuition. On one foot, you've got the straightforward step of quantifying costs – tallying up bricks, bolts, and hours of labor. It's numbers and math, plain and simple. Yet, on the other foot, the dance gets intricate as we assign value to the "what-ifs" of the project, the unpredictable risks that loom in the shadows. Then there's the element of surprise. Just like a sudden change in music tempo, projects often face unexpected changes and conditions. A seasoned estimator, much like a seasoned dancer, doesn't stumble at these changes. Instead, they anticipate and weave these potential shifts seamlessly into their calculations. It's more than just number-crunching; it's a craft that embraces both the known and the unknown.

Breakdown of Hard and Soft Costs in Construction Estimates

Understanding the costs in construction estimates is like diving into two distinct worlds: hard and soft costs. Let's start with the more tangible side—hard costs. Think of bricks, concrete, nails, and the sweat of laborers. These costs, directly tied to the actual building process, include materials, labor, and equipment. They're neatly categorized in the construction industry through the MasterFormat divisions—essentially a checklist of construction details. To nail down these costs (pun intended), we need top-notch drawings. The clearer the blueprint, the fewer the surprises.

Now, onto the somewhat nebulous world of soft costs. These aren't about the tangible stuff but play a huge role in our budgets. Imagine all the paperwork, permits, design fees, and even those head-scratching consultant charges. It's here that a seasoned construction manager becomes the unsung hero. Their experience shines a light on these often-overlooked expenses, ensuring every penny is accounted for. In short, while bricks and mortar give a project its shape, it's the combination of hard and soft costs that truly brings our construction dreams to life, financially speaking.

Types of Estimates and Their Evolution Throughout the Project

A construction project unfolds in distinct stages. Beginning with the "Concept Estimate," this is a preliminary outline drawn from historical costs to provide an initial cost projection. It sets the stage. Then, the "Schematic Design Estimate" comes into play, refining these initial figures to align a client's design aspirations with their budget. As the design details solidify, the "Design Development Estimate" offers a clearer picture, highlighting how specific design choices can influence the overall expenditure. Finally, when every detail is in place, general contractors present the "Construction Document Estimates", based on the finalized design, pinpointing the comprehensive cost for the entire venture. Each phase is integral, ensuring costs are consistently in harmony with the project's evolving design and objectives.


So, what is included on an estimate?

When you are preparing an estimate, it is a good idea to give the customer a hard copy, including a full breakdown of costs.

An estimate usually includes:

  • The date of the estimate (when it was created).

  • The type of project (what kind it is, remodel, build new house, fixing, etc.).

  • The location of the project (where it is).

  • An estimated price for each item of the project (how much money each aspect of the project costs).

  • The total of all estimated amounts (how much money the contractor expects to earn).

You must also include:

  • Your full business contact details.

  • Customer contact details.

Estimates play a pivotal role in construction project management. They provide a roadmap, guiding the project from inception to completion while ensuring budgetary adherence. For contractors, leveraging professional estimating and accounting services isn't just recommended; it's a game-changer. Such services bring precision, foresight, and a deep understanding of the construction landscape, eliminating guesswork and optimizing profitability. So, for those who are aiming to streamline their construction projects and ensure financial prudence, why leave it to chance? Reach out to Irvine Bookkeeping today for all your construction accounting and bookkeeping needs.


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