Estimating the cost of civil construction is a key process in the industry. It involves predicting the project budget accurately before work starts. Trained estimators or quantity surveyors who specialise in estimating and managing construction costs typically carry out construction estimation.
Construction estimating is the process of evaluating all costs associated with a specific construction project. The costs generally include direct and indirect expenses, overhead, and markups.
- Direct costs: funds allocated towards items of the construction process
- Indirect costs: any costs that are not directly associated with construction activities
- Labour hours: all costs associated with the actual construction of the project, wages or rate paid to the team
Someone must conduct the construction estimate properly. Ideally, a professional construction estimator creates cost estimates. They can give accurate reasons for the job’s cost. They also identify any risks based on their skills and experience.
Construction estimating is important. It helps the owner-developer or client and the contractors see if a project fits the budget. It also helps stakeholders determine if they need value engineering. This can indicate whether we need more funding.
8 steps to successful estimating of cost of a civil construction project
A construction estimator works for a head contractor, a subcontractor, or an owner-developer. They usually follow the same process.
1. Review the package
Contractors who bid on a project must complete the work outlined in the package. The construction estimator must be familiar with every aspect of the project.
The package would contain technical illustrations that visually represent the specifications of a construction project. Construction estimators often subdivide drawings into categories based on their purpose.
Head contractors and subcontractors will look at the same documents. After reviewing the documents, a construction estimator will break the project into work packages. These packages are for subcontractors or for their own team if they use their own labour.
A construction estimator must ensure that they:
- Include every aspect of the project in a work package
- Avoid assigning the same work twice to multiple work packages
- Define the scope of each work package
2. Visit the construction site
Professional construction estimators always conduct site visits. It gives them a better understanding of the site conditions. The only exception to this rule is subcontractors. They may only need to review the documents to understand their role in the project.
The main purpose of a site visit is to help the construction estimator understand the site conditions. These conditions can affect the project’s cost.
The cost and complexity of a project may increase if the site has:
- Poor drainage, difficult subsurface soil conditions and adjacent buildings
- Difficulties in access, which make it harder to move equipment and deliver materials
- Poorly located utilities (water, electricity), which may involve underground works
During a site visit, the estimator will take notes and photographs. They will also discuss with contractors the potential influence the site may have on delivering the project successfully.
3. Perform a material takeoff
A material takeoff is a measurement of the materials and labour required to complete a construction project. Construction estimators review the construction documents and count every item required for the project.
We list material needs based on the way we measure them. In Australia, there are certain requirements for how to measure materials and quantities: count, area, volume, length, and permits.
After finishing a material takeoff, construction estimators have a complete list of all the materials needed for the project. Construction estimators use this information to decide which equipment to include in each work package. They then assign the equipment accordingly.
4. Solicit pricing from suppliers and vendors
Once subcontractors have a definitive list of materials and equipment, they can gather pricing information from suppliers and vendors.
When pricing materials, subcontractors should note that:
- Material waste requires ordering extra materials
- Waste can be built in
- Certain material sizing can produce waste
- Bulk pricing may require ordering sizes
Quotes have limited lifespans. If a subcontractor gets a quote for materials, they must check that the quote is valid. It should last long enough for the owner to accept the tender. The quote should be high enough to cover the risk of price increases.
Contractors should think about the costs of equipment they already own. Depending on the tender and local requirements, the team may need to provide this information in their estimate.
By now, contractors should have definitive numbers, which they can include in their project costs. From there, construction estimators can add direct, indirect, and overhead costs to these numbers.
5. Evaluate labour requirements
Construction estimators can use information from the material takeoff. This helps them find the needed labour for a project. They specify the required roles and the number of labour hours needed to finish the project. They also consider field productivity based on data from similar past projects and the current project.
Estimating construction work is not the same for every project. Construction estimators should carefully calculate the loaded pay rate. The loaded rate of pay includes wages, insurance, sick, holiday, annual and parental leave, and penalty rates.
Construction estimators must include all the associated costs of hiring someone for the duration of the construction project. Otherwise, the estimate will not reflect the true cost of labour.
6. Determine insurance and bonding costs
Insurance and bonding help mitigate risk for owner-developers and contractors alike. All construction companies need public and product liability insurance, as well as material damage coverage.
Depending on the size, scope and nature of the construction project, construction companies may also need:
- General property and tools of trade insurance
- Commercial motor vehicle insurance
- Management liability insurance
Construction estimators must include both insurance and bonds in their construction estimates. However, some projects may require special bonds and insurance coverage.
7. Calculate overhead and indirect field costs
Construction estimators should consider the overhead costs and indirect field costs associated with a construction project.
The main contractor is responsible for:
- Managing and supervising all staff for the duration of the project
- Coordinating all subcontractors and specialist trades
- Conducting quality assurance
- Establishing temporary facilities, welfare, and site infrastructure
- Insuring the security, health & safety of the site
- Abiding by environmental protection & compliance
Construction estimators should think about the individual rates of these items. They should also consider how long contractors will need them. Contractors should include overhead costs in their estimates. They can spread these costs across all their projects each year.
Construction estimators should consider the total expected annual revenue of the company, including the total expected annual overhead cost.
8. Consider profit and contingency
After calculating all the costs for a construction project, the estimator should consider the profit margin. The profit is the fee that the contractor earns for completing the contract – which they can invest into the business to grow.
Contractor margin is a charge for off site overheads and profit. This bases itself on the contractor’s business overheads, plus an allowance for profit. The percentage calculator looks at the main contractors’ overhead costs and profits from past construction projects.
Risks are present in all projects and can occur at any stage of a project. Risk can affect quality and scope. By now, the construction estimator has calculated all project costs.
This includes materials, labour, equipment, overhead, indirect field costs, and contingency. They have found that the project will bring a good profit.
After the construction estimator sets the sales price, a tender manager will make a construction proposal. This proposal will clearly outline everything included in the tender price. They will also outline the conditions of the tender, also known as tags.
Your estimation is an offer and should include everything that you want. You might want to influence the process by offering a discount. This discount could be for using different procedures or cheaper materials that you can find more easily.
For construction estimators, visiting a site is a valuable way to check the cost and feasibility of a project. In turn, the result is a more accurate construction estimate. Contact us now to help you with any process you need.
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