Instant and Accurate Estimating Construction Costs Techniques
When it comes to construction projects, accuracy in estimating costs is key. Every misstep or inaccuracy can cost your business dearly in the long run both financially and logistically. It’s no surprise then that many contractors are looking for reliable techniques for fast and accurate cost estimation of their next building project. Fortunately, there are now plenty of solutions available to help you with this complex task!
Today takeoffsharks discuss some of the top strategies for obtaining precise estimates when calculating construction costs. These techniques can give you a better understanding of the cost of your project and help you more easily manage your budget.
Read on to learn more about these instant and accurate estimating construction costs techniques.
Step 1 – Determine Your Budget:
The first step in calculating your construction costs is to determine how much you’re willing to spend. This should be done before any project begins since it will inform the rest of your calculations and decisions.
From there, create a budget according to the scope of work that needs to be completed. You can break down each aspect of the project into its own budget line item and use this as a reference for later.
Step 2 – Apply a Markup That Will Result in the Desired Profit After Expenses:
That is simple, but not so simple if you don’t have a systematic method in place for creating an accurate estimate in a short amount of time. The speed and accuracy with which you complete the processes outlined above will have a direct impact on the closing rate and potential profitability of your construction projects.
If you keep your consumers waiting for too long for a price, you risk losing the sale and not having enough work to stay in business. If your price is too low based on your anticipated cost, you will lose money. You will lose clients (possible sales) if your price is too high.
Begin Estimating With These Techniques:
Estimating is an important part of project management and can help you plan for the resources, time, and cost associated with your project.
1. Unit Cost Estimating:
If you want to produce quick and reliable construction estimates, you must design a unit cost strategy for estimating your projects. Using a unit cost approach in conjunction with the appropriate estimating software is the most efficient, accurate, and cost-effective way to generate construction estimates for your company.
Estimating the cost of a construction project accurately can be difficult because each one is unique, hence construction cost estimation should be completed individually for each project. After all, faulty cost estimates can be detrimental to the project if the cost is overestimated, the owner may end up paying over-market rates, and if the cost is underestimated, there may be numerous unforeseen expenses once the project begins.
2. The Square Foot Pricing:
When you need to bid on a project quickly and require a faster construction estimating approach, square footage pricing is your best bet.
This method of cost estimation involves examining the whole amount of work to be done and presenting a ballpark figure. Surprisingly, this is extremely frequent in the construction industry. When bidding on projects, there are usually negotiating rounds, so your original price is almost never the final signing figure.
And, on occasion, a speedy estimate must be prioritized over an accurate estimate, which is why many contractors employ estimating software. What’s the purpose of spending hours calculating correct figures if you don’t submit your proposal on time? As a result, the square footage pricing approach can be used to obtain an approximate project estimate depending on the complete scope of the project.
3. The Rule of Two:
The Rule of Two is straightforward, however, it is not recommended if you require an accurate estimate. We all know that every expense is divided into two parts: labor and material costs. Calculate the number of labor hours needed to accomplish a project after considering its scope. This will provide you with the overall labor cost.
So these are the three most efficient techniques for developing a construction estimate for a project. However, much is dependent on aspects such as your company’s location, the nature of the project, your building method, and the pricing strategy you use as a contractor.
Construction Cost Estimates by Level of Accuracy:
The American Society of Professional Estimators (ASPE), which represents construction estimators, categorizes estimates into five levels. Level 1 is the least accurate and reliable label, while Level 5 is the most accurate and dependable.
However, when evaluating the complex five-level structure, each level serves a different role depending on how much certainty is required about the project’s expenditures. A screening decision necessitates a less precise estimate than reviewing a contractor’s offer.
Level 1 – Order-of-Magnitude Construction Estimate:
Order-of-magnitude construction estimates are the first stage of budgeting for a project and usually involve detailed research. This type of estimate is often used to determine if a project is economically feasible.
The level of accuracy for this estimate can range from -50% to +25%. It is important to note that these estimates are highly uncertain because they do not account for external factors, such as material costs, labor rates, or other market conditions that could affect the final price.
Level 2 – Construction Feasibility Estimate:
A Construction Feasibility Estimate is a type of cost estimate that provides an approximate indication of the amount of money needed to complete a construction project. It takes into consideration all factors involved in the project, including labor and material costs, regulatory requirements, environmental impacts, and other miscellaneous expenses.
Level 3 – Preliminary Construction Estimate:
A Preliminary Construction Estimate is the earliest of the three types of Cost estimates. It is also known as a “Guesstimate” and typically consists of an initial estimate with minimal information. At this stage, it is not possible to accurately predict costs, however, a general idea may be developed by looking at comparable projects in the same area or similar projects elsewhere.
Level 4 – Substantive Construction Estimate:
A substantive construction estimate, also known as a “detailed” or “definitive” cost estimate, is the most accurate and comprehensive type of cost estimate. It takes into account all foreseeable costs related to a project including labor costs, material costs, overhead expenses, subcontractor fees, insurance premiums, taxes, and even potential delays or changes in scope during the course of the project.
Level 5 – Definitive Construction Estimate:
The Definitive Construction Estimate is the most accurate and reliable estimate for a construction project based on detailed design drawings. It is prepared after a thorough evaluation of all elements of the project, including materials, labor, subcontractors, direct costs, and indirect costs.
Estimating construction costs is a complex and challenging task. Nevertheless, it doesn’t have to be stressful and difficult when having the right tools and approaches that can make the job easier. The techniques discussed in this blog post will help you understand the fundamental elements of the process and do accurate cost estimates for your future construction projects, allowing you to budget better on time.
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