What Is Estimating in Construction?

February 23, 2024

The estimation process is one of the most important in construction because it leads to the budget preparation, project cost controls and a variety of other processes throughout a building's lifecycle. Estimators create estimates that are accurate to current costs, but the buildings they're estimating will likely be built long after their own estimates have been created. This means that the supply of materials, labor and equipment will fluctuate. Shortages in these resources can cause prices to rise above normal levels and ruin an estimate that was created using accurate market data.

When preparing an estimate, estimators start with an overview of the building project's documents. This allows them to begin evaluating structural requirements and understand how the materials needed will affect the project's cost. They also take a look at the electrical, mechanical and plumbing (MEP) requirements for the building to ensure that their estimates are accurate in these areas as well.

Estimators then build in the profit margin and contingency. The profit margin is the amount that the contractor hopes to earn when they complete a job, and the contingency is an amount that is set aside for unexpected expenses like material waste or design errors.

Finally, the estimator builds in indirect costs, such as administrative fees, transport costs, smaller types of equipment, design fees, legal fees and permit fees. They also consider the cost of insurance and bonds, which mitigate risk for both owners and contractors. These costs are typically added to the estimated cost of the construction work to determine the final bid.

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