When it comes to construction costs, many different factors can affect the final price tag. From the cost of materials to the price of labor, many other elements can impact how much a construction project will ultimately cost.
As a construction manager, you can use two methods to estimate the cost of a project: they can either look for estimating companies to price projects, or they can do it yourself. But estimating the cost of a construction project can be daunting, and doing this on your own requires background knowledge and understanding.
By understanding all the factors involved, you can more accurately estimate the price of a construction project. So, to help you get a more accurate estimate of how much your project will ultimately cost, here are six things to remember when estimating construction costs.
Make Use of Digital Takeoffs
A digital takeoff is a process of creating a digital representation of a construction project. This can be done using various software programs, but the most common is Autodesk Revit. It is a great way to create a detailed representation of a construction project. It is also a great way to save time and money.
Unfortunately, most contractors still print out plans and start manually measuring items, which is a very time-consuming and outdated way of working, and it’s not very accurate either.
With a digital takeoff, you can create an accurate and detailed representation of a construction project in a fraction of the time it would take to do it manually. This is because you can use software to measure items on the plans automatically. This means that you don’t have to waste time doing it yourself, and you can be confident that your measurements are accurate.
Prepare Invitation to Bid
When you invite contractors to bid on a project, you ask them to give you a price estimate for the work. The invitation to bid should include all relevant information about the project, such as the scope of work, timeline, and budget. It is essential to be as clear and concise as possible to avoid wasting anyone’s time.
The more information you can provide upfront, the better. This will allow contractors to give you more accurate bids. It is also important to remember that you are not obligated to accept any of the bids that you receive; take your time and choose the one that is best for your needs.
Calculate Realistic Overhead and Profit
In order to make a profit on a project, you need to account for your overhead and profit margins. Overhead includes all the costs of running your business, such as rent, utilities, insurance, and salaries. Your profit margin is the percentage of the project price that you keep as profit.
You must first determine your total costs to calculate your overhead and profit margins. Add all your project expenses, including materials, labor, and overhead costs. Then divide this number by the total price of the project. This will give you your overhead percentage. Simply subtract your overhead percentage from 100% to calculate your profit margin.
Consider Job Site Pricing Factors
There are often unforeseen costs associated with job site conditions that were not considered when the estimate was created. This can lead to projects over budget and cause financial problems for the company.
Construction job sites are full of surprises. You never know what you’re going to get.
Estimating things coming up on the job site is crucial so you can be prepared for them.
- The amount of time the job will take
- The size of the job site
- The complexity of the job
- The number of workers needed
- The cost of materials
A few things can unexpectedly change the scope of work, but a reasonable estimate will consider these. This way, you won’t be caught off-guard as a contractor.
Prepare an Estimated Budget
A preliminary estimate is an early guess at what the cost of a project will be. This estimate is based on initial plans and will change as the project develops.
If you have a location-specific pricing database, you can get a more accurate price for a preliminary project.
To use this method, you need a set of drawings to scale and show a general overview of the project. This would include details like the grade beams’ location, the area’s square footage, or the walls’ height. Then, you would perform takeoffs that follow the process of construction. To do this, you would need to reference a price database to get predictable prices.
Final Cost Estimate
A final cost estimate is the last and most accurate estimate of a project’s cost. This estimate is made when the plans are complete, and all the variables are known.
The final cost estimate is used to create the budget for the project. This budget will be used to track actual costs as the project progresses. Any changes to the scope of work should be reflected in an updated final cost estimate before work begins.
Construction costs can vary greatly depending on several factors. Whether you are a contractor, an architect or an engineer, it is essential to keep these in mind when estimating construction costs. By considering all of these factors, you can get a more accurate estimate of the cost of your construction project.
CostCertified is a platform that can help remodelling contractors accurately estimate construction costs and manage everything related to your construction plan, from estimation, digital proposals, tracking costs, and CRM. Let us help you confidently take control of your construction project! Book an appointment with us today!