Technology September 8, 2017 Last updated September 5th, 2017 2,496 Reads share

A Comprehensive Guide to Cost Estimating in Construction Projects

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Estimating the budget of construction projects in particular, can really be a complex process indeed; something that’s dependent on a variable number of factors.

Always remember that construction cost estimating skills cannot be acquired in a jiffy. Proper training, study, and experience are needed to become proficient in construction project cost estimations.

In this article, we’ll discuss the different factors of construction cost estimating in precise detail. So pay attention as closely as possible. It can benefit you in the long run.

Types of construction cost estimates

It’s a standard procedure of most construction businesses to have multiple cost estimates during the pre-designing and the designing phases of the project.

A Comprehensive Guide to Cost Estimating in Construction Projects

The different types of construction cost estimates are:

Level ONE: Order of magnitude estimation – In this case, the budget estimation is done even before the start of the project. Only the order of magnitude estimation is used to determine the comprehensive feasibility of the project.

Level TWO: Schematic design budget estimation – Budget estimation made in line with the schematic design of the project.

Level THREE: Design development estimation – Construction cost estimation made during the design development phase of the project.

Level FOUR: Construction docs estimation – Budget estimation made on the basis of construction diagrams and specifications.

Level FIVE: Bid estimations – Bid estimation is done on the basis of the bid price offered to prospective customers as a whole. Bid estimates may include things like direct costs, subcontractor quotes, supervision costs and quantity take-offs.

Construction cost estimating trifecta


Construction cost estimating fundamentally involves 3 things in particular, and these three things are:

  • Money: This is where you calculate your projected cost, round it up and present the same to your customers.
  • Precision: If you are the owner of a construction business, you should be aware of this fact that your business can prosper ONLY if you can give your customers accurate cost estimations. Remember, no customer loves a surprise as far as prices are concerned. So the lesser the surprise, the better it is.
  • Speed: Most customers want to know the projected budget of
    a project as soon as possible. So speed does become a factor, whether you accept it or not.

To meet the aforementioned criteria in precise detail, you need to take a host of factors into consideration. Let’s take a peek at them all without further ado.

Factors that aid in construction cost estimations

#1. Similar project references

*This point is particularly beneficial for you if you are not a veteran of the subject matter.

The best references for construction cost estimations can be similar projects based on the same scope of work.

The internet can come in handy for this purpose of yours. Use it to your advantage for gathering invaluable information on material costs and labor charges and you will be able to structure your projected budget in no time for sure.

#2. Conditions of the construction site


Site conditions can play a huge role in determining the overall budget of a project. So know these things well, right before the determination of your projected budget.

Site conditions may include things like:

  • Poor soil conditions
  • Contaminations
  • Wetlands
  • Conflicting utilities (such as cables, pipes, overhead lines and others)
  • River
  • Heavy traffic
  • Archaeological sites
  • Endangered species.

You should take all these things into account in your projected budget.

Note: Site conditions can play a major role in increasing the threshold budget of a project. So make sure you clarify the very same thing to your clients before the start of the project itself.

#3. Material, labor and technology costs

Material costs include the charges incurred on building materials and supplies. This also includes the shipping charges incurred on the same.

Local Government-specified rates are usually taken into consideration for the calculation of labor costs.

Technology costs are usually incurred by large-scale construction projects in particular. These include the expenses incurred on CGI-based plans, 360-degree virtual tours and others.

Both the material and the labor costs can play a significant role in affecting the estimations of your budget.

#4. Indirect costs

These are the expenses that aren’t directly associated with any form of construction work in particular.

Indirect costs include things like:

  • Administrative costs
  • Transportation costs
  • Design costs
  • Legal fees
  • Permit costs
  • Design costs

– and any other costs that are not directly related to the construction project in particular.

#5. Equipment costs


Construction equipment costs fundamentally refer to the costs of running or renting heavy machinery; something that is inclusive of the likes of cranes, cement mixers, and other similar vehicles.

These must be taken into account for structuring the budget of your construction projects.

#6. Contingency costs

Unforeseeable factors such as material wastage and natural calamity can play a major role in increasing the cost of your construction projects. Hence, you must take these things into consideration while doing cost estimations for construction projects in general.

It’s true that you can never predict the occurrence of calamitous incidents in general, but it doesn’t mean you should not do anything to keep it at bay in the best possible way. You need to prepare a sound contingency plan to handle the worst in the best possible manner.

So always include contingency costs in your budget. It can help you a lot in the long run.

#7. The schedule of the project

The construction project schedule can definitely affect the overall cost of the project.

If the construction project has an aggressive time frame for completion, the price has more chances to increase In comparison to the way it was before. Along with that, several other factors such as inflation can also play a huge role in affecting the budget of the project.

#8. Insurance cost

The cost of general insurance bonds such as fidelity bonds, payment bonds, and performance bonds, in general, must be considered in advance, preferably before the start of the project itself.

So make sure you take these things into account while framing a budget for any construction project of yours.

So that’s all for now then folks. Hope you had a good and useful read.

Albert Smith

Albert Smith

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