Building is an important activity. It is complex. It involves many tasks. Each task should need resources. You will not be able to move without resources. You need to estimate what resources you require. What if you run out of money and time? And how to correctly estimate building construction cost? This guide is written to answer it. You will get tips and processes for estimation. The process is easy if you follow the correct method.
Getting the cost right is important. Your profit and project success depends on it. Bidding too low will hurt your profit. On the other hand, bidding too high would cost the job. The incorrect estimation will fail your project. It will also hurt your business. Your business and profit are at stake.
Building construction cost is for a few reasons. But this estimation must be accurate. Different people perform it. They are working on different levels in the project. They perform it for a specific purpose. Moreover, each has a specific purpose in the building construction. Usually, it is for maintaining business and increasing profit margin.
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The construction of a project is a huge task. You are always busy with everything around you. Moreover, you need time and money for each activity. For smooth construction, you need a good estimate. You need to oversee everything and early planning will help you to cover it.
What is Building Construction Cost?
Building construction cost has accuracy and estimations. These are estimations for MEP, residential and other projects. Customers need to identify areas for cost and estimate the requirement. This will allow budget allocation. Moreover, you will be able to determine feasibility. Additionally, you will have the cash flow for smooth activity.
Cost estimation is all about resources in the project. Moreover, it includes material, labor, equipment, and transportation costs. Profit margin is also part of the cost estimation. This is the next step after planning or designing. Every contractor requires an accurate and quick estimate for bidding.
Tip: Estimations don’t need to be perfect, instead you should bid more to win more.
Elements of Building Construction Cost
There are many elements in cost. Every cost is for a specific purpose in construction. Therefore you need to cover all costs. Moreover, you must include everything in the cost which comes with a price tag. This can be direct or indirect. Direct cost is mostly related to construction. Additionally, indirect cost is also part of building construction cost. This is your business operations cost. This may include taxes, wages, and office rents. However, you should have an estimate for each of them. Below are some main elements for building construction cost estimations.
- Labor Cost
Labor is an important element in cost estimations. Certainly, it is a major part of the project. Typically, it is around 50% of the project cost. This must be right. Moreover, you need to know about the duration of your project. This will decide labor requirements. Additionally, you must be aware of the specialty labor and tradesmen requirements. Furthermore, there is bad weather and holidays to consider. You will also need to pay union fees and permit fees. Finally, you have to consider duty hours and leaves for labor to avoid time delays and loss. - Material Quantity Takeoff
Material is important for construction. Your building construction cost has materials price. Material can be determined using plans and drawings. Quantity takeoff will help you to decide about materials. Quantity takeoffs will help to determine materials such as concrete and timber. Moreover, this can include doors, nails, switches, wires, and other materials. Afterward, you should measure and estimate the correct cost. Otherwise, you will end up at a loss if costs differ.
Moreover, you should have quantity takeoff. This will give you construction cost estimates. Delivery, price rise, and other factors must be included in material prices. Proper measurement units are important for estimations. - Equipment Cost
Equipment is also a requirement for the project. You must consider the equipment to complete your job. You can purchase equipment, or hire on rent. This will incur costs. Moreover, you need to secure and transport it to the site. - Other and Indirect Cost
There are indirect costs for construction activity. This is due to business operations. Moreover, time delays and do-overs can also incur costs. Building construction cost has a margin for indirect costs. Taxes, fees, wages, and utility charges are indirect costs. Moreover, other costs can also come into play once your project starts. You must use your experience and business strategies to cover them.
These are vital elements of estimations. However, there are other elements according to project and size.
Estimation for Construction Cost
There are different methods to estimate construction costs. Each one is used for different projects. This includes:
- Unit Price
This is a common method. You calculate the total cost depending on units. If a specific unit of the project costs an amount, you multiply it by the number of units. This gives you an overall price. Moreover, you can include direct and indirect costs in it. The unit price formula is: Material cost/ Area in square foot. - Square Foot Cost
This method is also common. Many contractors prefer it over accurate estimations. This is due to time requirements. First, analyze and understand the scope of the project. Then roughly estimate the cost. You can do this by considering the square foot area and multiplying the amount required for each square foot. Finally, you can negotiate the cost with the customer. - Rule of Two
This is also common in industry. It can be used in small projects. If you know the labor cost, you can multiply it by 2. As 50% of the project cost is labor. Moreover, you can add 10% as a safety margin. Furthermore, this method is good if you have experience in construction.
Tip: Estimation is complex. Your final estimate may include costs, construction materials, and labor. It can also include equipment and specifications.
Conclusion
Contractors and others need to estimate the cost correctly. The building construction cost is necessary for profit. If it is incorrect, you will lose the profit. Your business is also profit dependent. There are many elements in a construction project. You should include them. Finally, you need a suitable method for estimations. The more correct estimation is, the more you will earn and win bids.
