Creating cost estimates can be tough. You have to quickly consider your construction, labor and material costs to create a bid and submit it for a contract. Then you have to hope your estimate beats out your competition while still ensuring a profit. Mistakes in this stage could cost you money down the line, so you want to make sure you have a systematic, repeatable process.
Bidding and winning projects requires both accuracy and speed. In this blog, we’ll help you create that process by outlining the five steps you need to successfully estimate a construction project.
In This Article
Step 1: Review Construction Drawings and Specifications
The first step in the construction estimating process is completing a full review of your drawings and specifications. This step also requires reading through the Division 01 General Conditions to ensure you understand the contractor qualifications, bonding requirements, payment terms and the legal language in the contract. Once you’re familiar with these criteria, review your own divisional specifications to confirm you meet the scope for the project.
Next, you need to get a deeper understanding of the project as a whole. Roll out the project drawings, architectural drawings, site plans and divisional drawings to review in-depth. You don’t need to do a full takeoff yet (that comes next), but you should understand the end result of the project and spot any potential pitfalls that can be migrated.
Step 2: Performing a Quantity Takeoff
A quantity takeoff is a process used to quantify the various tasks needed to complete a project. This could include the number of light fixtures, square footage of drywall, or length of ductwork being installed. You’ll want to make sure you include each item that’s within your scope of work in your takeoff.
To determine quantities, you can either use a set of scaled drawings or walk the job site. As you go through the plans, identify which areas require which tasks and how many items you’ll need. This can get tedious, so many construction professionals opt to use digital takeoff or estimating software. We recommend this approach to ensure the highest level of accuracy.
This type of software allows you to count items and take digital measurements right on the drawings, no matter what type of construction project you’re working on. From there, it can track the quantities you’ll need and make adjustments to cost data as the project changes. Those adjustments can then flow right into a quantity takeoff sheet or sometimes directly into an estimating module.
Step 3: Building a Construction Estimate
Once you have the quantities from your takeoff, you can calculate your estimated costs. You’ll want to go through and figure out the cost per task with this formula:
Material + labor + equipment = unit cost
Use that equation for each task within your scope. When you have a unit cost for every item on your list, it’s just a matter of adding up those totals to find your total estimated project cost.
It’s important to note that historical costs and production don’t always equal what the construction industry will see in the future. To address those changes, you can include a percentage increase for different construction costs, such as potential materials, labor price escalations, waste and labor difficulty if there are unusual conditions.
Now that you’ve estimated your total costs, it’s time to build your overhead and profit to come up with a sales price. This will be the number you present to your client.
Step 4: Building Your Construction Proposal
Building proposals is one of the most important parts of construction management. It helps you clearly communicate your services and value to a client, and when done correctly, can help you win more business. There are a few key things to remember when writing your proposal:
Be sure to include a detailed breakdown of what your pricing includes so the client can see what’s included in that final number. It’s often helpful to include a bullet list that details the scope of your work, other professionals you work with and the estimated timeline.
Easy to Understand
Remember, your clients aren’t general contractors. Most of the language in the construction industry can be confusing for someone unfamiliar with those terms, so you want to make your construction proposal as easy to understand as possible.
We recommend following a similar format as the specifications provided or on any sort of received RFP. If you don’t have something like that to work from, focus on organizing information in a clear list and offer explanation wherever it might be needed.
Make a Good Impression
First impressions can go a long way. Clients need to know you’re a professional they can trust. A few ways to start your partnership off on the right foot include:
- Uploading a high-resolution company logo to your proposal
- Including company contact information
- Including an executive summary that outlines your company history and track record with similar projects.
These extra touches demonstrate that you care about meeting the client’s needs and you’re a reliable partner.
Step 5: Submitting Your Bid
After you build your construction proposal, it’s time to submit it. Before taking any steps to submit, though, it’s important to do a quick review. Look over the request for proposal and/or the specifications to ensure you’re following all of the bidder’s instructions. Double-check that you’ve correctly outlined your scope, have all the required documents and are meeting the bid due date.
When you’ve confirmed everything is in order, use the instructions the client provided to submit your bid. As an added touch, include a note offering to discuss the proposal with them on a call. This will give you an opportunity to address any of their questions or concerns and show that you care about the success of their project.
Let CrewCost Lead the Way
The estimating process can be daunting, but once you have a reliable system in place you can significantly eliminate risk and increase efficiency and speed. This reduces the overhead project management costs associated with estimating and ultimately makes your company more competitive because you can pass those savings onto clients or increase profitability.
CrewCost has a cost estimating tool built just for contractors. It can track previous expenses, help you visualize cost data and assist with creating new proposals, all with your bottom line in mind. Start your free trial today to see how CrewCost can help your construction business plan profitability by effectively estimating job costs.