Defining Construction Cost Estimating Today
Rory M. Woolsey, MBA, CEP
Posted: June 26, 2023 | Estimating
The Oxford English Dictionary defines estimating as “roughly calculating or judging the value, number, quantity, or extent of.” A judgment about future costs is necessary so we can make decisions throughout the construction process. We call this construction cost estimating. Budgetary estimates are generally qualified as opinions of probable cost; until then, an estimate is merely a judgment or opinion.
A better definition of construction cost estimating can be explained by the estimating process itself. Second to actually building the project to arrive at a real cost is to mentally build it before it is built. Estimating a project price is not calculator and unit price cost data (these are tools), but much more — the process.
The process can be explained in the following steps:
• Discover and define the scope of work
• Quantify the scope
• Apply costs to arrive at a project price
• Double-check/validate the result
Scope of Work
There are three categories of scope associated with any construction project:
1. The first is defined by the architect/engineer in the construction project manual
2. The second is the means and methods that the contractor will use to complete the work
3. The third is the context in which the project will be built. (The context and its impact on cost is often underestimated and can become another place for cost estimators to fail in their prediction of cost.)
Context Matters
The architect’s and engineer’s definitions of a project are typically meticulously precise and organized in a standard format. This two-dimensional definition of the project is only the beginning of defining and quantifying scope of construction. Accuracy in estimating goes beyond the AE package (things always fit nicely on plans) and must include accounting for the realities of the environment where the project is constructed. Project context matters!
Facility renovation projects are particularly challenging, and include site-specific issues such as ongoing operations, aging buildings, environmental issues, matching existing construction, noise restrictions, the weather, access and egress to the site, time constraints, the customer’s unrealistic expectations, the availability of labor and materials, and phased construction. Whew! In most facilities, the reality of the context of where a project is built has considerable impact on the budgetary estimate. Scope context matters!
Successful “hard bid” contractors know very well that scoping construction goes well beyond the AE scope and must include field-specific scope. The realities of the site — such as soils conditions, security, safety, site layout, environmental protections, and other context scope — must be considered, as well as the means and methods to execute the work. These all have an impact on the overall cost of the project.
Means and Methods
Beyond the context scope, the estimator needs to account for the means and methods used in the execution of the work. How will the work go together in the environment in which the contractor will work? What equipment and labor power will the contractor use to complete the tasks? The answers to these questions will influence the overall cost of the project. The best estimators will think like a contractor and mentally build the project in their head many times before the project is actually physically built. The informed budgetary estimator knows construction well, and is able to identify and capture the AE, context, and execution scope in the process of estimating the projected construction cost of a project.
Scoping defines the project while quantity take-off assigns quantities to the scope so that everything can be priced. Organization and math skills are key here.
Quantifying Scope
Quantifying the project is the next step in the estimating process. The take-off is just another opportunity for something to go wrong ... and many take-offs do! Converting scope to quantities requires a solid understanding of math, drawing scales, swell and waste factors, plan reading, common construction practices, and conversion factors. An accurate quantity take-off representing the complete scope of work is then the solid foundation to which unit prices are applied.
Application of Costs
The next step in the estimating process is the application of unit costs to the quantified scope of work. Competitive bidding contractors will get their unit costs from subcontractors, vendors, suppliers, and their own cost records. These are excellent resources for pricing, but typically they are not readily available to budgetary estimators such as architects and engineers.
Budgetary estimators get their unit costs from some of the above sources, but also from published national average cost data. Just “knowing” a construction cost database does not an estimator make: Pricing a project does well beyond cost data books. In pricing a project, the aggregate project cost total is more than just the sum of unit material, labor, and equipment —but must also include labor burden requirements such as social security contributions by the contractor, unemployment taxes, insurances, subcontractor costs (including their overhead and profit), sales taxes, bonds, and, finally, the general contractor’s overhead and profit.
Typically, the published unit costs do not include all the above. Each reference construction cost database handles these components differently. Pricing must be comprehensive and include all the direct and indirect costs associated with the project, and the overhead cost of being in business as a contractor.
Validate and Double-Check the Results
The final step in the cost estimating process is to doublecheck and validate your results. It is good practice to set the cost estimate up against historical project costs, another estimator’s review, or comparable costs per unit or assemblies costs. It is very easy to go through a project scoping, quantifying, and pricing and still miss a costly component. In a rush to meet a deadline, details can be missed or misstated. It is easy to get lost in the details and miss pieces of scope, quantities and prices.
Electronic Help
In construction estimating there is no substitute for the old school process of thinking a job through AE, context and execution scope based on real world construction experience. “Building a job before you build a job” is not an electronic process (although AI may change that) brought about from digital lines and words on a page. Estimators must still do the estimating due diligence.
Electronics can help (big time) in keeping data organized, formats consistent and performing all the tedious and timeconsuming math stuff. Spreadsheets are great and once a template is set up with all the right algorithms the estimator can focus on the unique scope at the core of the project. It once was necessary in the AE world that design changes required erasures and drafting pencils. Electronics saved that day as is the case in estimating.
Once we have a semblance of our job set up in a digital system, we can make changes and see “what if” results instantaneously. Estimating software does not do it all in the estimating process but it surely provides a great support for estimate structure and managing all the detailed data (i.e., project costing) as well as keeping those human errors to a minimum. My favorite…formatted spreadsheets.
The estimating process is the definition of construction cost estimating. For project owners, designers, and contractors, important key decisions are made based on judgments of probable cost. Following the process of scoping, quantifying, and costing will lead to a better judgment (or opinion) about the actual future cost of a construction project.
About the Author: Rory M. Woolsey, MBA, CEP, has worked in management and engineering in the construction industry for a number of years, starting as a construction laborer and superintendent. He has been employed as a draftsman, testing laboratory manager, field engineer, project manager, MIS manager, estimator, senior editor, designer, structural engineer, adjunct professor, general contractor, and a senior owner’s representative for many large public agencies. Mr. Woolsey has also held positions with some of the leaders in the construction industry, such as Bechtel, H.J. Kaiser Constructors, RS Means Company, and the Gordian Group. He is a Certified Estimating Professional (CEP) through AACE International. Mr. Woolsey earned a Bachelor of Science degree in Civil/Structural Engineering and a Masters in Business Administration, with an emphasis in construction project management. Mr. Woolsey can be reached at [email protected].
Image by Robert Owen-Wahl from Pixabay