Mastering the Full Process of Construction Cost Estimating
Rory Woolsey, CEP
Posted: August 11, 2017 | Estimating
By Rory Woolsey, CEP
Construction cost estimating is a process. Estimating begins with a thorough understanding (and visualization) of the project’s scope of work. Architects and engineers define the scope in plans and specifications, but for construction estimating, this scope is incomplete. 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 weather, ongoing operations, soils conditions, access/egress, security, safety, site lay-out, environment protections, and other context scope – must be considered, as well as the means and methods by which the work will be executed. These all impact the overall cost of the project.
A big part of the estimating process is mentally building the project multiple times before the project even breaks ground. Scoping construction requires knowledge of the construction processes – thinking like a contractor and building the project before the project is built. Some of the best estimators I know are those who come from the field, and understand that estimating is not just unit costing; it's more about the impact that AE, context, and execution scope have on each unit cost.
Quantifying the project is the next step in the estimating process. The “take-off” is just another opportunity to go wrong … and many have! 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 the solid foundation to which unit prices are applied, so you can understand its importance.
The third 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 usually they are not readily available to budgetary estimators such as architects and engineers. Budgetary estimators not only 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 make an estimator! Pricing a project goes well beyond cost data books.
In pricing a project, the aggregate project total is more than just the summation of unit material, labor, and equipment; it 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. The published unit costs do not typically include all the above; each construction cost database handles these components differently. Pricing must be comprehensive and include all the direct and indirect costs associated with the project, as well as the cost of being in business as a contractor.
The final step in the cost estimating process is to double check the results. It is good practice to set the cost estimate up against historical project costs, another estimator’s review, comparable costs per unit floor area, or assemblies costs. It's very easy to go through a project scoping, quantifying and pricing, and still miss a costly component. In a rush to meet a deadline, I once missed the landscaping in the back parking area and did not catch this until a final review of the estimate! Even this engineer periodically gets lost in the details, and has missed pieces of scope before (please keep this between the two of us).
About the author: Rory Woolsey, CEP, has worked in Management and Engineering in the construction industry for 40 years. He has held positions with some of the leaders in the construction industry, such as Bechtel, H.J. Kaiser Constructors, RSMeans, and The Gordian Group. For 20 years, he was the lead estimator and president of The Wool-Zee Company, Inc., working with architects, engineers and facility managers to accurately budget their construction projects at all phases of design. Mr. Woolsey has facilitated over 8,000 classroom hours of instruction nationwide to architects, engineers, contractors, and facility managers on topics of budgetary construction estimating. He is credited with creating a Scope of Work course for construction estimators. He is a Certified Estimating Professional (CEP) through AACE International. Rory has earned a Bachelor of Science degree in Civil/Structural Engineering and a Master's degree in Business Administration. Rory Woolsey is principle in his consulting business and can be reached at email@example.com. His website is located at www.rorywoolsey.com