Estimation in construction industry: Importance of Cost estimation


In construction, your ultimate goal is always clearly defined. Your objectives remain the same no matter what size project, how long it will take, or what design you want to use. 

With this in mind, it is essential to plan out every step of the process so that nothing slips through the cracks.

First, any company with plans for a construction project needs to do a cost-benefit analysis using accurate world figures to determine whether it will make economic sense. 

There is no mystery about how to construct something as long as you have the right tools and can execute the task in advance. 

The only way you'll get away with this without embarrassment is if you take care of all the details early on - like getting an accurate quote from a contractor ahead of time.

To start on realizing your vision, we'll explore and discuss why a construction estimate is an essential part of any commercial project.

What is a Cost Estimate?

A cost estimate is a company's idea of how much a project will likely cost. It often decides who wins contracts because customers don't want to invest too much money until they know the price. 

But no one knows for sure what something might cost - estimates are just educated guesses based on experience and other factors. 

That doesn't mean they're wrong, though - accurate estimates give customers peace of mind so they can make good decisions with their hard-earned cash.

Here are some of the factors that go into making accurate cost estimates:

  • Labor hours.
  • Cost of materials.
  • Outsourced labor 
  • Indirect costs

The more factors one can input when constructing an estimate, the more accurate it will be.

Why Accurate estimation is Important?

Budgeting beforehand is one of the most crucial aspects of constructing anything. Once construction has started, it becomes paramount to ensure everything runs smoothly and on time. 

Accurate budgeting determines the success or failure of any project - but there are some unique challenges in every industry, so you need to think about what works best for your company before making final decisions. Construction companies benefit significantly from comparing bids and working with estimators during the estimation process. It is also crucial for clients and other construction project stakeholders to remember that estimates are prone to changes. 

Simply put, estimates are an essential step of the building process but can change due to unforeseen circumstances.

If a project goes beyond the scope of an estimate, clients may find themselves having to pay for those additional costs or sacrificing certain design elements; to avoid this happening, they need to take note of how much time was spent writing up the bid - in addition to the cost and what they are looking for.

Every project has a goal or objective that must be achieved before completion. To ensure this, accurate budgeting must take place and consider what will work best for the project's success.

Construction projects require high-quality building materials; these are essential for ensuring a reliable and robust structure. 

Compromising on brick, sand, steel bar, or cement would result in low-quality buildings, leading to injuries or even death later down the line. This is why it's crucial to do proper research before finalizing your choices so that you're fully aware of what you're buying.

In the end, what matters most in any project is its profitability. As such, it is just as important to use qualified cost estimators to estimate construction costs to gauge how much money you will need to invest in the venture.

Factors Effecting Cost Estimates

Construction cost estimates are among the most important elements for businesses when trying to win new clients. 

It's crucial to be as accurate as possible, especially when calculating materials, subcontractors, equipment, and markup; here are a few helpful tips on figuring this out accurately.

Material Cost

You probably have a pretty good understanding of what your material costs are going to be before you even begin construction. But then again, change is inevitable in this volatile world - it always has been and always will be. You must stay close with your suppliers so they can give you feedback on the type of materials that would work best for your specific project requirements.

Labor Hours

The estimator will use their years of experience to gauge how many hours it would take them to finish a project. They will factor in the different productivity levels they can expect while working on each phase of this very complex task.

Labor Rates

Estimating labor rates begins with estimating the wages and benefits of a particular trade. The estimator will consider many factors, including the likelihood of overtime work, which may also increase operating expenses.

Material Prices

Estimating the material's cost is more complicated than it may initially seem. The price of each material varies greatly depending on current market demand and supply, the amount needed, the transportation cost to ship them to a site, and even the exchange rate if they're being imported from outside of America.

Indirect Costs

An accurate estimation of indirect costs is important for a precise estimate of project costs. The expense associated with land acquisition, permits, design fees, office support, temporary on-site utilities, and mobilization are just a few items that must be considered when estimating the total cost.

Subcontractor Quotes

Specialized contractors who act as subcontractors often handle certain parts of projects. These quotes should consider a wide range of considerations - including labor, material, and equipment cost - just like the general contractor.

Equipment Costs

Estimating the cost of an equipment purchase requires consideration of several factors, including time between cycles, maximum capacity, and whether or not it will have to be rented or bought outright.

Challenges of Construction Cost Estimation!

With every new project, there are a lot of parameters that need to be checked off because they vary so much. 

Like other trades, everyone does things differently in the construction and design industry. 

Each client is coming up with the idea that no one else has before- which makes it incredibly difficult for estimators to ensure everything goes smoothly. 

These people know every part of this equation, from outsourcing material supply to laborers' wages.

Estimating the price for a project can be extremely difficult given its diverse nature. Before arriving at an estimation range, many factors must be considered, including multiple possible variables and client demands. 

For example, estimators are often asked to provide an estimate that fits within a specific budget even though it may not match their own opinion about what is reasonable.

When the prices of crucial building materials such as steel, cement, and oil rise dramatically, contractors can reduce their pricing commitments considerably. 

Well-established construction estimators maintain a good relationship with suppliers and subcontractors, ensuring they can accurately estimate how much a project will cost.

However, when it comes to researching and estimating the costs for long-term constructions - especially ones prone to natural disasters - many factors contribute. 

Whether or not an economy is being considered, as well as what kind of business owners/developers will be taking advantage; the task at hand seems impossible without working closely with someone who has connections to find out what types of materials are needed, how much they will cost, etc.

Numerous challenges arise from dealing with daily life when working as an estimator. However, if you know how to exploit the various tools of estimation at your disposal, it becomes easier to do so and perform your job more resourcefully and economically. 

A powerful tool for this purpose is software for construction cost estimation like 247PRO, which does digital takeoffs swiftly and facilitates the quick production of accurate estimates.

What is the Best Way to Create a Cost Estimate?

Many organizations use manual estimating and budgeting Excel templates to determine, identify, assess, and report budgets. 

These tools may help the project manager with financial reports and data analysis; however, they consume many human and financial resources.

Thanks to construction budgeting software, today, companies can control the flow of their finances and cut out unnecessary expenditures. 

The program allows them to automate, analyze, and master a company's financial records, create accurate estimates, and manage all the team in one CRM.

Some benefits of the estimating software are:


Involving budget management software saves a lot of time and energy for project managers. It also controls the expenses as needed during the process. The right features can help keep you on track with your projects and adjust timelines if necessary.

It saves you time and money!

Cost Estimating and Budgeting is just Planning - which helps a company know how much it can spend on various activities without running out of money. They usually compare past and present financial reports to create an accurate budget. And because the cost estimation software for construction companies is so easy to use, you only need to input some information about your business. Then the rest of the process goes completely automated! All this means saving both time AND money.

Helps in the zero-based construction project budget

Building projects need accurate budgets if they are going to be successful in the long run. With good budgeting software, you can use zero-based budgetary strategies and monitor them at the start of a project. This will allow for optimum resource management during construction, leading to success for all parties involved.

Key Takeaways

Construction estimates are some of the most critical estimates when it comes to business. They must be accurate and timely to ensure that projects can be won. 

Thankfully, many software programs exist that do much of the estimating work for you - cutting down on costs while getting things done faster than ever before.

Estimating software such as 247PRO helps those who do an estimate. Accuracy increases while the process becomes more accessible and error rates go down, making life for contractors much more manageable. 

With its user-friendly interface and powerful features like estimating, invoicing, and task management, you can quickly get a quick and accurate project cost estimate. 

You also can save time using calculations such as indirect costs or identifying profit margins (among other things). 

Cost estimation software is an essential tool for any construction business - it will save them both time and money by accurately estimating materials, labor, and equipment.