Why is cost estimation so critical? The obvious logic – you don’t want to go broke – isn’t the only reason. It can take longer to recover from project profit hits due to bad estimates:
- Incremental changes add up.
- Out-of-date data can lead to project cost overruns
- Underestimating reduces your credibility which affects your reputation/brand.
Recently, construction project estimates include best guestimates for delivery delays and material shortages. “Cost is the most important factor in determining whether or not a project is even viable,” says Construction Business Owner. Jobs depend on it.
Types of Construction Project Estimates
Gordian, a company providing construction cost data, software, and services says the 4 types of construction estimates are:
1. Conceptual Costs
When a project is in its infancy, clients may request a conceptual construction estimate. The pricing isn’t set in stone, and it gives decision-makers enough information with which to work. Conceptual construction estimates can be prepared quickly because they require much less research. Gordian says 25% accuracy is desirable.
2. Square Foot
Square-foot estimates offer more detail but you can best-guesstimate the costs of labor, materials, and more. Specifications like types of materials aren’t mentioned. The estimate is based on probability and should have a 20% give-or-take margin.
These estimates get down to basics and are used for a construction project’s final design phases. This is a more accurate representation of costs because real measurements and materials are used. “A good systems and assemblies estimate can predict final cost within 10%-15% accuracy,” says Gordian.
4. Unit Price
This is the final phase of construction project estimates. It can take weeks to create because it requires your highest level of accuracy; it should allow for only a 10% margin of error. This estimate serves as the cost-estimate reference throughout the project lifecycle.
Accurate Data Essential
Your bottom line and company brand depend on accurate construction project estimates. For most of us, this means using proven construction estimating software and services.
Construction Monitor is our industry’s proven source of up-to-date customized, local, and accurate construction analytics using building permit data.