7 Min. Read

Building Cost Estimator: Calculating Construction Cost

June 30, 2021

How can a building cost estimator save you time in calculating construction costs?

Cost estimating is an essential part of the construction process.

It involves forecasting how much you think it will cost to complete a building project.

If you’re in the industry, you’ll know how important it is to get these costs right. It can be the difference between getting the work and not.

You’ll also know how time-consuming estimating is. How can you do it well when there are so many other things competing for your time?

Not only is it time-consuming, but it’s also a skill that only comes with experience.

So how can you make the whole process easier and more reliable?

Here’s What We’ll Cover:

Why Is It Important to Accurately Estimate Construction Costs?

What Should You Include In a Building Cost Estimate?

How Do I Estimate Building Costs?

How Does Building Cost Estimator Software Work?

Cost Estimation Software Providers

What Are the Benefits of Using Cost Estimation Software?

Key Takeaways

Why Is It Important to Accurately Estimate Construction Costs?

It helps to build a relationship of trust with a customer from the outset.

It is also important in deciding if a construction project is workable in line with the budget.

The job needs to be priced so that you generate profit while also being competitive enough to get you the work.

This can be more difficult than it sounds.

Accurate estimating also saves the stress of costs being more than expected at the end of a job. This can mean extra costs for the customer and you losing out on profits through trying to put things right.

It’s therefore incredibly important that you estimate properly. It prevents you from losing money and protects the customer against overpaying.

What Should You Include In a Building Cost Estimate?

Every project is unique.

It’s what makes working in the industry both interesting and challenging.

There are some common features that you will generally need to include in an estimate.

The costs of construction include:

Labor hours needed to get the job done
Labor rate i.e. the hourly rate labor cost
Material Prices – the cost of the materials needed for the job
Equipment costs – what equipment will you need and how much will it cost to run?
Profit margin added onto the cost of completing the work
Indirect costs such as admin, custom design fees, permits, etc.
Subcontractor costs if you need specialists or extra labor

How Do I Estimate Building Costs?

You can spend (and probably have spent) the night at your desk and work out the costs of the job by hand.

You’ll need to reach out to suppliers, vendors, and subcontractors. There will then be an anguished wait as they come back to you with a price.

You’ll also need to try and work out all the materials and manpower you think you’re going to need for the job.

Can this ever produce an accurate cost estimate?

It leaves so much room for human error.

A few different methods you might be familiar with in estimating costs are:

Unit Price Method

In calculating a construction cost estimate, a unit price method can speed things up.

With unit pricing, you calculate the direct cost of labor and material and then add any overheads and profits. This allows you to see what your actual costs are. You can then create an accurate estimate that is still competitive.

Using building cost estimator software is essential for this method. It gives you an up-to-date catalog of costs that are put together by researchers.

To find out your direct costs, add together the labor costs and come to a total.

You then work out your material costs and add the two together.

You’ll then divide this amount by the square footage of the job which will give you a unit price per square foot.

From here you can adjust the price, taking into account any extra considerations.

Square Foot Method

This is a useful way of estimating when you are prospecting or bidding for work.

To do this you’ll use the historical cost data you’ve gathered from jobs over the past few years. You can analyze this information and figure out your average costs per square foot.

For example, say you worked on 10 hotel construction projects over the last 2 years.

This will give you 10 lots of data to help you find the average cost per square foot of this type of job.

Of course, the more information you have the more accurate this will be.

This method is good to use when bidding last-minute. You don’t need the time to put together a detailed estimate.

The Rule of Two Method

On average, construction costs are around 50% labor. Knowing how much labor you’ll need is something that comes with experience.

The idea behind this method is to work out how many labor hours a job will need. You can then multiply it by two to come up with an estimate.

How Does Building Cost Estimator Software Work?

Construction cost estimator software helps construction companies be more accurate in their estimates.

It is a tool to use in calculating material and labor costs. In turn, it helps create detailed proposals from the estimates.

Competition in the construction industry makes this tool more important than ever.

Features of Cost Estimation Software

Some of the features you might expect to see inside the software are:

A cost database that holds both material and labor costs to use when creating an estimate
Proposal generator for turning cost estimates into bid proposals
Templates to speed up the process. Standard parts and labor required for certain jobs are automatically included
A database of previous projects and cost estimates
Project reporting features create cost breakdown reports with charts and graphs for analysis

Cost Estimation Software Providers

If you’re looking to try estimation software, here are a couple of providers to consider:

Procore Software

Procore can manage your construction project from start to finish.

ProEst is Procore’s cloud-based estimating platform for general contractors and subcontractors.

CostCertified

CostCertified is another piece of estimating software.

Inside, contractors can create estimates and view the status of estimates they submit.

What Are the Benefits of Using Cost Estimation Software?

The most obvious benefit of the software is that it makes the estimating process faster.

It is especially helpful when you are working on complex construction projects. The software can produce an estimate that is much more accurate than a human being can do.

Some of the other benefits you might find are:

Cost information at your fingertips. You can access cost databases, calculate taxes, and work out the costs of labor and materials. It also allows for adjusting prices based on location and features a list of standard-size rooms. The software integrates with accounting software.
Generating Estimates. You can use the software to perform all tasks necessary to generate an estimate. This includes providing measurements and take-offs. It also has the facility to mark-up construction drawings.
All the documentation you need. Estimating software has templates for proposals and cover letters. It also has a suite of templates for generating proposals and cost reports while maintaining a record of past projects.

Key Takeaways

Estimating the costs of a job will always be a big part of the construction process.

In such a competitive industry, you need to find ways to keep your name in the ring.

Using a building cost estimator can help.

It makes the process quicker and more accurate than ever. This is through the provision of up-to-date cost information and useful templates.

More than this, however, is the ability to integrate it with your other software. By moving the whole process online, you can keep a historical record of projects.

The benefit? A better estimating system for you and your customers.

Read more helpful tips on our resource guide.