How to prepare a detailed construction estimate

by Brendon

The preparation of a detailed estimate requires that the estimator break the project into cost centres or cost subelements.

This essentially means that the project is broken down into subcomponents that will generate costs. These subcomponents are called cost centres which should be priced in order to retrieve all necessary costs from the client. In fact, the cost of preparing unsuccessful bids could be a relevant cost centre itself as it is considered to be an administrative cost affecting your budget.

What are cost centres?

It is these costs that the estimator must develop on the basis of the characteristic resources required, namely, man-hours, materials, subcontractors, equipment-hours or any funds needed to accomplish the work or meet the requirements associated with the cost centre.

The cost centre in the construction industry relates to some physical subcomponent  of the project, such as excavation piles, excavation, steel erection, interior dry wall installation etc.  Certain non-physical components of the work generate costs that should also be considered.  These items should be listed as “indirects” and are typical costs that are not directly connected with physical components or end items in the facility to be constructed.  These items generate costs that must be recovered and may include insurance and bond premiums, fees for licences and permits required by the contract, expenses related to on site safety and home office overheads projected as allocated to the job. 

These items may be referred to as general conditions or general requirements although they may not be specifically referred to in the contract documents.  These items fall into categories for conditions of contract and general requirements of the contract.

When preparing a bid estimators create a general framework with cost recovery in mind.  Estimators should therefore have knowledge of the technologies involved in building the project,  which allows them to divide projects into individual pieces of work, namely physical subcomponents, systems, etc  These work packages will naturally consume resources generating costs that must be recovered from the client.

The construction bidding process

Getting the deal done!
Getting the deal done!

What are the steps followed to develop the estimate?

A chart of cost accounts acts as a guide or checklist as the estimator reviews the plans and specifications to highlight which cost centres are present in the contract being estimated.

The estimator should generally follow certain steps in developing the estimate:

Break the project into cost centres.

Estimate the quantities required for most cost centres that represent physical end items which is commonly called quantity takeoff.  For those cost centres that relate to nonphysical items determine an appropriate parameter for cost calculation, namely, the level of builder’s risk insurance required by the contract or the amounts of the required bonds.

Price development for physical work items may require an analysis of the production rates to be achieved based on resource analysis.  The estimate should therefore:

  • Assume work team composition to include number of workers, skilled and unskilled, and equipment required.
  • Estimate an hourly production rate based on the technology being used.
  • Make an estimate of the efficiency to be achieved on this job, considering site conditions and other factors.
  • Calculate the effective unit price.

Calculate the total price for each cost centre by multiplying the required quantity by the unit price.  This multiplication is called an extension and this process is called running the extensions.



Construction Bidding

The Simply Lean Pocket Guide for Construction - Tools for the Elimination of Waste in the Design-...

The Simply Lean Pocket Guide for Construction was created to provide the necessary forms and worksheets for a team to learn, implement, and document Lean problem solving activit...

View on Amazon

DEWALT Construction Estimating Complete Handbook: Excel Estimating Included (DEWALT Series)

This affordable, real-world guide to success in construction estimating is loaded with tips, checklists, worksheets, data tables, and step-by-step tutorials to help you navigate...

View on Amazon

HIGH VOLTAGE ELECTRICAL SUBSTATIONS: A "Road Map" to the Engineering Design, Preparation of Bid D...

This book summarizes the experience of 50 years working on the Engineering Design, Preparation of Bid Documents, Bid Process and Construction Supervision of High Voltage Electri...

View on Amazon

Further Reading

The key to a successful project and effective cost control is the development of a good estimate as the basis for bid submittal.
Updated: 05/07/2016, Brendon
Thank you! Would you like to post a comment now?



You might also like

In today’s marketplace should you buy or rent a house?

In the midst of the global financial crisis, what is the current economic sit...

Planning An Office Refurbishment Project

Office refurbishment is an essential part of ensuring business success. Our w...

Planning for Grad School

How to search for the best academic institution re your professional goals an...

Disclosure: This page generates income for authors based on affiliate relationships with our partners, including Amazon, Google and others.
Loading ...