How to Estimate a Construction Project
Cost estimates for a commercial project are one of the things that need to go right for the success of the construction project. After all, among the most common things most commercial builders and owners look for is the financial part of the construction. Without it, your project runs the risk of stalling due to financial constraints.
Therefore, what is the best way to estimate the cost of your commercial construction project, and what exactly is involved during the process? Our Sacramento commercial builders share all you need to know about estimating for a construction project.
Why Estimate a Construction Project?
There are two main reasons why estimation is a valuable part of any construction project. One, it allows contractors and commercial builders to win new projects. Considering that most owners are looking to save money, these estimations help them decide which contractor to pick.
Also, they allow for easy approximation of costs. This is an important part. During the estimation phase, commercial construction companies Sacramento have to deal with take-offs, construction documents, and other related costs. This creates a useable roadmap on how much everything is going to cost and whether it is a worthy venture.
What to Consider
It is important to learn a few things before starting work. Some of the things you need to consider during the estimation process include direct costs and indirect costs.
Direct costs are those that are related to the activities that are carried out during the construction process. For example, buying materials and paying for equipment is a direct cost. Labor is also another activity that lies within this category.
Indirect costs are also known as overhead costs. They are important to the construction but are not directly related to the activities that happen during the construction. For example, costs aimed at covering utilities, temporary structures, legal fees and permits, security, quality control, and administrative costs are all indirect costs.
Levels of Accuracy in Estimation of a Construction Project
Given that this is an estimation of costs, it is not going to be 100% accurate. Especially in the very first stages of the construction process. However, with time, and as the project matures, you should expect to see these estimates getting more accurate.
Usually, estimates are placed on different levels (1-5) as subscribed by the American Society of Professional Estimators. These include:
Level 1: Order of Magnitude
This first stage usually has the roughest estimates. During this phase, the project is still in its idea stage so estimations are usually based on previous projects or expert judgment. Here, you can expect the level of accuracy to be -25% to 75%.
Level 2: Intermediate Estimate
The intermediate estimate level is an important level because it will determine the feasibility of the project by looking at the general cost construction. It is at this level that most owners, especially for large scale constructions, decide whether to proceed with the construction or not.
Level 3: Preliminary Estimate
The preliminary estimate level is where the cost of construction is given more detail. Its accuracy is what informs financing. In some projects, the budget will be determined at this level. At this stage, accuracy is highly important.
Level 4: Substantive Estimate
This estimate depends on the estimated unit costs. Construction companies and other relevant stakeholders look at the objectives, deliverables, and reasonably finalized project designs before coming up with a substantive estimate. Turek’s Plumbing, Appleton kitchen remodel company, uses substantive estimates often to get their costs in order. They also recommend using this estimate as a roadmap to keep the project within budget.
Level 5: Definitive Estimate
This is the final stage where all costs are known. Therefore, the accuracy here is high. This estimate is used to create bids, tenders, and cost baselines.
Using Estimates to Determine Budget
Usually, an estimator or project manager will handle the estimation process by calculating the overall costs, funding, and budget allocation needed for the success of the project. Our tilt-up contractors explain that these estimates also include risk management and reserves for contingency.
Making Successful Estimates
Finding the best construction company for your commercial construction project is paramount for your success. That is why Headwaters Construction Inc is ready to give you the best services. Call us today and enjoy the best service for your construction project.