Commercial construction projects have high direct and indirect costs. Accurate cost estimation is key to project success. Many project owners and contractors cannot afford the time and energy to track and account for commercial estimating services.
What to Include in Commercial Estimating Services?
Professional commercial estimating services provides construction professionals a reliable project cost estimates. Construction cost estimation includes direct and indirect costs. Direct expenditures include labor and materials for the construction job.
- Planning Before Construction
Commercial estimating services assist contractors in planning project costs with precise estimates. Estimation helps in feasibility study and in bid preparation.
A project manager outsources cost estimation to professionals who break the project into smaller work units. They assess each work unit’s cost and the contractor’s bid and inform the client. The customer, architects, and designers review cost projections to establish project sustainability. They refine the designs until they reach their goals and release the project for commercial construction bids.
- Bid Preparation
Commercial contractors use cost estimation services to bid on projects. They assess the project’s viability and cost using this data. Contractors use detailed building cost estimates to identify the appropriate markups for profitability. For instance, a commercial contractor may add a 25% markup to complete the project without budgetary restraints and still make profits. Contractors can improve their chances by employing commercial estimating services to create competitive bids.
- Value Engineering
Every commercial construction project seeks cost-effectiveness and excellence. Here comes value engineering. It optimizes function and cost to assess and improve project value. Value engineering examines ways to finish the project cheaply without sacrificing quality. For instance, project stakeholders may suggest adopting cheaper but comparable building materials.
- Change Order Management
Project scope changes are common in commercial estimating. Stakeholders influence some modifications to reduce costs, whereas others, like inflation, raise material prices. When project scope changes, stakeholders use commercial estimating services to update cost estimates.
How Do Commercial Estimating Services Work?
Cost estimators must understand construction to provide accurate and detailed project estimates. This research-intensive process is tiresome, as they need precise information and a lot of back-and-forth. The entire process is here.
- Obtaining Project Data
The construction business bases every choice on data. The cost estimator collects all project data to assess its scope. Cost estimators begin project designer estimates by reviewing drawings, designs, models, specifications, and materials. They then analyze every design document component and examine material prices.
Site visits assist building cost estimators in evaluating designs’ viability. For instance, they could utilize the soil sample to choose construction materials. Site visits also help them comprehend the topography and logistical problems contractors may face.
- Project Requirements Analysis
Construction projects require various resources. Cost estimators use the project scope to divide the project into manageable work units, making it easier to track resources. The cost estimate would divide this job into excavation, leveling and grading, foundation wall building, and waterproofing.
Each work unit requires specialized equipment, materials, and labor expertise. The excavating unit needs excavators, dozers, loaders, and trucks to move garbage. Workers in each work unit have various hourly rates and require particular labor experience. Truck drivers and excavators get varying hourly pay.
Finally, each work unit needs various materials. The foundation wall construction unit needs bricks and concrete. Bituminous coatings for low water pressure and crystalline waterproofing systems for high water pressure are required. By breaking down the project’s scope, cost estimators get accurate materials, labor, and equipment.
- Making Cost Breakdowns
Every building project involves direct and indirect costs.
- Direct Costs
Construction supplies, equipment, labor, and transportation are direct costs. These project-related costs affect progress, and direct cost changes affect project finances. Cost estimators add all direct costs to estimate project costs.
- Indirect Costs
Indirect expenses support the construction company but do not affect project progress. Administration costs, including utilities, permits, insurance, and project management, are necessary for office operations. Construction estimators add a percentage to direct costs for indirect expenditures.
- Contingent Funds
Many parties working together make construction projects unpredictable. To account for unanticipated difficulties, estimators add a percentage to direct expenses. Examples are material price variations, worker strikes, weather changes, and shortages. Contingency funds differ between commercial projects and general contractors.
- Margin Profit
Profit margins are the last cost breakdowns estimators consider before submitting project estimates. Contractors submit construction bids using a fixed proportion of the project cost. The building business prefers 8%–15% profit margins. After identifying all project resources, cost estimators break down their costs to make reliable estimations.
- Manage Your Estimates
As observed, cost estimation is laborious. You can handle this process yourself if you don’t mind the hurdles. Easy designs quickly become entire scopes using construction bid management software. The action saves you time by handling low-value admin tasks like page-turning in the documents. Digital Estimating generates a thorough project scope, bill of goods, and material and labor requirements. With this knowledge, commercial contractors can readily estimate, helping them.
How Construction Estimating Services Benefits Busy Contractors?
Accurate commercial estimating helps owners and general contractors estimate building expenses. The information lets project owners know the contractor’s bid range, keeping the project on budget. General contractors use the information to plan their bids and meet project requirements. However, using cost estimation services has many additional benefits, including:
- Anticipating Issues
Residential and commercial developments often face obstacles. Such issues could increase project costs and surpass the budget. Sudden weather changes could influence project delivery dates. Unexpected problems are likely, and cost estimators can assist in identifying them.
- Industry Experience
Their industry experience helps them anticipate permitting delays, material fluctuations, and subcontractor availability. They give multiple ways to help the contractor overcome each issue with minimal effort.
- Analysis of Risk
Risk analysis helps estimators identify project hazards and their financial impact. They suggest ways to overcome these obstacles to reduce project costs.
- Budgeting for Every Project Aspect
Construction projects are budget- and time-sensitive, so every detail influences quality and delivery. Estimators break down the project and assign costs to each stage. The following methods help cost estimators assure appropriate coverage:
- Transparency in Communication
Continual communication between estimators, contractors, and clients ensures stakeholder satisfaction with estimates. Cost estimators explain how they calculated costs and how they researched them. They keep stakeholders informed throughout the process.
- Budget Changes
Estimators may submit construction estimates slightly above budget. When this happens, estimators change estimates to meet budget limits. Value-engineering options are best for lowering project costs without compromising quality.
Due to the complexity of commercial construction projects, accounting for the total cost might be risky. Thus, phased estimations work better. The procedure divides the project into stages. Estimators break down each stage to find every estimate. Complex construction projects use progress payments, where general contractors are paid after each phase, and the client is satisfied. This setup is essential for budgeting and monitoring. It ensures contractor cash flow to meet project requirements.
