Cost Estimation: The Cornerstone of Every Construction Project


Cost Estimation: The Cornerstone of Every Construction Project


Laozi, an ancient Chinese philosopher, once said, “A journey of a 1000 miles starts with a single step.” Likewise, the most complex large-scale construction projects could not begin without an accurate estimation of costs. Accurate cost estimation by professional construction estimators is critical in creating and maintaining a feasible budget of project costs.


Elements of a Comprehensive Project Cost Estimate

A professional cost estimator’s goal is to provide accurate information to the project developers about the planned projects possible costs. When stakeholders have accurate cost estimates then decisions about project feasibility can be made with authority.

  • Quantity Takeoff: The ¬†estimator will work to develop and accurately identify the correct materials called for in the project. Without an accurate takeoff, the entire estimate will be inaccurate.
  • Labor Hours: The estimator will use his experience to estimate the labor hours needed to complete a given project. He will take into account the varying levels of labor productivity expected based on the complexity of each stage of the project.
  • Labor Rates: Estimating labor rates begins with a basic wage and benefits estimate for a given craft. This estimation takes into account the burdens of various taxes such as FICA and FUI and includes others that are required by the company itself. The estimator must also take into account the possibility of overtime work and the increased costs associated with these extra hours.
  • Material Prices: Estimating materials costs is more complicated than it may initially appear. The cost of a given material fluctuates greatly depending on current market demand and supply, the quantity required, the cost of transportation to site, and even exchange rates if the materials are to be shipped into the US from another country.
  • Equipment Costs: The cost estimator must take into account several factors regarding equipment including cycle times, equipment capacity, and the cost differential that occurs if the equipment must be rented rather than equipment that is already owned.
  • Subcontractor Quotes: Portions of the project are usually completed by specialty trades that operate as subcontractors. Their quotes should include the same careful considerations of labor, materials, and equipment costs as the general contractor.
  • Indirect Costs: An accurate estimation of indirect costs is critically important in the overall estimate. Land acquisition, permits, design fees, office support, temporary on-site utilities, and mobilization are just a few items that must be considered in order to arrive at an authentic estimate of project costs.

Why Is Accurate Construction Estimating Important?

It is virtually impossible that the estimators‘ initial estimate will be the same as the project’s final price tag. However, comprehensive estimates allow developers to make important choices. The estimate aids developers in determining the feasibility and profitability of a potential project. Procurement of financing will also depend on the estimators report. Later in the project’s development, developers can make important decisions about changes in project design and/or materials that affect cost positively or negatively. For example, during the value engineering phase of our projects, South Bay Construction will take a critical look at materials and design choices in the estimate in order to present options to the client that increase value while reducing costs.


Perhaps, most importantly, an accurate estimation keeps all parties focused on delivering a project on time and under budget. It holds a developer and construction company accountable for increased costs and overruns. At South Bay Construction, we approach each step of the estimation process with honesty and integrity. Our goal is to always provide our clients with the information necessary to make the best possible decisions on each of the projects.