Building Construction Cost Estimating Software​: How to Estimate Construction Costs

Introduction to Construction Cost Estimating

In order to accurately estimate construction costs, you’ll need to invest time and likely money too. As a construction company, you may be able to provide a rough estimate for construction costs. However, to provide a true construction cost estimate, you’ll need to evaluate the specifics related to the jobsite and vision. From permits to potential risks, there’s a lot to calculate. Construction cost estimating software can help you track costs as well as improve efficiency, which can help find the most cost-effective way to complete a project. Read on as we analyze how to estimate construction costs and how construction cost estimating software can aid in the process. 

What is commercial construction cost estimating?

Commercial construction cost estimating is a due diligence process that allows construction companies to decide if they want a project, and clients to choose the right construction partner. In most cases, the estimates will develop in phases. Before diving into the details, you’ll need to understand the scope of the project. In order to clearly define the scope of the project, investment may be required to assess any risks. Once you graduate to reviewing the design details, there are several ways the budget can be manipulated. Arriving at an accurate estimate can be time consuming, requiring some level of commitment between you and the client. While you’ll always win some and lose some in business, remember the value of your time. To aid in delivering accurate cost estimates that prioritize efficiency, take advantage of construction project management software. Creating estimates is about much more than coming up with what a project will cost. Construction project management software can help evaluate risk, increase efficiency, document findings, and more. 

8 Steps on How to Estimate Building Construction Costs

To build an accurate estimate for construction costs, you’ll want to invest the time into taking the right steps. The unique characteristics and risks of each project should be considered individually in an effort to create the most accurate estimate. The process of developing an accurate estimate is known as a preconstruction process. Investing the time and money into the preconstruction process helps both parties ensure they know what lies ahead, and ensure there is an adequate budget to support it. Here are 8 steps involved in estimating building construction costs. 

1. Assess bid package: The bid package contains an overview of the project, drawings, MEP requirements, and other details that are essential when creating an estimate. 
2. Visit the job site: It may be necessary to visit the job site to create a bid. Visiting the job site can offer valuable insight that may or may not have been identified. For example, you may assess accessibility, drainage conditions, utilities, and other variables that may impact the estimate. 
3. Evaluate materials: Materials can significantly impact an estimate. Factors such as the quantity and types of materials needed can be evaluated. 
4. Compare supplier pricing: Once you’ve defined what you’ll need to complete the project, you can work on finding the best price. 
5. Evaluate labor requirements: From determining the type of work to the number of people and hours, labor rates can be evaluated. 
6. Evaluate insurance costs: Various types of insurance may be required to complete the project legally. Explaining the need for insurance(s) and providing estimates demonstrates a level of detail that can set your firm apart.
7. Calculate overhead: Costs such as permits, site cleaning, temporary offices, equipment, and so forth should be evaluated per project.
8. Factor profit margin: As a for profit company, you’ll want to build in a profit margin for your hard work. 

Construction project management software can help simplify the process of composing estimates. In addition, it can help evaluate risks and how to derisk projects, while still calculating them into the estimate. Perform research step-by-step and utilize software to put the pieces together to deliver a detailed and accurate estimate.

What are the different types of construction cost estimates for construction projects?

Depending on the situation, you can respond with the appropriate type of estimate. For example, if a client has just inquired about a potential project, you’ll first want to evaluate if it’s worth your time or if the project is feasible. This is otherwise known as a feasibility estimate. If it’s deemed feasible, the estimate can progress, finally arriving at a definitive estimate after contracts have been signed. Let’s review the five main types of construction project estimates. 

Feasibility estimates can be used in the beginning stages of determining if a project is worth the time or not. As the scope and construction method are evaluated, you can determine if it’s something you want to move forward with before investing too much time. Feasibility estimates are generally performed based on historical data or previous experience. 

    2. Intermediate estimate 

An intermediate estimate is otherwise known as a base estimate. Once you’ve deemed the project as one you would consider taking on, you can dive deeper on the size, scope, and complexity of the project. You can also evaluate risks or challenges. Intermediate estimates are still not totally accurate estimates as they are based on knowledge, historical data, and experience. 

    3. Preliminary estimate 

Preliminary estimates start to take a closer look at the blueprint. Costs can be categorized based on design details and calculation errors can be corrected. 

    4. Substantive estimate 

Once the design is agreed upon, the substantive estimate can refine the costs and examine materials more closely. If needed, materials can be swapped out to adhere to a budget and the finer details can be decided. This estimate is one of the last times things should be changed. 

    5. Definitive estimate

By the time you arrive at the definitive estimate, an agreement should have been made. A definitive estimate outlines all details and costs agreed upon, serving as the most accurate version of the estimate.

What are the different types of cost estimating techniques in construction​?

In construction, there are different techniques that can be used to provide estimates. Before choosing a method and offering estimates, it’s important to understand what the client expects. In addition, you’ll want to make sure they understand what an estimate encompasses, how it may change, and what may impact it the most. Let’s review various types of cost estimating techniques that can be used for construction projects.

• Analogous estimating: These estimates are calculated based on the known costs from projects completed previously and expert judgement. Analogous estimates can fail to recognize that no two projects are the same, and deserve unique considerations. The best time to use these estimates is in the infant stages of project planning when very little is known about the project. If you are using these types of estimates with known information, you may be doing yourself and your client a disservice. 
• Three-point estimating: These estimates utilize an optimistic estimate in which funds are spent efficiently, a pessimistic estimate in which funds are spent inefficiently, and a perspective that balances the two. 
• Definitive estimating: As reviewed earlier, definitive construction estimates are based on known factors and final costs. Definitive estimates are used as a baseline when a project is being carried out.

How do you calculate construction costs?

Calculating construction costs is a complex task. You’ll need to consider materials, labor, equipment, permits, potential setbacks, preparation, and so forth. Depending on the level of accuracy you’re trying to achieve, you may or may not need to perform research to configure an estimate. Whether you’re generating an estimate based on similar past projects or specific project details, construction project software can help develop accurate estimates. They can also help assess risks and what those risks could equate to in terms of cost. 

All about construction cost estimating software

Construction cost estimating software can help optimize and de-risk projects utilizing AI technology. By inputting information, you can utilize software to track costs, minimize risks, and strategize the most efficient project plan. As a result, you can win more bids and generate more profit.

How does ALICE help with cost estimation in construction projects?

ALICE is an AI-powered construction simulation and optimization software. With ALICE you can utilize the planning features to optimize projects, minimize risks, and deliver accurate estimates for clients. Start by uploading a 3D model or precedence diagram, followed by labor and equipment availability, production rates, crane locations, and calendars, with the option to add any additional constraints. Next, input construction methods referred to as recipes. You can input new construction methods, or revise or reuse previous methods. In seconds, ALICE can simulate your project to produce the best sequence of work and evaluate the cost and time impact of different decisions. You can present these solutions and the cost impact of them to clients to create value. Once you’ve earned the business, you can continue to use ALICE to track a visual of the progress, modify schedules in real time, and so much more.