1. Why Estimating Matters
Estimating provides a realistic project budget and schedule, identifies potential risks early and supports decision-making during bidding, procurement and execution.
Project managers typically use three types of estimates:
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Conceptual or preliminary estimates for feasibility and early approvals
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Detailed quantity takeoffs for precise budgeting and resource planning
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Unit price estimates for contracts and billing purposes
2. Estimating Techniques
Tip: Always include a contingency buffer for unexpected events. A 5–15% contingency is typical depending on project complexity and risk. Use a mix of methods: start with analogous or parametric for speed, then validate with bottom-up for accuracy.
3. Key Cost Components
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Direct Costs: labor, materials, equipment, subcontractors
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Indirect Costs: overhead, permits, insurance, site management
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Contingency: allowances for unforeseen risks, delays, or price fluctuations
Tip: Always separate contingency from overhead and profit in your estimate. This ensures transparency with clients and avoids disputes later.
4. The Construction Estimating Process
Steps in construction estimating:
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Review the Bid Package – specs, drawings, documents.
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Conduct a Site Visit – assess conditions and challenges.
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Takeoff – measure and quantify materials, labor, and equipment.
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Solicit Pricing – gather supplier quotes, labor rates, market prices.
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Evaluate Labor Requirements – roles, hours, productivity, benefits.
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Determine Bonds & Insurance Costs.
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Calculate Overhead Costs.
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Account for Profit and Contingency.
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Compile and Review – finalize detailed breakdown of costs.
Tips: Use checklists to avoid leaving out small but costly items like temporary works, safety measures, or utilities.
5. Best Practices
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Maintain historical cost benchmarks for similar projects
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Collaborate with suppliers and subcontractors for realistic quotes
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Peer review estimates to validate assumptions
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Update estimates continuously to reflect design or site changes
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Integrate estimates into project controls to track actual vs. planned costs
Need help? Download our free Construction Estimation Template (Google Sheets) here.