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:

  • Conceptual or preliminary estimates for feasibility and early approvals
  • Detailed quantity takeoffs for precise budgeting and resource planning
  • Unit price estimates for contracts and billing purposes

2. Estimating Techniques

Technique
Purpose
Example/Use Case

Analogous Estimating
Uses historical project data to estimate quickly
Estimating a similar past building project

Parametric Estimating
Applies unit costs (e.g., $/m²) to quantities
Cost per square meter for flooring or concrete

Bottom-Up Estimating
Calculates each task individually for accuracy
Estimating every structural element

Three-Point Estimating
Accounts for uncertainty with optimistic, pessimistic and most likely costs
Large infrastructure projects with variable material prices

BIM/Software-Assisted Estimating
Extracts quantities and costs from digital models
Using Revit + cost database for MEP systems

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

  • Direct Costs: labor, materials, equipment, subcontractors
  • Indirect Costs: overhead, permits, insurance, site management
  • 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:

  • Review the Bid Package – specs, drawings, documents.
  • Conduct a Site Visit – assess conditions and challenges.
  • Takeoff – measure and quantify materials, labor, and equipment.
  • Solicit Pricing – gather supplier quotes, labor rates, market prices.
  • Evaluate Labor Requirements – roles, hours, productivity, benefits.
  • Determine Bonds & Insurance Costs.
  • Calculate Overhead Costs.
  • Account for Profit and Contingency.
  • 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

  • Maintain historical cost benchmarks for similar projects
  • Collaborate with suppliers and subcontractors for realistic quotes
  • Peer review estimates to validate assumptions
  • Update estimates continuously to reflect design or site changes
  • Integrate estimates into project controls to track actual vs. planned costs

Need help? Download our free Construction Estimation Template (Google Sheets) here.