Every construction project needs a site, building materials, skilled labor, and a budget that all the stakeholders can accept. Bidding Enterprise specializes in construction cost estimating that produces reliable, useful budgets tailored to each project.
The construction budget — also called the work budget — is a document containing the detailed, anticipated cost of the construction work, including itemized quantity lists. The total represents all the costs and expenses the general contractor will have to cover to build the project.
The budget is based on quantity calculations and a unit-price analysis of each item in the project. Each unit price rests on a reliable calculation of the materials, equipment, and direct and indirect labor required to build that item.
What an estimate needs to include
In an estimate, items are arranged logically in the sequence of the work and grouped into categories — often called divisions.
Breaking the work into categories and subcategories creates a hierarchy, often called a work breakdown structure, which makes it easy to total items and find them within larger units of construction.
Each unit is given a scope, and cost and supervision centers are assigned to it, giving better quality, financial, and administrative control over the different trades and groups of related items.
What a project budget does
Besides setting the amount of money needed to build the project, the construction budget does several important jobs as the project moves forward:
- It is the basis for the bid and for preparing the construction contract.
- It is used for progress payments, cost planning and control, checking amounts quoted by third parties, and as a reference for cash flow.
- It supports the rational use of resources, setting priorities, measuring progress against objectives, and identifying and reducing risk.
Preparing a firm price estimate requires, first of all, knowing the plans, specifications, and quantities of the completed design.
It also requires knowing the location of the work, the climate, the ground conditions, site access, utilities, and the availability of materials and qualified labor — in short, everything that brings the estimate closer to the reality of the site.
Most importantly, a contractor's estimate requires a deep understanding of all the work needed to build the project, so construction difficulties can be anticipated and priced.
Relevant construction costs
Direct construction costs are all the resources physically incorporated into the work — raw materials, by-products, and consumables — plus the equipment, machinery, tools, and labor needed to complete the project or a given part of it.
The direct cost of each item is calculated on a unit-price analysis worksheet, which lays out materials, equipment, and labor for the work described in that item in an orderly, systematic way.
Using the same format and procedure for every item makes the estimate easier to understand, review, and document, and standardizes the process.
Studying direct costs follows a structured, logical procedure, so that the same inputs under the same conditions always produce a consistent result.
Detailing and listing direct costs
- Determine the general construction procedure for the item, describing the main operations and activities involved.
- Analyze the variables with the greatest influence on the item's cost — materials, construction system, available labor, equipment, and productivity.
- Determine the supplies to be used according to the plans and specifications, and calculate consumption and yields per unit of work: first materials, then equipment, then labor, and finally productivity — all under the expected working conditions.
- Combine the cost analysis of the activities that make up the item. Each activity — preparing, moving, or installing, for example — needs different human and material resources and has different production rates.
Conclusion
Bidding Enterprise produces reliable construction cost estimates and material takeoffs that help general contractors build a working budget for any project and submit it to win the bid. Our estimators focus on the details and use current software, so clients receive estimates that are clear, useful, and ready to act on.