If you’re a new business owner in the construction industry, you may feel a bit overwhelmed by your new responsibilities. From hiring to bidding, all operations fall under your oversight. Especially if you have more physical construction experience than business know-how, the financial aspect of managing a company comes with a steep learning curve. You’ll have to learn how to leverage your expenses right off the bat so that your company can save money, resources, and work in the long run.
For construction businesses, the process of project cost estimation is essential to successful financial planning. If you can master this procedure, you’ll have no issue balancing your books and staying on track with your budgets.
To understand commercial project cost estimation, you should start by identifying the primary goals of cost estimation:
- Counting the Costs– The ultimate objective to cost estimation is to come up with the total amount you’ll have to spend to complete the proposed project, add your markup, and then present your bid to the client.
However, you don’t just want to know the sum total; you always want clear calculations per square foot and per subcategory of work.
- Precision– Precise cost estimation requires up-to-date knowledge of material and labor costs. The market constantly changes, and you need to be able to provide your clients with numbers that match the current market prices.
- Speed– Clients will want cost estimates as soon as possible, and if you’re competing against other bids, you’ll need to provide an accurate and detailed estimation in a short period of time.
Compartmentalizing Cost Estimation for Different Projects
Accuracy is a crucial factor that affects every construction job, no matter the type or scale. If you need to hire numerous subcontractors for a project, it can help break up the costs according to the work each subcontractor will perform. For example, using commercial HVAC cost estimating software will help you approximate the price of installing HVAC systems and hardware. You’ll need to evaluate other areas of work, including electrical, masonry, paintings, carpentry, concrete work, and glasswork.
The Planning Process for Commercial Jobs
The complete process of cost estimation includes the following steps:
- Project Commission– The commissioning of a project starts early in the construction process and can continue for up to a year. It ensures verification that a company will build, construct, and deliver a given project following the requirements of the client.
- Defining Requirements– This pre-design phase identifies what a project requires, its functions, the costs involved, the location, and what laws need to be followed for construction.
- Creating a Design Team– At this stage, project owners contact architects and other consultants to develop a team. They may need to work with specialized consultants on complex projects for design requirements that include hazardous materials or acoustics. The architect or consultants have the task of overseeing the design process and making sure that everything’s going according to plan. However, for industrial projects, an engineer may take on this responsibility.
- Structure Designing– In this step, an architect creates several designs. They first meet with the owner to find out their requirements and run plans by them. After they reach a decision, they work closely with other team members to create the design structure per the client’s needs.
After gaining the owner’s approval and collaborating with other members to create the design, the last stage includes producing construction documents. It involves creating construction drawings or blueprints for the constructor to build. The cost estimate is continuously revised as the architect brings the design to life.
- Bidding According to the Extent of Work– After the completion of construction documents, contractors receive the bidding documents. Apart from the materials, they receive samples of the contract agreement and instructions on biddings. Contractors create the estimates depending on the scope of the work. They all collect the same information to ensure that fair and equal bidding occurs through this process.
Final Tips and Tricks
To impress clients and win bids, you need to pay great attention to detail throughout the cost estimation process. If you’re new to commercial construction management, you may want to consider hiring a cost estimation specialist or investing in advanced cost estimation software. If you put the time and resources into the cost estimation process, you’ll not only please your clients, but you’ll also save yourself from the stress of oversight and unexpected costs down the road.