Accurate estimation can be tough but it is one of the most important parts of construction to get right. It’s made tricky by the fact that each job is unique in its own right but generalisations also need to be factored in to make sure that estimates don’t take too long to complete. Price too high and you may scare the customer away, but price too low and you might end up regretting getting the job. There are a few key elements that need to be fully understood, and will lay the foundation for creating more accurate estimates in the future.
There are two ways that most estimations are undertaken: by job costing or process costing.
Job costing is the total sum of the labour and materials plus any overheads. Process costing is an average of the cost of each step in the construction process. Both have their pros and cons though process costing can be more accurate though longer to perform then job costing.
The key elements in job costing are materials, labour, and overheads; and obviously the more accurate you are with these, the more accurate your overall estimate will be. With labour costs, make sure to factor in the cost and availability of subcontractors as well as the duration and rate of the employees. Materials speak for themself but there can be a myriad of unforeseen requirements that need to be considered. Overheads are often added on as a percentage rather than itemising each specific overhead. The company accountant can be good to speak to in order help work this percentage out.
There is an array of challenges to be aware of when carrying out an estimate and we’ll take a look at some of the main ones here.
Time can be a huge restraint, with pressure from employers and customers to get estimates out as quickly as possible. This rush can easily lead to mistakes and overlooked costs. Fortunately there are a host of tools available to help improve the ease and speed of estimates. There is a lot of great software available now that can help streamline the job costing aspects for you and save time. Templates, improved workflow and working off of similar projects can all help.
Make sure that communication between all parties is clear and informed. A lot of time and resources can be wasted by poor communication between teams which can lead to overlaps, double ups and duplication’s which could have been better used. Likewise, systems need to be put in place to document and process bill of quantities (BOQ) documents. These are crucial to creating an estimate so the easier they are to access and review by all concerned parties the more accurate they will be.
Bidding for work is one of the most important elements for the success of a company. By standardising the process and having a structured approach to estimating, following the guidelines set above will lead to more accurate bids that will win more profitable jobs.
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