The most crucial part of construction is construction cost estimation. The truth is that the more jobs you bid on, the more chances you have of actually winning work. There are 3 strategies that are most effective when it comes to construction cost estimation. Professional construction cost estimating consultants apply these strategies.
The unit pricing strategy:
Most contractors know their pricing but aren’t aware of their actual direct costs. The first part of every estimate is doing a digital takeoff. Digital software is by far more accurate and faster to measure quantities. Estimating construction costs has been deemed a difficult task but if performed correctly, not many complications arise.
After the digital takeoff, we can use unit pricing to find out about the direct labor and material cost and then later adds overhead, profit, and supervision. Doing this will allow you to see your actual costs and lets you be more competitive with your numbers and makes wiggle room when you negotiate. Being able to see what your costs are will allow you to make adjustments during the negotiation phase. Using construction estimation software will allow you to work faster and better.
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The square foot strategy:
This strategy has two main uses, first as a prospecting tool and as a last-minute bidding tool.
Prospecting during the conceptual stage of projects will allow you to get your foot in the door with architects. The thing that most architects do is get over budget and design everything in that way. People in construction than have to go back and get them to redo a bunch of things. This strategy can be used as a last-minute bidding tool. These strategies cover cost estimation problems and solutions. Sometimes you’ll get last-minute opportunities to bid for a job, you won’t have much time to fit in all the details so what you can do is price a little higher and you don’t have to be accurate with your first number. You can do this by analyzing past data and performing an analysis to discover your average costs per square foot.
The rule of two strategies:
If you have been doing the construction business for a long, you already have a database of how much labor things take. Knowing the labor is about 50% of the costs if we can calculate an estimate of our labor cost, we simply have to multiply that number by 2 and 10% as a cushion. As an estimator, it is your job to know how long things take. The pricing starts using the database, but several adjustments go into the pricing based on field conditions, custom items, complexities, etc. And these adjustments play an important role in construction project cost breakdown.
To sum it up:
Estimating the traditional way in this digital age is the easiest way to lose projects. Using digital estimation software will allow you to stay ahead of the curve. This will allow you to win more bids, and the strategies mentioned above will get you the best results.