Building Blocks of Effective Estimation: Key Principles for Construction Professionals

Proper estimates are essential in the construction industry whether in small or large projects. This is a major concern for project managers because often the scope of the projects is vague and does not include an accurate picture of the cost of the project or the resources that will be required to complete a project. For someone who is involved in the construction industry, an individual must have a certain knowledge and understanding of key estimation principles and practices.

In this blog post, I will be unraveling some of the basic methods that are considered the cornerstones in attempts at developing accurate estimates for construction projects.

Understanding the Scope Of the Project, Consider the Following Aspects

The first thing that is crucial to define before making a detailed estimate is to clearly define the full extent of the project at hand. This goes beyond just the physical construction itself; it is the way that people approach the development of physical space to affects the way that people use it. Make sure you obtain information on requirements for the materials, finishes, site, sustainable and efficient materials, Complication and industry standards, special performance, and requirements for maintenance in the future.

There are always many drawings and documents associated with a project, so it is necessary to review them all. Focus on the real problem; do not simply look at the surface of the problem to discover other subsidiary complications or limitations that may be present. Take a walkthrough for orientation and familiarization of the existing conditions and contextual relationships. Determine essential accessibility for pedestrians, transport of goods, and other access needs. List out all the activities that would be needed to complete the project and also make a list of all the factors that can influence the cost and time of the project. Defining the scope of work puts you in a good position to define your cost model to be used in the project.

Define Cost Model Structure

Structuring your Cost Model is the next step in defining your project with project scope as the first building block. Separate major cost groups as site development, foundation and structure, outer and inner shell, interiors and exterior, equipment and utilities, and accessory structures. Sometimes, you may have several items under one general category, in which case, you will need to subdivide these categories further.

Your model structure provides the roadmap upon which to professionally determine cost estimates and reasonably sum them for each of the components. It enables you to verify whether you have included all the scope items and makes you validate subtotals before the final overall summation of cost estimation for the total project. Select the type of model structure that will reflect how your organization normally determines and manages actual costs for reference during sanity check and history matching processes at some later point in time.

The Following Step Involves Identifying The Resources 

The breakdown of resources needed for each part of the structure of your cost model should be documented. The following is an example of how the details for ordering materials can be presented down to the quantities required. Determine those labor trades that are necessary for installation and the number of man hours required for staging tasks, inspections, and overseeing the works. A list of equipment for site work, material movement, lifts, tools & tasks that require rental equipment, and duration:

Permit fee, disposal fee, temporary use fee, inspection fee, security fee, and cleaning fee. It is more reasonable to divide the project into resourced bits, as it helps to calculate each required element systematically and to avoid some unpredictable mistakes. This is because when one has well-defined resource requirements it makes it easier in the quality control check to ensure that those requirements are well reflected in the estimating documents.

Research Current Pricing

Your next layer in the foundation includes the estimation of today’s prices of resources which are: materials, labour and hire charges of machines, and other incidental expenses. Look at the last bid or invoice numbers in your company files and records and reliable vendors. Search industry database sources. Equip yourself with certain cost indexes that will help you account for inflation or shortage of materials.

Assess where in your region market conditions can affect prices – high development demand, cost of fuel, stormy season. Perform several runs by fellow individuals to ensure that the research is exhaustively conducted. The second factor is current vetted pricing, which is crucial to fine-tuning the estimate totals of your agency. Try to paint the picture to the contractors of the full cost spectrum they are experiencing in the current environment when bidding or negotiating your construction project.

Map Construction Sequence

Construction staging is an important aspect that can have a notable impact on cost and schedule. The sequencing choices made – yards, access points for contractors, parking, utilities, temporary roads, staging, removal, deliveries, crane placement, pour sequence – have effects that reach downstream to productivity, site traffic, trade coordination, and costs.

Xactimate estimators construct a plan that gives direction on the sequence of construction concerning the organization of work, safety, and costs. Other overhead costs associated with the planned strategy include the expenditure on temporary structures and control measures, the time that will be spent on coordination, and contingency funds that may be used to counterbalance time overruns or reiterations. Understanding the constructed process that you are expecting the contractors to follow, it creates the basis that your estimate will be able to highlight other indirect or ancillary quantities in addition to material and labor costs.

Apply Historical Data

Trends frequently demonstrate the trend that is to be expected. When using the electrical estimating service, be sure to consider general historical trends to determine the likely cost ranges for each of your estimated categories – the cost per square feet of particular building types or materials, the cost of civil site work as a percent of total project costs, the costs of electrical and mechanical systems.

Review the post-accounting of the trades that were in the archived list – Were some of the trades always over budget or under budget? Did you ever get into cycles where there were change orders such as finish, specialties, or utilities? Continually recognize these trends to improve estimating and contingencies. The historical metrics enable a company to determine whether the assumptions used in creating the current estimates are reasonable or not, something that might come as a shock in the future.

Calculate Appropriate Contingencies

It cannot be denied that every project has its component of predictability and unpredictable outcome. Use contingency values that tend to reflect any arising impediment that would affect the cost of the project or the float time. Distribute contingency dollars related to aspects in which risks arise from fluctuations in design improvements, acceleration of the construction schedule, unforeseen ground conditions, and unpredictability in material costs and availability. Split contingency funds into specific risk factors contingency vs general contingency pool/allocated contingency.

The art lies in determining the right amount of risk mitigation funds that can be strategically awarded while at the same time avoiding the risk of bidding on inflated amounts that affect competitiveness or client trust. Use past projects, and especially, performance numbers to inform where smart contingency spending is most needed. Therefore, when many issues arise on a project, they can be managed in a proper manner and without significant delays in time and money.

Validate & Fine-Tune Details

As the last step to your estimate, it is crucial to look for any details both at a broad and at a very granular level. Check that all the structure of the model, and all resources as well as their prices coincide with each other in all the estimating documents. Double-check math calculations. Ensure that contingencies and supporting cost line items balance or analyze the differences if any. Analyze such evidence as quotes, estimating guides, and factors that could be pulled from historical analytics.


Cost control forms one of the important parts of a lumber takeoff service project and thus reliable estimates are crucial. Prevent rolling over of budgets or time by keeping these estimating basics in mind – establish project scope, create cost model, identify quantifiable resources, analyze its costs, define construction phasing, use historical data, incorporate wise contingencies, and get authenticated by rigorous processes. Use these six estimating building blocks each time to build well-defined, accurate, detailed, and reliable estimates that enable the delivery of value-based on-time, and on-budget construction projects.