How to calculate construction costs

Whether you are preparing a competitive construction budget for a bidding project, or simply trying to calculate the costs for the construction, remodeling or repair work you want to do, follow the steps below to ensure that your construction costs are accurate and your construction budgets are organized and complete.

Before you start, review all the plans and specifications and consider whether you will need the services of suppliers or contractors to complete the task. If that is the case, give them the information they need to quote their construction or remodeling work as soon as possible.

In order to ensure you have enough time to receive and review the prices of your suppliers and subcontractors, set a delivery date for the quotes, which must be at least one day before the expiration date of the tender. Ask suppliers and subcontractors to make their proposals in writing and in detail. If time does not allow it, take detailed notes of the bids that you give over the phone.

If possible, obtain at least three estimates. The subcontractor’s work estimates usually cover a considerable price scale and if you have three estimates for each job, you can make a better informed decision about the amount you should use in your construction budgets. As the quotation process progresses, make sure your subcontractors receive any changes or revisions you make.

Once you have the estimates in your possession, prepare a comparison sheet and list the main items that the subcontractors will include. Many times, contractors who present estimates on the same job include different elements in their proposals. Use the comparison sheet as a guide to review and compare the quotes you receive. Add money to a contractor’s proposal for something that the contractor has excluded and others have included.

Prepare a summary of estimates for all your costs and tenders. Divide all costs into three basic categories:

  • The costs of construction materials include all materials, labor, equipment, etc., needed to build a building (for example, foundations, windows, and roof).
  • Costs not related to construction or remodeling, also called general conditions costs or general direct expenses, include all materials, equipment and costs directly attributable to the completion of the work, but which are not a real part of it (for example , temporary sanitary services, garbage containers, supervision costs, the cost of electricity for the project).
  • General overhead costs include other costs necessary to maintain your business, which are not directly attributable to the project (for example, rent, telephone, office electricity). Identify and quantify these costs and then increase your hourly labor rate to cover them or add a budget item to your construction budget for each project you are calculating.
  • The costs of general conditions (not related to production) can include 20 or 30 budget items, depending on the complexity of the project. Create a summary sheet and list the various costs and items you anticipate. Many of these are directly related to the time it takes to complete each task, so you should have an idea of ​​the duration of the project. For example, if you estimate that you will need two temporary health services per week, you will need to know how many weeks you will use to determine the total cost.

Once you have the costs of construction materials and those of the general conditions, determine the partial total. Your earnings, overhead and insurance costs are usually calculated as a percentage of that total. Combine these costs with your partial total and you will get the cost of the full estimate.

Calculate now the cost of labor

Before initiating any deduction of the quantity of the plans, read the specifications in writing. Many times, the specifications manual includes special requirements or important differences and you must write them down before continuing.

When you begin to review the plans to determine the amount of construction materials and workers needed to get the job done, these suggestions will help you stay organized:

  • First, check all the plans to get an idea of ​​what the work will require.
  • When making your detailed deductions, use markers or colored pencils to mark the plans. This way you can know at what moment you have included something.
  • There are many ways to obtain the amounts you will need to prepare the estimates.
  • If you calculate the quantities of all the materials first, it is easier to go back to allocate the labor costs if you know what detail was being considered. The installation at floor level of a 2×4 wood around a window opening requires much less work than that of one to 40 feet in the air under a canopy.
  • The detailed description and the additional sheet make it easier for another person to review their work.
  • In case a revision of the plan is issued, you can easily compare the new details with the previous ones and verify the impact of the change.

When the project is under construction, you can more accurately compare the real costs of materials and field work. If in your estimate the work appears in a lump sum, it will be impossible to determine where it was calculated in less and where in more.

When calculating quantities, be sure to know what scale is used in the drawings and details. Check the scale with other plan sheets; Sometimes, the architect scores an incorrect scale on the plans. If you think you are looking at ¼ inch scale drawings and are really 3/16 of an inch, your quantities will be wrong and this will significantly influence your labor and material costs.