Chapter 4: Introduction to Estimating

Introduction
● Cost - One of the most critical attributes in a project that must be controlled by the
project manager, superintendent, and cost engineering team.
● Cost Estimating - The process of collecting, analyzing, and summarizing data to create
an educated projection of the expected cost of a project.
● Budget - The first step in the cost control system and the basis for the construction
project, created through cost estimating.
● Cost Control System - The system used to manage project costs and ensure they
remain within the established budget.
● Estimating Team - The team responsible for developing project cost estimates, which
may include the project manager, cost engineer, and superintendent.
● Estimating Process - The series of steps involved in preparing a project cost estimate,
including the development of a responsibility list and schedule of the estimate.

Types of cost estimates

● Conceptual cost estimates - Developed using incomplete project documentation,
referred to as budgets, schematic estimates, or conceptual estimates. Least accurate
type of estimate with substantial contingencies of 10-20%. Prepared quickly using the
square feet of floor unit prices, assembly prices, subcontractor plugs, and percentage
add-ons for general conditions.
● Semi-detailed cost estimates - Used for guaranteed maximum price contracts, have
elements of both conceptual and detailed estimates. Accuracy is proportional to the
accuracy of the documents and the time spent on preparing an estimate.
● Detailed cost estimates - Prepared using complete drawings and specifications, take
the longest time to prepare, costs the most in personnel resources to complete, and
produce the most accurate final figure. Required for projects which are lump sum bids.
The process includes quantity take-offs, pricing recaps, early subcontractor plug
estimates, job site general conditions, competitive subcontractor and supplier quotations,
and markup choices.
● Guaranteed maximum price estimates - Hybrid of budgets and detailed estimates,
often prepared on negotiated projects after completion of the design development
phase. Detailed estimates are produced for scopes that have been adequately designed
and specified, and subcontractor plugs or allowances are included for areas not yet
designed. Contingencies are more prevalent in GMP estimates than detailed estimates
and may amount to 2-5%.
Work breakdown structure
● Estimating Process - The process of developing an estimate for a construction project,
which involves gathering information, analyzing and refining it, and finally reaching a
final estimate or bid.
● Work Breakdown Structure (WBS) - An early outline of the significant work items in a
project, including their cost or schedule considerations, which serves as a reference for
the estimating process.
● Document Overview - One of the first steps in the estimating process, involves a brief
review of the project's drawings and specifications to gain a general understanding of the
project and its building systems.
● Cost Codes - A system used in accounting and financial management to categorize and
organize the costs associated with different aspects of a project.
● Direct versus Subcontracted Scopes of Work - In the estimating process, the
distinction between tasks to be self-performed and those to be subcontracted, is based
on factors such as specialized tradesmen, pricing risk, and the cost of equipment and
transportation.
● Project Item List - A work breakdown structure with columns indicating direct labor and
material costs as well as those of subcontractors.
● Subcontractor Notification - The process of informing subcontractors about a project
and inviting them to bid, which may be done electronically with access to drawing files.
● Bill-of-Materials - A comprehensive list of the materials needed for a construction
project, which can be derived from the WBS if it is sufficiently detailed and includes cost
codes.

Quantity take-off
● Work Breakdown Structure (WBS) - A method for breaking down a project into smaller,
more manageable components.
● Quantity Take-Off (QTO) - The process of measuring and counting each item of work to
be performed, which is crucial in preparing a construction estimate. This process is
time-consuming and starts with the foundations of the project.
● Material Quantities - The counted and measured quantities of materials, which must be
mathematically converted to purchasable units that match up with standard unit pricing.
● Purchasable Units - The units in which materials are purchased, such as cubic yards
for concrete or tons for structural steel.
● Waste or Lap - The allowance for waste or lap in material quantities, which can vary
with the material, installer, project, and estimator. Common allowances are 5-10%.
● Small Items - Items such as nails, glue, caulking, and rebar tie-wire, which can be
estimated but determining exact quantities is difficult. Allowances are usually sufficient at
this stage.
 ● Subcontracted Work - Work that is performed by subcontractors, which is taken off by
the general contractor in a similar fashion as the direct work but not as detailed.
Order-of-magnitude estimates are developed for this work.

Pricing
● Estimate Accuracy - There is no one exact estimate for any project, but some
estimates are more accurate than others.
● Pricing Recapitulation Sheets (Recaps) - A pricing recap sheet is developed for each
system or CSI division that is utilized. The estimator should not begin pricing until all
materials have been taken off and recorded on the quantity sheets.
● Pricing Process - After, the quantity take-off has been completed, the estimator should
begin pricing labor and direct materials. The circled or highlighted material quantities are
brought forward from the quantity take-off sheets and entered onto the pricing recap
sheets.

Pricing self-performed work

● Construction Workers - Men and women who work on construction sites with their
tools and hands and have been trained and specialized in a specific trade or craft such
as a carpenter, electrician, or plumber. They should not be referred to as "construction
workers" or "construction laborers".
● Direct Labor Productivity - A measure of the most difficult item to estimate in
construction projects and considered the riskiest. It is estimated as man-hours (MH) per
unit of work and is used by contractors to determine the overall project risk and the
appropriate fee to apply. The best source of labor productivity is an in-house database.
● Round Off Calculated Man-Hours - It is important to round off calculated man-hours in
construction estimates. Fractional extended man-hours should not be retained as they
are difficult to schedule and monitor for cost control.
● Wage Rates - The rates applied to labor in construction projects and determined by the
company, location, union agreements, type of work, and in some cases, Davis-Bacon or
prevailing wage rates established by the Department of Labor. Labor burdens, including
taxes and benefits, are also included in the estimate.
● Crew Wage Rates - Some estimators use crew wage rates which combine journeymen,
foremen, and apprentices, averaging at the journeyman's wage.
● Blended Wage Rates - Some estimators use blended wage rates which factor in
multiple crafts and trades together.
● Loaded Wage Rates - Some estimators use loaded wage rates which combine bare
wages with labor burden.
● Material Unit Prices - The best source of material unit prices are from suppliers. The
process of procuring construction equipment rental rates is similar. Suppliers are invited
 to provide prices early in the process. Other sources of material prices include in-house
historical costs, previous estimates, and databases or reference guides.

Pricing subcontracted work

● Subcontractor pricing - The best source of pricing for subcontracting work is from the
subcontractors themselves. They will be responsible for delivering the work according to
the contract and are usually invited to bid on projects during the early stages of the
estimating process.
● Respect for subcontractors - General contractors should treat past, current, and future
subcontractors with respect to receive competitive bids. This includes timely monthly
payments and the release of final retention after close-out.
● Order-of-magnitude estimates - General contractors should estimate subcontracted
work in-house to refine rough budgets and to check the reasonableness of subcontractor
bids. These in-house GC estimates are referred to as order-of-magnitude estimates or
plug estimates.
● Bid day quotes - Subcontractors may provide general contractors with early budgets for
their scopes, which the GC can refine when actual bid day quotes are received.
● Comparing bid day pricing - A bid tab spreadsheet is used to compare subcontractor
and supplier bid day pricing. The estimator should not assume that the specialist firms
are always in error and that their own in-house estimate is the correct one to use

Jobsite general conditions

● Jobsite General Conditions Costs - Project-specific costs associated with site
administration and equipment rental during construction.
● Estimating Jobsite General Conditions - Difficult and risky task requires knowledge of
the proposed construction duration.
● Site-Specific General Conditions Costs - Also referred to as job site administration
costs.
● Time-dependent Line Items - Many line items in the job site general conditions
estimate template are time-dependent.
● Construction Duration - A proposed project's construction duration beyond that
provided by the project owner or architect.
● Project Schedules - Required to be submitted with bids or cost proposals to support the
preparation of the job site general conditions estimate.
● 20-40 Activity Summary Schedule - Prepared using past experience, estimated direct
work man-hours, and input from the superintendent.
● Project Duration - Based on man-hours, project complexity, and early subcontractor
input on durations and deliveries.
● Construction Schedule - Summary schedule for the project and abbreviated general
conditions estimate included in Chapter 5.
● Detailed Construction Schedule - Detailed construction schedule and detailed general
conditions estimate for the case study project are included in the eResource.