CONSTRUCTION ESTIMATE

The Elements of a Construction Cost

Estimate
Quantity Take-Off: Developed during the pre-construction phase, a quantity
take-off measures the materials and labor needed to complete a project.
The Elements of a Construction Cost
Estimate
•Labor Hour: The labor hour, or man hour, is a unit of work that measures
the output of one person working for one hour.
•Labor Rate: The labor rate is the amount per hour one pays to skilled
craftsmen.
•Equipment Costs: Equipment costs refer primarily to the cost of running,
and possibly renting, heavy machinery, such as cement mixers and cranes.
The Elements of a Construction Cost
Estimate
•Subcontractor Quotes: Most contractors will hire multiple specialist
subcontractors to complete parts of the construction.
The Elements of a Construction Cost
Estimate

•Indirect Costs: Indirect costs are expenses not directly associated with construction
work.
The Elements of a Construction Cost
Estimate
•Operations and Maintenance Costs: More a concern for the owner than the contractor,
one accounts for operations and maintenance costs during the design phase. Making
choices that lower the total lifetime cost of a building may result in higher construction
costs. Operating costs include land rent, the salaries of permanent operations staff,
maintenance costs, renovation expenses (as needed), utilities, and insurance.
•Profits: Of course, in order to make a profit, the contractor adds a margin on to the cost
of completing the work. Subcontractors do the same when preparing their own quotes.
•Contingencies: Since even the most accurate estimate is likely to be affected by
unforeseeable factors, such as materials wastage, an estimate will usually have a
predetermined sum of money built in to account for such added costs.
 The Elements of a Construction Cost
Estimate

•Escalation: Escalation refers to the natural inflation of costs over time, and it’s especially
vital to take into account for long-running projects. Some projects have escalation clauses
that address how to handle this inflation.
•Bonds: An owner will usually require a contractor to arrange for the issuance of a
performance bond in favor of the project owner. The bond functions as a kind of guarantee
of delivery.
•Capital Costs: Capital costs are simply the costs associated with establishing a facility.
•Variances: Owners will often allocate construction budgets that are larger than cost
estimates because even good, thorough cost estimates have a tendency to underestimate
actual construction costs.
DIRECT COST
INDIRECT COST
VALUE ENGINEERING