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Getting A Project Estimate
Who is a Contraction Estimator?
A construction estimator is a person that draws up the overall estimate of a project. This estimate includes different items in the project, the contractor’s general conditions, and fees and overheads. The construction estimator works closely with vendors, clients, engineers, and architects to arrive at these estimates.
A construction estimator needs a keen eye for detail and accuracy. They need to keep track of the materials and resources used in a project to avoid inaccurate estimates. Estimators, just like engineers and architects, have a background in construction design. To make accurate estimates, they need to assess the project from multiple angles. This way, estimators can determine the best way to account for costs in various construction types.
Estimators need strong analytical and mathematical skills. They also need solid communication skills as they work hand in hand with other construction specialists. They work in connection with construction designers to review project plans. The designers cover the technical aspects, but estimators need to view the designs to ensure they do not miss important details.
Developing Estimates Based on Construction
Beyond the estimation of building aspects, estimators also need to calculate costs related to the physical construction of the building itself. These expenses include labor, equipment costs, subcontractor costs, and other factors:
- Labor rate: The amount per hour paid to skilled workers
- Labor hour: The unit of measurement that determines the amount of work that a person can do within that hour
- Equipment costs: The cost of renting or operating equipment that will be used for the project. Project deadlines will play an important factor in equipment costs
- Material prices: Historical data is often used to determine material prices as market trends can cause the final estimate to fluctuate based on when the materials are purchased during buying cycles
- Quantity takeoff: A list compiling the amount and cost of materials and labor needed for a specific project
- Contingencies: Unforeseen circumstances can occur anytime during the project that can throw off budgets. Contingencies take into account this situation
- Variances: Variances are developed to cover any
- fluctuating expenses. Typically, estimates are usually lower than actual construction costs. The property owners will set aside a large budget to cover the discrepancies if construction costs increase due to weather, higher worker wages, or seasonal events
- Indirect costs: Indirect costs cover everything from administrative costs, transportation costs, permits, legal fees, and other factors
In addition to these elements, the operational and maintenance estimates may be calculated along with capital costs in acquiring the land, bonds to guarantee the delivery of the project, contractor profits, and supervision costs.
Estimator and Takeoffs
A key role for estimators is the creation of a takeoff.
A cost estimator must create a list of all of the materials required to complete a project. Known as a material take-off, or simply takeoff, this list of materials and their associated costs has a significant impact on the final cost.
When building a takeoff, construction estimators look at the blueprints and schematics of the project and carefully create a comprehensive list of all of the materials that will be required for a project. This includes materials like concrete for the foundation, wood for framing, roofing materials, wiring and plumbing supplies, and even things like hinges, screws, and nails.
Once a cost estimator has created a list of all the materials required for a project, they must then assess the cost of those materials. Cost estimators must ensure that the prices assigned to materials are as close as possible to the anticipated costs of those materials in the future when a project would be completed.
Additionally, construction cost estimators must consider things like the weight of the materials to factor in moving the materials to the job site and working with the materials to complete the project.
Creating a takeoff is a time-consuming process essential to arriving at an accurate final cost for a project.
Inaccuracies during a material takeoff can result in cost overages that impact the financial success of the construction firm completing the project.
The Importance of Cost Estimators
The initial cost estimate can’t match the final project’s price tag from the nature of construction projects. Cost estimators, however, help the project stakeholders make important decisions on a project’s profitability and feasibility.
The procurement of a project’s financing depends on the cost estimator’s report. As the project progresses, the stakeholders can also make important decisions that impact the costs negatively or positively. A cost estimator needs to take a critical look at the material and design choices and advise the client accordingly on ways to increase the value but reduce the costs.
The most crucial role of a cost estimator is ensuring a project is delivered within budget and on time. The developer and contractor are held accountable for cost overruns. Cost estimators, therefore, primarily offer clients information that is necessary for making critical decisions on projects.
Types of Estimators
There are different types of cost estimators depending on a project’s size. Estimators may hold different positions throughout various construction projects.
Primarily, we classify cost estimators according to their employers. The different types of cost estimators are as discussed below:
THE CLIENT’S COST ESTIMATOR:
The Client’s Cost Estimator makes investment decisions at the conceptual stage of a project. They negotiate and finalize a contract then implement cost control measures.
CONTRACTOR’S COST ESTIMATOR:
The contractor’s cost estimator has a detailed task of determining approximate project costs needed for bidding. They also have a database of company data that shows records of the company’s equipment and labor. This cost estimator also knows the best construction methods for the company. The contractor’s cost estimator also must know the material suppliers needed in a project and the likely discount prices.
ENGINEER’S COST ESTIMATOR:
The Engineer’s cost estimator, in most cases, works as the client’s cost estimator. His purpose is to determine approximate costs and present them to the client. The Engineer’s cost estimator also evaluates alternative construction methods that will be budget-friendly for the project.
How Many Estimates Are Used in a Project?
Several cost estimates will be created during the pre-design phase and the design phase of a project. These levels are broken down into five basic categories.
Project Estimation Cost Levels:
Order of Magnitude Estimate:
This estimate is often considered to be the pre-design or project initiation estimate to determine the project’s feasibility.
Schematic Design Estimate:
This is an intermediate estimate created during the schematic design phase and has 15–20% margin of error.
Design Development Estimate:
This estimate is made when the designs are created and is often considered the preliminary estimate as project budgets may be created at this time based on the designs. The margin of error for this estimate is 10%.
Construction Document Estimate:
The construction document estimate is determined based on the construction specifications and drawings and includes a margin of error of 5%. This estimate can also be the substantive estimate to determine unit costs because the contractor has more finalized project documentation regarding deliverables and objectives.
Bid Estimate:
This contractor-generated estimate is provided as a bid to the client as the estimate is based on construction documentation. At this level, the tenders may also be created.
Expectations
How The Process Works
What is Construction Management?
Construction management is a professional service that uses specialized project management techniques to oversee the planning, coordinating, monitoring and controlling of a construction project from beginning to end. Construction management may be provided by a general contracting firm as part of the services offered. There are also construction management firms that provide management services.
What is a Construction Manager?
A construction manager is someone who plans, coordinates, budgets and supervises construction projects from development to completion. They may be employed by a general contractor or a construction management firm.
Often, they meet with architects, trade employees, engineers and other members of the project team during an active project. They regularly address emergencies, work delays, or other problems that affect the construction project they are managing. A construction manager maintains a wide focus on the project. They set schedules, monitor finances, and are responsible for keeping the project on schedule, within budget, and executed as determined by the project plans.
What Are the five Stages of Building Construction?
The five stages of construction are:
- Initiation
- Planning
- Execution
- Monitoring
- Completion
To optimize the investment in your construction management services, it is best to get your construction management provider involved as early in the process as possible. Your construction management provider has technical expertise in the field of construction and can offer additional value to your project the sooner they are a part of your project team.
What is Pre-construction?
Pre-construction is part of the planning stage of a construction project. It involves the definition of the project, identification of potential issues, planning and scheduling, scope, cost estimation, and analysis of needs for the construction project.
Proper pre-construction can help you locate time and money-saving opportunities and help inform future decision-making. These services are also a helpful tool for the project owner to better understand the project before committing to a general contractor.
It is typically a standalone service and fee separate from construction costs.
What Does a General Contractor Do?
General contractors supervise part or all of a construction project. General contractors may specialize in all or some types of construction. Usually, a construction project specializes in one or many types of building like commercial, residential, or industrial.
General contractors manage and hire subcontractors while acting as the primary contractor with construction clients. General contractors can be hired by business and property owners, construction management firms, and other construction companies.
What Are the Steps to Manage a Construction Project?
The steps in managing a construction project may vary drastically depending on the type of project, its general conditions, and on the general contractor or construction manager’s methodology.
- Typically, the first step is to establish a project plan which is essentially a game plan for your construction project.
- Following the project plan, a detailed schedule will be created.
- Once a plan and schedule are established, execution and monitoring take place and continue through project turnover.
Payment
How To Finance The Project
How Do Construction Draws Work?
Most construction projects work on the basis of having four separate draws to cover the related costs at certain predetermined project milestones. However, the number of draws and milestones can also vary with each project.
For instance, a new residential home may see the first draw occur after the completion of the basement and foundation. The second draw after the sub floor is installed, the windows installed, and the building fully enclosed. The next draw after the completion of the drywall, and so on.
Its important to plan out the draw schedule with your builder and then reconcile it to what the lender is willing to provide so that outstanding costs can be paid in a timely fashion.
Each time a draw is requested by the borrower, the lender will perform an inspection either themselves or through the services of a third party to make sure the work completed meets the requirements of the draw. If the appraiser deems that the remaining work exceeds what was projected for that stage of the project, the lender may withhold funds from the draw request to assure enough funds remain to complete the project.
What Percent of the Construction Costs Get Financed?
Construction financing for building costs tends to range between 60% and 100% of the project cost with the average being 75%.
Each project will require its own unique lender assessment and each lender may have different criteria they apply to a project to determine the percentage of costs they will finance.
There are many determining factors that can do into the percentage of costs that can be financed including
- the amount of equity in the property
- the type of construction project
- the size of the project
- the strength of the resale market for similar real estate
- the builder under contract, and so on.
Do I Have To Utilize a Warranty Approved Builder?
Most institutional lenders will require that you are utilizing a warranty approved builder. The opposite is true with private lenders in that most do not have this requirement. At the very least, most private lenders will want to see an executed builder contract.
Information Required by a Builder for Financing
Institutional lenders will require the builder applicant to be a approved builder to be considered for financing. In addition, conventional lenders will want to see three years of accountant prepared financial statements showing construction related revenues and a resume of completed projects at a minimum.
Mortgage Arrangement to Secure a Long Term Loan
For most institutional lenders, the take out mortgage will need to be arranged before the construction financing is available for use. With private lenders, there is more flexibility with locating and securing the take out mortgage after construction has begun.
Construction Loan Requirements to Plan Out a Project?
The following is a fairly comprehensive listing of potential requirements and support information that you be asked to provide by a construction mortgage lender. Just keep in mind, that not all these items will apply to all project, and for some projects, additional information will be required as well.
- Building Plans. This would include blueprints, flooring plans, property elevation reports, artist renderings, and anything that support the physical description of the project.
- Construction Budget. This is the largest area of focus for obvious reasons and should include everything from land acquisition to all the hard and soft costs associated with the project including but not limited to: material costs, labour, contractor fees, water and sewer hookup, lot levies, building permits, and so on.
- Construction Contract With Builder (if applicable).
- Cash Flow Projection laid out in a time line, by cost or building activity.
- Offers To Purchase or Lease Completed Units including proof of deposits.
- Proforma financial statements for the overall project
- Environmental Assessment Report
- Property Appraisals