The estimator's role and types of estimates

Every construction project begins and ends with a number. Before an owner commits to a building, someone has to say roughly what it will cost; before a contractor signs a contract, someone has to say precisely what the work will cost that firm to build. That someone is the estimator. Estimating sits at the start of the construction management process: the estimate becomes the budget, the budget becomes the cost control baseline, and the cost control baseline decides whether the project makes or loses money. An estimate that is too high loses the bid; an estimate that is too low wins a job that loses money for years.

This course is the first of two on estimating. It covers quantity takeoff, the measurement of work from drawings, and the build-up of unit prices from labor, equipment and materials. CON-300 continues with subcontractor pricing, general conditions, markups and bid strategy. This lesson introduces the people who estimate, the kinds of estimates prepared as a design develops, and the accuracy that can be expected at each stage. All prices in this course are illustrative examples chosen to make the arithmetic clear; real prices vary by region, market conditions and time, and an estimator always uses current local data.

Who estimates, and for whom

Estimating is done on both sides of the contract. Owners and their consultants estimate to decide whether a project is affordable, to set budgets and to check bids. Contractors estimate to price work they intend to build. Subcontractors estimate their trades and submit prices to general contractors. Each estimator answers a different question, so it is important to know which question an estimate is answering before using its number.

• Owner's cost consultant or quantity surveyor: prepares cost plans at each design stage, advises on value for money, and checks that the design stays within the budget.
• Design team: architects and engineers prepare or commission estimates, and they make the design decisions that drive cost.
• General contractor's estimator: prepares bid estimates for the work the firm will self-perform and assembles subcontractor and supplier prices for the rest.
• Trade contractor's estimator: takes off and prices one trade in detail, such as concrete forming, masonry or drywall.
• Construction manager or design-builder: prepares estimates during design to guide decisions, then converts them into a guaranteed maximum price or contract sum.

In the United States, estimators commonly belong to the American Society of Professional Estimators (ASPE), which certifies Certified Professional Estimators (CPE), or to AACE International, which certifies Certified Cost Professionals (CCP) and Certified Estimating Professionals (CEP). ASPE publishes Standard Estimating Practice, and AACE publishes recommended practices on estimate classification and cost engineering.

Whatever the credential, the estimator's core skills are the same: reading drawings and specifications, measuring work accurately, understanding how the work is built, knowing what labor, equipment and materials cost, and judging risk. An estimator who has never stood on a site where the work is built makes avoidable mistakes, which is why many estimators start as field engineers, carpenters or foremen.

Estimates through the life of a project

An estimate is only as good as the information behind it. Early in a project the design is a sketch and the estimate is a range; by the time drawings are complete, the estimate can be measured item by item. Estimators therefore prepare a sequence of estimates, each more detailed than the last.

• Order of magnitude (feasibility) estimate: prepared before design starts, from a description of the building such as its use and size, using cost per unit of floor area, cost per bed, cost per parking stall or similar measures from past projects.
• Conceptual or schematic estimate: prepared from schematic design, using elemental costs, which price the building by its major parts such as substructure, structure, envelope, interiors and services, each measured by simple quantities.
• Design development estimate: prepared when systems and materials are selected and drawings show most dimensions, using elemental and some measured trade quantities.
• Pre-tender or construction documents estimate: prepared by the owner's consultant from nearly complete drawings, to check that bids will fall within the budget.
• Bid or definitive estimate: prepared by the contractor from complete tender documents, with detailed takeoff of every item, current supplier and subcontractor prices, and markups.

The same building can therefore have five or more estimates, prepared by different people with different methods. Comparing them is useful only if you know how each was prepared and what it includes. A common source of disputes is an owner comparing a pre-tender estimate that excluded escalation, taxes or contingency with a bid that includes them.

Estimate classes and accuracy

Estimators describe estimate maturity with a classification system. The most widely used is AACE International Recommended Practice 18R-97 for process industries and its companion 56R-08 for building and general construction. Both use five classes, numbered from Class 5, the least defined, to Class 1, the most defined. The primary characteristic that sets the class is the maturity of project definition, measured as the share of the complete engineering and design that has been done.

Three features of the table stand out. The ranges are asymmetric: actual costs are more likely to exceed an early estimate than fall below it, because early designs leave things out. The ranges overlap, because estimates are prepared at different points within each stage. And AACE warns that the values are indicative, not promises: a complex or novel project can exceed the high end of the range, and the only way to set a range for a specific estimate is a risk analysis of that estimate.

Owners and lenders often ask for an estimate to be within a stated percentage, such as plus or minus 10 percent, at a stage when the design cannot support it. Part of an estimator's job is to state the class, the basis and the range honestly, so that decision makers understand the uncertainty instead of treating a single number as exact.

Conceptual estimating methods

Early estimates use parameters instead of measured quantities. The simplest is cost per unit of gross floor area, taken from completed projects of the same type and adjusted for differences. Others include cost per functional unit, such as per student place in a school or per bed in a hospital, and elemental unit rates, such as cost per square meter or square foot of exterior wall area. Three adjustments turn a historical cost into a forecast for a new project.

• Time: costs from a past project are escalated to today with a construction cost index, then escalated again to the midpoint of construction, because that is when most money is spent.
• Location: regional cost indexes or location factors adjust for differences in labor rates, productivity and material prices between cities.
• Size and quality: larger buildings usually cost less per unit of area because fixed costs and envelope are spread over more floor area, and specification level changes everything from finishes to mechanical systems.

US cost data come from published cost databases such as RSMeans, the Engineering News-Record construction and building cost indexes, the Bureau of Labor Statistics producer price indexes for construction inputs, and a firm's own records of completed projects.

The bid estimate

A contractor's bid estimate is the most detailed estimate in the project's life and the one with the most at stake. It is prepared under a fixed deadline, usually two to six weeks from the release of tender documents, and it combines the firm's own takeoff and pricing of self-performed work with prices received from dozens of subcontractors and suppliers, often in the last hours before bids close. A typical bid estimate is built in layers.

• Direct costs: labor, materials, equipment and subcontracts for each item of permanent work, built up from measured quantities and unit prices. This course concentrates on this layer.
• General conditions or general requirements: project-specific indirect costs such as site supervision, temporary facilities, hoisting, cleanup, permits and site security.
• Overhead and profit: the firm's head office costs and its margin, applied as a percentage or a lump sum.
• Bonds, insurance and contingency: performance and payment bonds, builder's risk and liability insurance, and an allowance for risks the estimator cannot price item by item.

The estimate is also a planning document. Its quantities become the basis of the budget for each cost code, its labor hours become the basis for crew planning and the schedule, and its assumptions about methods and equipment become the starting plan for the field team. A well-organized estimate is therefore handed over to the project team, not filed away.

Qualities of a good estimate

Good estimates share a few qualities regardless of who prepares them. They are complete: every item of work shown or implied by the documents is included or explicitly excluded. They are traceable: another estimator can follow every quantity back to a drawing and every price back to a source. They are consistent: units, rounding, waste factors and markups are applied the same way throughout. And they are honest about uncertainty: assumptions, exclusions, allowances and the estimate class are written down and sent with the number.

Estimators also guard against a few classic errors. Arithmetic and unit errors, such as entering square feet as square yards, are caught by checking totals against cost per unit of floor area for similar buildings. Omissions are caught by working through a checklist organized by the specification divisions. Double counting is caught by assigning every item to exactly one cost code. Optimism, the tendency to assume the best crew and the best weather, is caught by using historical productivity, not hoped-for productivity.