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Whether a small renovation or large-scale commercial construction project, the first question on most project owners’ minds is, “How much will it cost?”
The answer relies heavily on the skills of a commercial construction cost estimator. An estimator’s role seems pretty straightforward: they come up with an estimate. However, the process is extremely labor intensive and requires a keen knowledge of every aspect of a construction project, from material and labor costs to site preparation and everything in between.
Here, we’ve outlined important questions and answers to better understand how construction cost estimating works and, more importantly, how project owners can achieve more accurate pricing.
A construction estimator, sometimes called a cost planner, is someone who must have extreme attention to detail and accuracy. Working closely with all stakeholders (e.g., architects, vendors, construction managers, engineers, and clients), an estimator prepares current market cost estimates based on their industry knowledge of materials, labor, and equipment. The estimator will help to prepare bid documents and identify project costs at all stages.
The sooner you can get an estimator involved in your project, the better. Project owners typically have an idea of how much square footage they need, some design ideas, and a budget in mind. A qualified estimator can help make sure that a project owner’s vision aligns with their budget. If they get too far along in the planning process without understanding the cost implications, it can be a major setback and disappointment. An estimator is also involved throughout the construction process to help maintain a project’s scope and update the project owner on where things stand.
A qualified construction estimator will typically produce an estimate that is within a certain price range, say +- 3%. It’s extremely important to choose a construction management team with an estimator who has a strong background in your industry if you want a realistic price range.
A retail building project, for example, is far less complex than a healthcare facility or jail construction project. Highly specialized commercial projects of this nature need to take more than just the physical construction into consideration. An estimator will also factor in additional project requirements such as the logistics of mobilizing to the project, phasing, dust containment measures, security barricades, additional project supervision measures, off-hours work requirements, and other items that could possibly be left out of budgets prepared by inexperienced estimators.
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Estimates are generally broken down by the 50 divisions of work, based on the CSI MasterFormat®. Some examples of divisions include general requirements, concrete and masonry, metals, wood, finishes, furnishings, electrical, mechanical, and others.
Each division will typically contain multiple different items, resulting in several hundred line items on an estimate, each indicating labor, material, and subcontractor costs where appropriate. Project alternates may also be used to show price variances between options, such as the difference between a higher quality finish and a more budget-friendly alternative.
Soaring material prices have made it difficult for some estimators to provide realistic budgets, especially for projects that might not begin for a year or two down the road. Inflation in the construction industry is twice that of general consumer goods. Steel and flat roofing have nearly doubled in the last year and wood is four times what it was prior to the pandemic. It has caused major sticker shock for some project owners.
An experienced estimator will start by determining a budget based on current markets and then create realistic price points based on market and inflation forecasts. They will also maintain open communication with suppliers and subcontractors throughout the process, always updating data in their system so they can stay on top of pricing.
There’s no way to predict the future or inflation, but most construction experts agree that material prices likely won’t be coming down any time soon, unfortunately. Holding off on a project will likely result in higher costs in the end.
Many project owners want to leverage ways to minimize scope creep and cost overruns. Here are several factors to watch for that will likely contribute to higher costs.
Asking these types of questions is an important aspect of the relationship a project owner forms with their construction management team. Communication and transparency are the best ways to eliminate costly surprises throughout the construction process. At The Samuels Group, we’re happy to talk through these questions in more detail and help you assess your project and its goals. Contact us today, and be sure to download our helpful conversation starter guide below with even more questions to bring to the table.