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.
1. What does a commercial construction cost estimator do?
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.
2. When should an estimator get involved in the construction planning process?
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.
3. How does an estimator ensure accuracy?
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.
4. What are the general categories that a construction estimate is broken down into?
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.
5. How does an estimator maintain accurate data, especially when material prices are volatile and wages are rising?
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.
6. What are some factors that drive up construction costs?
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.
Time of Year: In northern states like Wisconsin and Iowa, building in the winter presents challenges and will generally cost more than summer construction due to the need for tenting and heating, and generally lower productivity.
State of the Economy: Despite rising prices, construction crews are busy and are experiencing labor shortages just like other industries. These factors can impact availability and potentially drive up pricing due to their inability to take on more work.
Specialty Items and Finishes: If an architect specifies a product from a single manufacturer, it can drive up costs simply due to the lack of competition. Some common examples include equipment, metal wall panels, floor finishes, wall finishes, ceilings, HVAC and electrical fixtures. Architects should specify multiple supplier options for materials on a job.
Liquidated Damages: Some bid packages specify penalties or damages if a contractor can’t complete the work by specified deadlines. If those deadlines are unrealistic, contractors will generally increase their pricing as a safeguard and to help cover costs for increased labor due to overtime and running multiple shifts.
Poor Site Conditions: If a construction site has unsuitable soils or requires lots of prep, you can expect a higher estimate. Construction projects that necessitate remediation, excessive grading or draining, rammed aggregate piers, and additional foundation work are inherently costly.
Material Availability: Typical materials that may have once taken a month to arrive at a jobsite can now take more than a year. Waiting for products or having to use more expensive alternate materials due to lack of availability can drive up costs considerably.
Building Classes: There are several types of building classes that will dictate whether you can use noncombustible materials and whether sprinkler systems and other items are required by code. For some industries, such as healthcare and detention facilities, the type of building class is predetermined. While it may not be possible to choose which building class a project falls under, it’s still important to understand how it can impact the estimating process.
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.