What is Construction Estimating?

Construction estimating is an all-important process that is part and parcel of construction project management. This process involves the anticipation of the total cost for a construction project. Essentially, the success or failure of a project starts from the point when estimators do the project costing. If it is done wrongly, funding the completion of the project will be a huge challenge.

To avoid future funding problems, accurate costing/estimating is crucial to the success of a construction project. Now, let us see why construction estimating is so important.

Why is Construction Estimating important?

Estimating is very important because a high degree of accuracy leads to a successful project bid. As a construction project manager, if your estimates are spot on, clients will be more than likely to award you projects because they trust in your capacity to get it done. During the project estimation phase, the take-off funds and other direct costs will be added together so as to aid the estimator in approximating labor costs.

Furthermore, the two parties involved in the project ( Client and Construction company) take estimation seriously because both parties know that undervaluing the cost of the project may lead to project failure. The client will also be keen to get it right because an over-valuation will lead to financial losses that will not bring in any benefits worthy of the cost.

Construction Estimate Components

The project manager or professional estimator is the person responsible for estimating the cost of a project. Since each project is unique in its own right, the estimator should approach projects differently based on the main objectives of the project. A total cost estimate will consider the expenses of the project from the inception stage up till the completion stage. There are two main components of construction estimates, namely, direct cost and indirect cost. Both are discussed below.

Direct Cost

This is the expense for any specific tasks or material. Common examples of direct costs are materials, labor, equipment, and other work tools, etc.

Indirect Cost

Indirect cost covers items that do not directly impact activities. They are called overhead costs, and some examples are Security cost, administrative cost, quality control, utilities, legal fees, permits, etc.

Both direct and indirect costs affect the profitability of business enterprises in general, which is why they should be very serious. To understand in clear terms how both costs affect income, consider this equation.

Income -(direct cost + indirect cost) = Profit


As you can see from the above equation, an increase in either direct cost or indirect cost or both will lead to a decrease in the profit margin of the business. So, therefore, cost estimators need to ensure that they value both costs accurately to reflect the nature and number of tasks required to complete building projects.


An inaccurate construction estimate is like a cog in the wheel of progress of any construction company. That is why companies ought to invest a lot of resources towards ensuring that they get it right, the first time, and every time. Understanding the basics will help managers avoid pitfalls when preparing estimates for a project. Without an accurate estimate, the project may suffer severe financial consequences.

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