The estimation process for the construction projects is a very challenging task. Precise and accurate estimations are the foundation for a successful project. When it comes to construction estimation, soft and hard costs are essential to calculate with authenticity. Hard costs are direct costs for a construction project, while soft costs are not directly related to construction but impact the overall budgeting. A good estimator always pays excellent attention to both direct and indirect costs. So, both costs should be calculated to estimate accurately. You can get help from the **construction estimating services** for authentic estimation.

**Different Techniques for Cost Estimates**

Before discussing, how to calculate cost estimates, let’s explore various techniques that are helpful for the cost estimates

**Analogous Estimation**

This technique uses historical data from the same projects in the past to calculate the current project cost. Minute variations are expected according to the scope of the project.

**Top-Down Estimation**

In this overall project scope and time frame are analyzed to calculate the estimates.

**Parametric Estimation**

In this stats and project variables are analyzed to calculate the current project estimates.

**Three Point Estimation**

In this, the best scenario, worst scenario, and average scenario about the project are involved to calculate the final realistic cost.

**Bottom-up Estimation **

Break down the project into smaller tasks to create more accurate estimate calculations.

**Construction Estimate Calculations**

Following is the step-by-step guide to calculating construction estimation.

**Identify the Project Scope **

The first step is the analysis of the project scope. This can be done by analyzing the drawings for all sub-projects, such as architectural, electrical, plumbing, HVAC designs, etc. The next step is to determine the division specifications for each substage. Write down the material, quality of material, procedures, methodologies, and labor that are essential to complete all these stages. A pro tip here is to visit the site to analyze whether there is any additional work you need to do before starting construction, such as rock or vegetation removal. Include the cost for this, too.

**Quantity Takeoff**

The next step is measuring the quantity of takeoff. This is a crucial step because materials more than you need will disturb your budget, and shorter than you need will leave you with a shortage of materials and affect the workflow. That’s why I write down the quantity required for each material.

**Cost Estimation (Hard Cost)**

The next step is estimating the cost of the materials. Here, it would help if you focused on the following costs

- Material
- Labor
- Equipment cost
- Rents for equipments

Vendor quotes, previous data about materials costs, and the latest market prices can help calculate material costs. Labor costs are challenging to estimate, but you can calculate them using previous data about labor costs. If you don’t have data, you can purchase it from other reliable **construction estimating companies**. Equipment costs are easy to estimate according to industry trends. Don’t forget to estimate the rent cost for the heavy machinery and materials required to complete the project.

**Overhead Cost Estimation (Soft Cost)**

Overhead or soft costs are not directly related to the construction work but are necessary to mention because they are essential to running the business. Examples are operational costs, Administrative costs, Property leasing, Equipment rental, Delivery costs, Human resources, Recruitment, Sales and marketing, Accounting and finance, etc. Overhead cost estimation depends upon the type of category. For example, if you estimate the design fee, get help from the trending designer’s fee. Gather information about your area’s recent permits and inspection fees and calculate accordingly.

**Add Estimation for Unforeseen Circumstances**

Always remember to add the unforeseen costs in your estimation report. Ignoring this will cost you a loss, or you will be unable to complete the project without profit. What is the advantage of spending too much time on a project without getting any profit? So, always add 5-10% unforeseen cost estimation.

**Consider Profit Margin**

After calculating all estimates, give a margin to the constructor profit. Palace almost **5-15%** profit margin for the contractors and provide a final estimate to place bids.

**Cross Check All Steps**

After completing all steps, cross-check the whole procedure, e.g., project analysis, material takeoffs, quantities of materials, labor cost, equipment cost, and soft cost.

**Generate Estimation Report**

The final step is generating the estimation report. Write a clear estimation report that mentions all steps, materials, and costs. After completion, share the report with the lender, contractor, and construction crew. Listen to their suggestions and address their queries.

**Re-Check and Adjust Estimation**

Getting a suggestion from a construction team member and adjusting the estimation report can improve its accuracy. So, constantly change the estimation after the team’s suggestions.

**Construction Estimation Through Latest Technology**

Manual estimation calculations have chances of errors. The latest software, tools, and technology reduce the chances of human error. Vario’s latest software is available, which generates estimation reports for you based on initial drawings. Many **construction estimating service** providers use the software for producing error-free estimation reports. Some vital software to calculate the construction estimates for a project is given below

- Procore
- Planswift
- Sage Estimating
- Build trend
- Contractor foreman
- Buildexact

**Final words**

Construction estimate calculations are essential for the completion of the project on time and with a significant profit margin. Accurate calculation of both direct and indirect costs (material takeoffs, quantities, labor cost, equipment cost, administration cost, permit fee, and administration fee ) is essential for the success of the project. First, analyze the project scope, divide the project into sub-stages, calculate the materials and quantities for each stage, and then calculate the overall cost. Remember to add a fair margin for the soft cost and unforeseen costs for a profitable project.

**Frequently Asked Questions**

**What is the formula for construction estimate calculation?**

The simplest formula for calculating the construction estimate is to multiply the area value by the construction rate per square foot or square meter.

**How do you calculate construction estimates?**

Construction estimates are calculated by adding up all the following costs

- Direct cost
- Indirect cost
- Labor cost
- Subcontractors cost

**What are the different types of estimates?**

- Ballpark estimate
- Budget estimate
- Statement of Work (SoW) estimate

**What are the various techniques for estimating project costs?**

- Analogous estimation
- Top-down estimation
- Parametric estimation
- Three-point estimation
- Bottom-up estimation