How to Estimate the Cost of a Construction Project

The construction industry is moving towards more advanced projects, ultimately affecting the company’s cost estimation. Contractors must adapt to this change to win profitable jobs. Besides, many companies use construction management tools, like Bridgit, for cost estimation. You can also visit this link to know more about the construction costs.

Contractors and project managers keep researching the latest methodologies to efficiently complete the projects. With the rapid change in the construction industry, you must stay updated about project costs.

This article will brief you on how to estimate the construction project cost.

Types of construction cost estimates

First, you must know the common types of construction cost estimates. Most contractors and construction managers include all types while estimating costs in the planning phase. Doing so helps the project stakeholders to cover almost all the costs associated with the construction project.

Here are the three construction cost estimate types:

Design estimate

It’s an initial construction estimate determining how the construction activities will proceed. As its name suggests, managers can prepare a rough estimate using architectural and schematic designs.

However, managers must collaborate with an expert civil engineer to understand the blueprint design estimate type. Engineers and managers prepare the cost estimation document as designers work on the blueprints.

The contractor and the construction manager devise an activity plan using the design document. For example, you must choose the type of bridge construction after analyzing the client’s requirements and design estimate documents. After that, you can easily estimate the construction cost.

Bid estimate

Contractors submit a bid estimate on the client’s Request for Proposal (RFP). The bid estimate is a professional document that needs a detailed analysis during its preparation. Usually, contractors and construction project managers work on the bidding process.

The bid estimate must include the following:

  • Material cost – Material that will be used in the construction.
  • Equipment – Construction equipment, like heavy machinery and technology.
  • Labor – Salaries and wages payable to the workers.

Clients or project owners review each bid estimate. After that, they hire a competent and reliable contractor or construction company.

Control estimate

It’s the real-time cost that occurs during construction. Contractors track the project’s progress and monitor the direct costs. These costs differ from the estimated cost and make the construction more efficient.

The control estimate helps construction managers to identify the areas of improvement in the cost structure and control the surplus usage to avoid future problems.

3 methods to estimate construction costs

Here are the three methods you can use to estimate construction costs:

Unit pricing

It’s the most common method for estimating construction costs. You might also have seen how beginner-level traders estimate their products’ costs using the unit pricing method. The principle is the same. However, many factors affect construction unit pricing, including:

  • Cost of labor per hour
  • Cost of cement by ton
  • Equipment weekly/monthly rent

Unit pricing is the best method to estimate direct costs associated with the construction project. Once you complete the unit pricing cost estimation, all that remains is the indirect cost.

For example, you buy electrical equipment at a unit price which will be a perfect estimate. But hiring an electrician’s team for the electrical equipment installation is different. During estimation, you must include indirect costs, like inspection, maintenance, and repair.

Remember that you can perfectly estimate indirect costs using the unit pricing method. That’s because these costs vary with construction jobs.

For example, if the structure is complex, you might have to install multiple scaffoldings during construction. But for ordinary construction, single scaffolding is enough.

Square footage pricing

It’s a quick construction cost estimation technique but inaccurate. The square footage method includes only analyzing the project scope and submitting a rough estimate.

Some clients keep the bidding proposal’s submission deadline strict which is a challenge for companies. In that fast process, contractors go for the square footage pricing method. Although the estimate is inaccurate, submitting a bidding proposal will make you a candidate for the job. So, it’s considered a safe approach but not for every company or contractor.

Large-scale construction companies that can execute multiple projects simultaneously use square footage pricing. Their overall capacity is huge; therefore, they can easily bid for several projects and complete them.

These firms’ contractors and project managers follow the square footage technique and submit multiple proposals to different clients. Doing so increases the chance of winning more than one construction project.

You should know that after the bid solicitation phase, the client doesn’t hire a company or contractor directly. Instead, they hold several meetings with the potential candidate for the job. During the meetings, clients and contractors negotiate the final budget.

So, the square footage method helps you book a spot in the client’s list of potential contractors. After that, you can make a profitable deal by negotiating with the client.

The rule of two

This method is unique as it’s based on contractors’ and managers’ experience. The “rule of two” method uses only variables from the cost estimate equation of a construction project, i.e., labor cost.

The principal says that the labor is almost half of the construction project cost. For example, if you have the number of hours required by the labor for construction, double their cost, and around 10% additional charges. That would be the rule of two cost estimates.

This method varies from contractor’s experience to experience. Here are some other factors that also influence the rule of two cost estimation techniques:

  • Project scope – A list of project milestones and objectives highly impacts cost estimation.
  • Complexity – The project’s nature determines how complex the project is, affecting the cost estimation.
  • Risks – Several risks are associated with construction, like jobsite safety and weather, that affect the project cost.

So, use the “rule of two” method if you have experienced contractors, and add a rough estimate of the indirect costs to prepare a budget plan.


Construction cost estimation is an important step that determines the project’s success. If you don’t correctly estimate the budget, you can’t have enough budget to complete the project. Therefore, follow the above cost estimation method and win construction bids like a pro.

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