Construction Estimating

Construction Estimating - How do I create a construction budget?

Video N°3

In this video, we will discuss the following subjects: Auxiliary materials in construction. Estimating indirect work. Summary chart Review of other specific expenses What is the expense of the overhead of a job? Table to summarize. If you are planning to enter the construction, electromechanical assembly or similar industries, we recommend that you watch this series of videos that explain the steps to follow and the precautions to take to ensure that your estimates are accurate and reliable. During the bidding process, it is essential to be sure that the quoted price is sufficient to complete the work without setbacks and to be profitable. If you do not, you will not just fail to win the project. You could be in real trouble. Learn or update your knowledge of how to create an accurate budget in this series of 6 short videos.

How to calculate construction overheads

How to calculate the overhead costs of a construction project

How to Calculate Overhead Costs in Construction Projects: A complete guide to calculating overhead correctly.

Example of Direct Labor - Man Hours Calculation

Example of Direct Labor - Man Hours Calculation

Direct Labor Cost Calculator

Example of Direct Labor: Example of Direct Labor - Man Hours Calculation. Example of direct labor calculation for the construction of a reinforced concrete foundation.

Calculation of the labor required to construct a reinforced concrete foundation.

In this example, we calculate the man-hours required to construct a reinforced concrete foundation. 

In this job, the concrete is supplied by a semi-automatic concrete plant located on site.

Read more about in Calculate man hour.

How to Calculate Man-hours Worked - Man Hours Calculation

How to Calculate Man Hours Cost in a Construction Project - Man Hours Calculation

Man-hours Calculation

Calculation of incidence of overtime. Example, the increase percentage of labor cost is.... [72.5/60] * 100= 20.83% more.

Read more in Calculate man hours

How to Estimate Input and Consumption Materials

Estimate input and consumable materials

Consumables and input materials

How to estimate input and consumption materials. Definition and identification of indirect materials in a construction and industrial assembly project.
Read more in Calculate man hours

How to Calculate Profit Margin

Profit Margin 

We define profit or benefit as the income remaining after all expenses have been paid.

These expenses include engineering costs, direct and indirect labor, supplies, consumables, equipment costs, overheads, interest, taxes, etc.

In the figure below, we highlight the Profit Margin line item.

How to Calculate Mark-up

Mark-up for a construction project

The profits made belong to the owners of the company. The shareholders or owners of the company can keep the money or reinvest it in the business.

In short, we calculate profit as total income minus total expenses.

The stage of determining the mark-up is just as important, if not more so, than the stages discussed above.

Determining the industrial profit, or net profit margin, that the contractor expects to receive as compensation for its work is the final step in any budget estimate.

In carrying out a project, each contractor brings its prestige, capacity, experience, capital, equipment and other relevant factors to bear.

For a contractor to receive the expected profit at the end of a project, the starting point must be a reliable estimate that ensures a lucrative contract.

Any negligence or omission in the estimate can reduce or eliminate the expected benefit and cause financial problems.

Markup – Formula

The mark-up is the amount by which the cost of a budget is increased to arrive at the selling price.

We apply the mark-up to the quotation as follows

1 - As a percentage of the final cost of the quotation - Cost mark-up

Final price (excluding tax) = cost + cost * (% cost mark-up)

If the cost is 1 and the mark-up is 20%, the price is 1.20.

2 - As a percentage of the sales price - Price mark-up

In this case, we obtain the final price as follows.

We call the unknown final price Pf.

Pf = cost + Pf *(% mark-up)

From the formula we remove the final price (Pf) and we have

Pf = cost / (1 - (% mark-up)

If the cost is 1 and the mark-up is 20%, the final price is 1.25.

Margin Profit - Formula

The margin or profit on a job is the money left over after all the costs of doing the job have been paid.

In the first case, the margin is [1.20–1/ 1.20] *100 = 16.66 %.

The second case has a margin of [1.25–1/1.25] *100 = 20.00 %.

The margin that the companies set depends, of course, on

• The previous experience of each company in carrying out similar works.
• The characteristics of the work.
• The size of the project.
• The terms of payment.
• The time allotted for carrying out the work.
• The companies with which they will be competing on the market.
• The tenderer's interest or need to carry out the work.
• The risk that the tenderer considers it reasonable to assume, etc.

How to calculate the profit margin - typical contractor profit

In practice, the percentage of profit usually varies between 5 and 30%.

Usually, higher percentages are used for small and/or risky jobs.

The usual is

1. For small and/or difficult jobs, the margin to be charged is between 20 and 30%
2. For medium and low-risk jobs, margins of 15-20% are common
3. For large and low-risk jobs, the margin is 10 to 15%.
4. For very large and low-risk jobs, the margin is 5 to 10%.

Each company defines its own percentage of profit or revenue.

How to Calculate Labor Cost - Man Hours Calculate

How to Calculate Labor Cost per Construction Project

How to Calculate Labor Cost – Man Hours Calculate

Comprehensive guide to calculating the direct labor cost of workers per construction projects. read more in Calculate man hours

Construction estimator skills

Skills for Construction Estimators

Basic skill

The estimator needs basic innate skills for successful professional development. Of course, these skills are developed with experience, but the estimator must have at least certain innate skills to perform the job.

Anyone entering the estimating profession should have a combination of the core skills listed in Figure 1.

Math skills

Estimation, by its very nature, requires the formulation of numerous mathematical operations and complex calculations.

Mathematical literacy is essential for beginners.

Communication skills

Another necessary skill is the beginner's natural ability to develop good oral and written communication.

The success of the project often hides in the details and their correct evaluation.

In most situations, it is necessary to communicate on a routine basis with

Colleagues who specialize in the type of project.

Equipment and service providers.

The client.

With subcontractors.

Or attendees at business meetings.

Good writing is another key skill that will help you present complex reports clearly and concisely.

Perseverance or persistence 

This trait is a hidden gem, but essential to the Estimator's personality. 

Estimators need to be persistent. 

Perseverance is used, for example, in the painstaking effort to find the best price for an infinite number of materials for a project in a universe of suppliers. 

Perseverance enables the estimator to complete all aspects of the quotation on time, regardless of the effort required.

Honesty and reliability 

Evaluation requires honesty and reliability. 

These qualities are required by

The company's shareholders, who are interested in the economic success and prestige of their company. 

Your own colleagues, who will manage projects on the basis of the valuer's preliminary analysis.

Audio: How to choose a Contractor

How do I choose a contractor?

Contractor selection checklist

Podcast #3

In this audio, number 3, we discuss the key functions of the client's purchasing department and the role it plays in selecting the most appropriate contractor. 

Audio: How to Estimate

How to Estimate

How do I carry out construction and industrial assembly?

How to do an estimate? This audio, the second in a series of podcasts, explores the tasks that an estimator or group of estimators typically perform to quote a project and the skills that are most sought after in the research profile of a successful estimator.

PODCAST #2

Audio: How to carry out industrial construction and assembly

How to do construction work?

How to carry out industrial construction and assembly work.

General information

In this first podcast, we provide general information on how to estimate industrial construction and assembly work.

Podcast#1

Infographic of eBook "Estimator's Piping Man-hours Tool"

Infographic of e-book: Estimator's Piping Man-hours Tool

Man Hours Calculation

After calculating the man-hours obtained by multiplying the type of union of the line of the pipe by the consumption of hours to execute each type of union-consumption of hours that you extract from the eleven tables of consumption verified by the hand of the work of the e-book: "Estimator's Piping Man-hours Tool"; You will need to adjust this total number of hours to increase or decrease it according to the conditions under which your project is being developed.

Here is an infographic that summarizes this concept.

e-Book "Estimator's Piping Man-hours Tool"