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Cost Estimating: Fundamentals Page 1 of 25

Lesson:
Cost Estimating: Fundamentals

by John A. D'Onofrio, MS.CE., P.E.

Course Description:

Engineers, architects and contractors are often asked to prepare cost estimates when working
on a new project. This 1-hour interactive online course takes you through the process
discussing where, in the various stages in project development, cost estimates are made.
Through illustrations, you will consider different methods of cost estimating, the level of project
detail required for each, and when the use of each method is indicated. You will understand the
uncertainties associated with a bid due to level of detail available and the economics of inflation.
You will learn to recognize these uncertainties and include contingencies and adjustments for
inflation.

For those who are new to cost estimating, this course is an introduction. You may find yourself
going over sections more than once. For the experienced Estimator, you will find this course a
guide and a reference as the only way for any Estimator to improve is to practice what they
have learned. Move on through this course and into the field of cost estimating.
RedVector.com is a Registered Provider with The American Institute of Architects Continuing Education Systems. Credit earned on
completion of this program will be reported to CES Records for AIA members. Certificates of Completion for non-AIA members are
available as well.

This program is registered with the AIA/CES for continuing professional education. As such, it does not include content that may be
deemed or construed to be an approval or endorsement by the AIA of any material of construction or any method or manner of
handling, using, distributing, or dealing in any material or product. Questions related to specific materials, methods, and services
will be addressed at the conclusion of this presentation.

Learning Objectives
At the conclusion of this course you will be able to:
• Understand where in a project cost estimates are used
• Recognize the different types of cost estimates
• Identify when it is best to use each type of cost estimate
• Discuss the common pitfalls involved in cost estimating
• Recognize the need for contingency
• Explain how to adjust for inflation
There will be a multiple choice exam at the conclusion of this course to gauge your
understanding of the material.

General Course Notes

Keep the following points in mind as you study this course:
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• All pronouns are gender neutral and can be taken to be male or female. I
acknowledge the arrival of many hard-working, well educated women into the
fields of engineering, architecture, and contracting.

• The “Estimator” may be an engineer, architect, or contractor. Each is called

upon to prepare cost estimates during various phases of a project. Each can
benefit from the principles contained in this course.

• The cost estimate is the result of the Estimator's work. It includes the final
estimate in presentation form, all the supporting data that led to the estimate,
and an understanding of its purpose and accuracy.
• The “scope” is the level of project detail available for the Estimator's use and
the extent of the work the Estimator is to consider. If the project is in the
concept stage, then the scope will be low, perhaps 10%. If the project is being
“let” for contract bids, then the scope should be close to 100%. The term
“scope” will have this meaning throughout this course. However, the level of
project detail can be referred to by different terms in different parts of the
country.
Glossary

These terms, when used in this course, have the following meanings:

1. Area – (1.) measurement of a surface within specified boundaries; (i.e. square foot, square
yard; square meter).
2. Assembly – a system of component parts whose cost of labor and materials is combined (i.e.
roof).
3. Assembly estimate – an estimate based on the unit cost of a single or multiple assemblies.
4. Benchmark – a single item that is representative of the entire project.
5. Benchmark estimate – an estimate based on the cost of the benchmark item.
6. Contingency allowance – A sum designated to cover unpredictable or unforeseen items of
work or changes subsequently required by the owner.
7. Cubic – having three (3) dimensions; a volume (i.e. cubic foot, cubic yard, cubic meter)
8. Designer – a person who designs, or one who makes original sketches, drawings or plans
including designating of materials (i.e. engineer, architect).
9. General contractor -- The prime contractor who is responsible for most of the work at the
construction site including that performed by the subcontractors.
10. Inflation – (1.) an increase in the amount of money in relation to the supply of goods and
services; (2.) an increase in the general price level.
11. Labor / materials estimate – a cost estimate based on the cost of labor and the cost of
materials used on the project.
12. Materials – the component parts needed to construct the project which are usually
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fabricated or manufactured by others (i.e. pipe, doors, windows, shingles, etc.).

13. Materials / Labor estimate – See “Labor/Material estimate” above.
14. Native materials – materials located on or near the actual jobsite which may be obtained at
little or no cost to the contractor (i.e shot rock, excavated soil, local water supply).
15. Overhead – (1.) an indirect expense; (2) the general, continuing costs involving in running a
business (i.e. rent, utilities, insurance, etc.).
16. Owner – the project owner; the person or organization which owns the real property on
which the proposed project is to be located.
17. Prime contractor – see “General contractor” above.
18. Productivity – the rate of producing or the amount produced (cubic yards excavated per
hour; bricks laid per day).
19. Quantities – a detailed analysis and listing of all items of material and equipment necessary
to construct a project.
20. Square foot estimate – a cost estimate based on a known cost per square foot of a similar
building.
21. Staging – the act or process of completing a construction project from beginning to end in a
methodical way (i.e design, approval, construction).
22. Subcontractor – A person or organization which has a direct contract with a prime
contractor to perform a portion of the work at a site.
23. Take-off – the act of measuring quantities or calculating quantities of materials and labor
from blueprints.
24. Take-off estimate – An estimate based on taking off quantities and unit prices.
25. Vendor – a person or organization who furnishes materials or equipment not fabricated to a
special design for the work (i.e. supplier).
26. Vendor estimate – an estimate based on information supplied by a vendor.

Introduction

The New International Webster's Dictionary defines an “estimate” as, “a rough calculation.” In
cost estimating the rough calculation concerns the cost of a project and is a projection of its
likely cost based on the project scope and the estimator's knowledge of cost data. One of the
keys to project success is correct cost estimating. Project costs cannot be estimated exactly due
to uncertainty that is always present in construction. However, the Estimator who can
consistently produce accurate cost estimates will be sought after and successful.
The old saying, “Every project starts and ends with a cost estimate” is only partly true. Cost
estimates are used at every phase of a project, from concept to planning, design, and the
selection of contractors and sub-contractors. During construction, project changes and extras
require cost estimates. Of course, at the end of the project there is the final tally.
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The Estimator who provides cost estimates may be brought on board early in the project. From
a business point of view, this puts them in an advantageous position. However, the Estimator
needs to know which type of estimate is indicated for the various phases of the project.
Attempting to use the wrong method for the job will result in wasted time and effort and an
estimate that is of no use to the owner. Therefore, it is critical that the Estimator know the extent
to which the project scope (detail) has been determined and the owner's purpose for requesting
an estimate.

Estimating is a combination of art and science. It requires well rounded knowledge of the
construction industry. An estimator may be working on items that he is completely familiar with.
However, he is also likely to encounter items that are less familiar. The estimator needs to
recognize when it is time to reach out for assistance. For example, a general contractor
estimating a street improvement project may be very familiar with the cost of new concrete
sidewalk, but may not have up-to-date information on the cost of purchasing and installing the
landscaping and trees along the route.

Very often the format and presentation of the estimate proves valuable to moving the project
forward. Estimates that allow the owner to make comparisons of various choices or perform
“what-if” analyses are most useful. A properly presented estimate can help protect the
contractor and lead to increased profits as well.
The Estimator should always know to whom he is providing an estimate. Is it:

• The owner who is considering a new project?

• A client doing fiscal planning?

• The designer (engineer/architect) for a project that is weighing options?

• A prime contractor seeking subcontractor estimates to bid a project?

Each will require a different type of estimate and should be presented in a different way.

The Estimator needs to have access to cost data. There are national cost data services that
publish data in various formats. These are a valuable reference. However, the best data is that
which is collected by the Estimator. Each project provides an opportunity to collect and store
cost data. This process utilizes the data generated from the cost accounting that must be done
for every project. By understanding the various forms and formats of a cost estimate the
Estimator can develop a data system that best suits his needs. Off-the-shelf computerized
spread sheets and data-base programs make an excellent format for storing and retrieving data.
However manual card-x systems with paper files can also be very effective.
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The Estimator must realize that estimates may not predict bid results. An estimate is a
projection based on many assumptions; the most important is that the economic conditions
assumed will prevail when bids are taken. The truth is that bids can fluctuate substantially from
the estimate. Such fluctuations do not necessarily mean that the bid was bad. Material prices
and availability, subcontractor workload, trade union issues, and weather are some factors that
can change quickly and effect costs. Such occurrences should not dissuade the Estimator from
putting forth his best effort for each project.

Understand the Project:

Construction projects are always one-of-a-kind custom jobs. They will consist of similar
components but will all be different. This is especially true for building additions and system
renovations. Estimating is difficult but necessary and the Estimator must never approach the
task capriciously. If you don't understand how the job is done, never guess, ask someone.
Better yet, ask several people. Understanding the job is just as significant to your success at
cost estimating as taking-off quantities.

To be of value, the Estimator must have a mental picture of the entire project to the extent that
the scope allows. It is often necessary to plan the project stages and know how this affects
costs.

Project staging is building the project on paper. The various steps in the process are listed as
line items in the order they occur, and their cost is estimated. Be sure to include clean-up and
restoration costs as well as soft costs such as architecture, engineering, permits, inspections,
testing, and etc. Sometimes financial costs such as loan interest are included.

Note that a reasonable understanding as to the order of the work is necessary. If a function
must be taken out of sequence, additional costs may be incurred. For example, layout
(surveying) usually takes place after general site clearing. However, if there are environmentally
sensitive areas on the site, the surveyors may need to mark those areas before the clearing
crew arrives and return to the site after general clearing to mark out for construction.
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Limitations in the process must be understood and considered. These limitations may include,
but are not limited to:

• Scheduling- subcontractor and labor union relationships

• Architectural and engineering functions
• Site constraints
• Construction layout
• Availability of materials
• Permits and inspections

Make no mistake in thinking that a project is too big or too small for these issues to have an
effect.

The line items provide the owner, client, or customers (OCC) a quick picture as to which items
are costly and which are not. This gives the OCC the information necessary to make changes. If
the overall estimate exceeds the budget, then the OCC knows where to look for savings going
forward. On the other hand, smaller items may be expanded to improve the final project. For
example, a person considering the construction of a new home may choose to eliminate the
proposed pool to save money, but expand the patio and barbecue to better utilize the back yard.

Subcontractors are often asked to estimate only one (1) phase of the project. For example, a
mechanical contractor may make an estimate for only the HVAC (heating, ventilation and air
conditioning) system in a new or renovated building. Such estimates require coordination with
the architect, engineer, or owner as to staging. Will the HVAC crew have total access to the
premises or will they have to work around other trades? How far in advance notice of the start of
the work (lead time) will the mechanical contractor be given? Is this a union or an open-shop
project?

The scope of the project will determine the number of line items in the estimate. The estimate
for a project with a 10% scope will be substantially less detailed than an estimate for bid. Do not
try to make the estimate more detailed than the scope warrants. The accuracy of the estimate
can be no better than the scope from which it was made. More detail will entail extra work and
produce an estimate that is no more accurate. In fact, it can be misleading if it presents itself as
more authoritative than it really is. While many experienced owners will understand this, those
who are not experienced in the construction industry (homeowners, small businessmen, etc.)
may not. Estimates made early in the project and based on a low level of detail should contain a
statement to this effect. For example:

This estimate is made for planning purposes only and should be updated when
the full details of the project are known. This estimate is based on 2007 cost
data.

This estimate is based on average building square foot cost data for 2006 and
should be updated when additional project details are known.

Often the estimating process will point out gaps in the scope. The Estimator should point these
out to the OCC so they can make the necessary decisions to clear things up. For example, in an
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underground drainage project many different materials can be used for pipe bedding.
Governmental jurisdictions often have specific requirements for this material while private drains
may not. Native materials may be present from the trench excavation while other materials may
have to be sourced and trucked to the site. Thus, estimating is an integral part of the project
planning process.

Consider, for example, an estimate for a proposed parking lot. The majority of the drainage
inlets in a parking lot are less than 6 feet deep, but one (1) of them is 12 feet deep. No big deal
you think because you can simply double the cost of the shallower ones. Wrong – you do not
understand how the deeper drain inlet is built. It is a big deal that can give you sleepless nights.
You are going to need to know:

• If the soils are stable enough for the masons to work at that depth?

• Will we need shoring to get the pipe to that depth and be able to work safely at
the depth?

• Is there shoring elsewhere on the job or will we need another subcontractor?

• How much extra time will this add to the project?

This construction could run thousands of dollars more than you estimated so find out before you
simply come up with a number. These are the types of hidden costs that can make or break a
job.

Recognize that you can't always get everything, and when the ground is ultimately opened there
may be surprises; but try not to let the obvious ones get away. You can usually recover from an
underestimated item since the underestimates and overestimates tend to balance out. However,
an item that was not budgeted completely will leave quite a mark.

Here’s another example: Suppose the engineer and/or architect has directed that a job be
done, but hasn't necessarily specified how you are to do the job. For example, you’re
estimating a rehabilitation project (the most difficult type project to accurately estimate) and the
existing foundation exhibits distress. There are a number of avenues for you to explore. The
contractor may wish to explore several of them and make a recommendation. The Estimator is a
vital part of this process.

• Option One: Dig out under the existing foundation, pour new footings and rehab
the existing foundation. However, you can never determine until you dig out the
foundation how extensive this may be.

• Option Two: Cement grout the soil. A sub-contractor experienced at cement

grouting comes in and pushes concrete into the soil layers beneath the
foundation. The masonry foundation is then repaired.

• Option Three: Piers or piles can be sunk adjacent to the foundation that will take
the load off the footing. The masonry foundation is then repaired.

All the solutions will require sub-surface investigation and that cost must be included. Once the
cost of the various methods is estimated, the contractor needs direction from the
architect/engineer. However, with the estimates in hand, the contractor is in the best position to
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assist in making a favorable decision. Make that recommendation, but be prepared with an
estimate of how much it will cost to perform several solutions to the problem.

All jobs, regardless of their degree of difficulty, require planning and forethought. You must
figure out what will be necessary for you to complete the job. You are going to be responsible
for obtaining and estimating the cost of all tools, all materials, all permits and all personnel on
the job. You are also going to be responsible for the cost of “hidden” expenses and job site
safety.

Type of Work
Various types of work are often classified by “division.” A common list of divisions for residential
construction is as follows:

Division 1 Site work Division 5 Roofing

Division 2 Foundations Division 6 Interior construction
Division 3 Framing Division 7 Specialties
Division 4 Exterior walls Division 9 Electrical
Division 8 Mechanical

The Construction Specification Institute uses a more extensive set of Divisions for more
complex projects. They are:

Division 1 – General Conditions Division 10 – Specialties

Division 2 – Site work & Demolition Division 11 – Equipment
Division 3 – Concrete work Division 12 – Furnishings
Division 4 – Masonry Division 13 – Special Construction
Division 5 – Metals Division 14 – Conveying Systems
Division 6 – Wood & Plastic Division 15 – Mechanical
Division 7 – Thermal & Moisture Protect. Division 16 – Electrical
Division 8 – Doors, Windows & Glass Division 17 - Controls
Division 9 – Finishes

Estimating Methods:

Benchmark Estimating

Benchmark estimating is based on the single, most important aspect of the project. For
example:

• A waterline project might be estimated by considering the linear feet of pipe

involved.
• A new sidewalk might be estimated by the number of cubic yards of concrete
required.
• A New HVAC system might be estimated on the number of tons of cooling
required.
• New interior lighting might be based on the number of electrical watts of power
required.

Some estimators use rule-of-thumb gained through experience with a particular type of
construction. Other benchmark estimates are based on the cost of similar projects or published
cost data. Clearly these are rough estimates based on little scope. For that reason they are
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most effectively used in the early stages of a project.

Often the estimator will be in casual conversation or in a meeting and be asked for an estimate.
This indicates that the OCC is considering a new project and this question could be a business
development opportunity. However, the estimator must always keep in mind that benchmark
estimates lack precision and they must advise the OCC of the estimate's limitations.

Consider the situation where the Director of Public Works is at a meeting with the Budget
Director and is asked, “What do you think it would cost to fix the pavement on Dockside Place?”
You know that Dockside Place is approximately 500 feet long and 30 feet wide. Some quick
work with a calculator tells you that the project involves 1,700 square yards of new pavement.
Last year a 2-inch overlay project cost $6.50 per square yard. Within a few minutes you
estimate the cost of overlaying Dockside Place to be $11,050.00. Add in 5% for inflation and
your estimate is rounded to $12,000.00.

That was quick and relatively simple, but is it accurate?

• The street improved last year had no curbs and Dockside Place does. Can a 2-
inch overlay be placed and still have sufficient curb face?

• The homes along the street improved last year had gravel driveways and not
much driveway reconstruction work was needed. Will raising the level of
Dockside Place mean that driveways will have to be reconstructed?

• Why does the pavement along Dockside Place need reconstruction? Is it just old
or is there a drainage problem that is causing the pavement to deteriorate? This
may have to be solved before the new pavement is placed.

• Last year's project was a street without much traffic. Dockside Place is busier.
Can a simple detour be established or will police be required to direct traffic?

The above list illustrates the uncertainty produced by a lack of scope. The Estimator knows that
these items may cost as much as the paving itself. The Estimator responds to the question by
saying, “A quick estimate is $20,000.00 plus or minus $5,000.00. If this is a serious project and
within the budget, then I can refine this estimate and get back to you.”

This response is useful to the budget director. It gives him an idea as to the magnitude of the
project and a basis for deciding if it may fit into the budget. He understands that this is not a
precise estimate and may rely on for planning but not too heavily. Remember, a highly precise
estimate is not always needed. The Estimator that can fit his estimate to the scope available
and communicate the precision achieved will have done his job well.

Square Foot Estimating

Square foot estimating is used in building construction and is similar to benchmark estimating
except that it is based on a building type instead of a single aspect of the project. Such
estimates are based on limited scope and are used early in the project planning process. The
key to accurate square foot estimating is to understand the type of building the OCC envisions
and the quality of the final product desired. For example, R.S. Means publishes square foot cost
data for residential construction. They report on twenty-eight (28) different residential
classifications. Variables consist of:

• The number of floors (1-story, 2-story, 3-story);

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• The floor configuration (ranch, split level, bi-level, multi-story);

• The living area provided;

• The perimeter of the building;

• The equipment and amenities (basement or not, number of baths, type of heating
and air conditioning systems)

• Quality of materials and workmanship expected (sufficient to meet code,

average, exceptional).

The Estimator often uses this type of estimating when discussing a new home with a potential
homeowner. Providing cost estimates for different type homes before the architectural plans are
purchased helps the homeowner avoid the mistake of commissioning plans for a house they
cannot afford to build. Often homeowners will have rudimentary plans that came from a
magazine. This is a step up in the scope and gives the estimator insight into the size and style
of the desired home. This will eventually lead to a project budget that will assist the architect or
engineer in preparing the appropriate plans.

Similar type of data is available for commercial and storage buildings. Items to consider are:

• Basic building material (lumber, masonry, reinforced concrete, steel);

• Exterior finish (corrugated metal, stucco, brick, pre-cast panel);
• Height and number of stories;
• Elevator or walk-up;
• Sprinkled or non-sprinkled;
• Electrical and mechanical requirements.

When considering building construction, square foot estimating is extremely flexible and a
powerful planning tool. The estimator should become familiar with this method and local sources
of square foot cost data.

Assembly Estimating

Assembly estimating is used when a portion of the work involved in a building project is to be
estimated. The assembly is a system of component parts whose cost of labor and materials is
combined to produce the cost of the assembly. Assembly estimates may be used early in the
planning process in a manor similar to square foot estimating, or it may represent increased
scope information resulting in a more precise estimate. This can be a very powerful tool as the
project planning process moves forward.

It is important to remember that an entire project is the sum of all its assemblies.
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Assembly estimates are dependent on the size of the assembly. For example, Division 1 Site
Work includes an assembly for utility trenching. Costs per linear foot of trench are based on
trench depth, (2 to 8 feet deep); bedding material, type of pipe, and backfill. Division 2
Foundations includes a concrete block wall assembly. Cost per square foot of wall is based on
wall thickness (8 inch and 12 inch), reinforcing, damp proofing, parging, and interior insulation.
Division 3 Framing includes an exterior wall framing assembly where the cost per square foot of
frame wall is based on 2”x4” studs and 2”x6” studs set either 16” or 24” on center. The cost
includes top and bottom plate, corner bracing and exterior sheathing. Division 7 Specialties
include kitchen systems, appliances, bath accessories, fireplaces, swimming pools and decks.

The judicial use of assembly estimating can produce a more precise estimate than simple
square foot estimating since it is generally based on increased scope. Estimators organize their
estimate by division. This is a useful practice that improves the presentation of the estimate and
its usefulness in future project planning.

Assembly cost data may come from the estimator's experience; often the best data for a local
area. However assembly cost data is also collected nationwide and published by a number of
construction cost reporting organizations. The Estimator should become familiar with one or two
national sources.

Unit Take-Off Estimates

Unit Take-Off (UTO) estimates are made by carefully analyzing the architectural or engineering
plans, making quantity estimates of the various items to be constructed (take-off quantities), and
applying unit pricing to those items. The estimated cost of a particular item is calculated from
the formula 1:

Ci = Q x U where Ci is the estimated cost for a particular item (i)

“Q” is the quantity of that item to be constructed or installed

“U” is the unit price for constructing or installing the item.

Each item to be constructed becomes an estimate line item. The following illustration shows part
of typical line items in a Unit Take-Off estimate for repair to a damaged residence. The title
indicates the job reference and the estimate date. The reference in red indicates the source of
the unit cost data. The subsequent columns are labeled as follows.
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No. It is a good practice to number the line items as you proceed for easy
reference later.

Item. This is a description of the item under consideration.

Unit Cost. This is the unit cost of material and labor to construct or install the
item.

Per. This is the units describing the quantity (sq. ft., sq. yds. etc.). Be sure the
measured quantity and the unit cost are in the same units.

Quantity. This is the result of the Estimator's take-off from the plans. Be sure the
measured quantity and the unit cost are in the same units.

Cost. This is the cost of constructing or installing the item and is the result of the
calculations performed using formula 1.

Grade. This is a comment on the grade or quality of the material used in the
estimate. Note: High grade materials often require more skilled workers to install.

Geographical adjustment and Overhead & Profit. These are two items that
are generally represented by a factor. The geographical adjustment accounts for
the fact that published cost data is collected nationally and an adjustment from
average is necessary for individual geographic areas. This factor is supplied by
the data publisher. Overhead and profit is up to the Estimator. The three items
may be lumped together as one factor by multiplication. However, when
preparing a bid estimate, the overhead and profit are given a separate column so
these items can be analyzed separately.
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A sum of the cost for all the items, adjusted as appropriate, is the basis for the estimate.

UTO estimates are best made late in the project planning process when the scope is 90 percent
or greater. More preliminary estimates can be made form architectural or engineering plans that
are at the 70 to 80 percent detail level. However, attempting to use this method early in the
planning process is a mistake. First, due to the level of scope that it requires, using this method
early on requires many assumptions that may or may not turn out to be accurate. Thus, much
time and effort is wasted without improving the precision of the estimate beyond what can be
achieved using other methods described above. Second, using this method may give the false
impression that the estimate is more precise than it really is. This is a disservice to the OCC and
may place the Estimator in a bad light.

The first important aspect of Unit Take-Off estimating is quantities. In order to do quantity take-
offs it is essential that you have blueprints (plans) that can be read and understood.

What are blueprints? For the younger readers, blueprints are a reproduction process that results
in engineering or architectural drawings being rendered with either blue lines on white paper or
white lines on blue paper, hence the term “blueprints.” Architects and engineers draft their
design plans. In order to produce sufficient number of drawings for distribution, they must be
copied. In the past, the most common form of copying plans was to make blueprints. Today,
due to advances in technology, drawings are not only blueprinted but reproduced using
xerographic or ink-jet photocopy machines; however, the term “blueprint” has come to be
synonymous with any copy of the project plans.

Some people are intimidated when they first role out a set of plans. On large projects there can
be a lot of pages. Find the title block which should always be on the drawing. It gives you
information about the drawing, and will tell you what you can expect to find on the drawing. For
example, a drawing depicting the overall project and the limits of construction is usually called a
“Site Plan.” A drawing showing proposed electrical installation will be called “Electrical” and so
forth. Take the time to sit down and write out an index of the drawings and their drawing
number. You need to familiarize yourself with what is on each drawing so you'll know what to
expect and where to find it later.

Let's say you have to do the quantity take-offs for the sanitary sewer, storm sewer, utilities,
curbing and roadway. Find the drawing that shows these items. Locate the drawing's scale,
often found in the title block. Be sure to check the scale since all drawings in a set may not be
drawn to the same scale. Beware, it is easy to use the wrong scale during take-off and get
erroneous results. The Estimator's tool box should have, at least, an architect's and an
engineer's measuring scale. More and more plans are being drawn in metric scales and the
Estimator should become familiar with them as well. Note that measuring scales should be
recognized as precision instruments, used only to measure, and properly stored and cleaned.

Now, pick one of the items you need to take-off - curb. First, examine the drawing to see
whether or not the engineer or architect provided any measurements for the curbing.
Oftentimes there will be dimensions along the centerline of the roadway which will assist in
estimating the length of a run of curb. Sometimes the engineer or architect will specify a quantity
in note form on the drawing. For example, a note might read, “Const. 345 l.f. conc. curb B.” This
translates to “Construct 345 linear feet of concrete curb type B.” This note tells us the item
(concrete curb type B), the unit of measure (linear feet), and the quantity. If there is no listed
dimension, use the scale to measure the quantity graphically. When you record the number, it
is often helpful to mark the number as scaled, for example: “(s).”
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Move across the drawing methodically highlighting each item as it is recorded so you do not
count it twice. Everyone chooses their own method for this, but a lot of people move from left to
right and from bottom to top. Using either a pad or a computer program, record all of the
numbers in a column you have marked “conc. curb B/linear feet.” When complete, you will have
recorded the entire conc. curb B, either noted or scaled. The sum of that column is the total
quantity of conc. curb B on that sheet.

What about area and volume quantities? Area quantities require knowledge of two (2)
dimensions while volumes require three (3). Since plan sheets generally depict two dimensions,
it is often necessary to use more than one sheet to calculate volumes. For example, you will
encounter volume quantities whenever you do take-off for roadway cut and fill. The length and
width of the various stretches of roadway are depicted on the plan view (overhead view)
sheet(s). However, the depth of excavation must be obtained from a second set of sheets
usually referred to as “cross-sections.” These will tell you the depth of the roadway and the
materials be used for its construction (i.e. how many feet of cut or fill to grade). In addition, the
Roadway Detail sheet will show how many inches of stone or how many inches of asphalt etc.,
are required.

Record the quantities and their units of measure. Remember, area and volume calculations
require that all dimensions be in the same units. Do not multiply feet x inches x yards and
expect to get the right volume.

Avoid assumptions. The roadway width may appear to be the same throughout the project -- but
don't bet on it -- CHECK the various sections to make sure.

Now, that you have determined the various dimensions, (length, width and depth), and checked
the units for compatibility, perform the multiplications and arrive at the appropriate area or
volume. Check the computed measuring units against your cost data; you may have to make a
conversion. For example, if you computed earthwork in cubic feet but your unit cost data is in
cubic yards, then you need to convert cubic feet to cubic yards (divide by 27) to be compatible
with your unit cost data. Errors produced by using incompatible measuring units are easy
to make and are very costly! Be alert for these at all times.

In Summary:

• Don't be intimidated by PLANS;

• Look at the title blocks and make an index of drawings for yourself;

• Familiarize yourself with the drawings and know what is on each;

• Be sure you have and use the appropriate scales for measuring;

• Check the drawing scale;

• Develop a comfortable routine for taking-off quantities and stick to it;

• If the engineer/architect has provided a dimension, use theirs. Only scale when
you have to;

• Develop a habit of keeping track of number taken off the plans and number which
you have scaled;
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Cost Estimating: Fundamentals Page 16 of 25

• Be sure to convert your numbers to the appropriate quantities (i.e. feet to yard, to
square yard, cubic yards etc.)

• Record your numbers, even intermediate calculations, either in writing or

electronically;

• Keep your measuring units compatible;

• Make sure you make the necessary conversions;

These few simple steps will give you quantities accurate enough to be able to estimate the job
cost for an individual item.

Now consider the unit cost of each item. Data from the Estimator's file is often the most accurate
for a given item and geographical area. If the estimate is being made for a contractor's bid, then
clearly contractor personnel will require input at this time. Nationally published construction cost
data is commonly used and a big help in complex estimates. However, the Estimator needs to
understand what the published data includes and does not include. Read the explanatory parts
of the data report carefully before using this data. Some issues to check are: (a) Overhead and
profit, (b) the basis for wage rates, (c) availability of materials and (d) geographical location.

Material and Labor Estimates

This type of estimating is the most detailed of methods. The Estimator must break down the
construction process to its individual steps. The amount of material and the man-hours of labor
for each trade required to complete each step is estimated. The future cost of all materials and
labor must be projected in order to arrive at the cost of completing each step in the job. The sum
of the cost for all the steps and all the soft costs (overhead, mobilization, insurance, permits,
loan interest, profit, etc.) produce the estimated cost of the whole project.

The Estimator must be aware that the cost of material and labor is often a moving target. Trade
union labor on a man-hour basis can usually be estimated by contacting the trade union directly.
These rates often reflect “fair labor rates” for government projects. Skilled open shop labor can
vary over a wider range. However, the Estimator must be cautious of “cheap” labor, especially
for craftsmen, and check them carefully.

Although the reverse has happened, materials tend to increase in cost along with inflation.
Inflation adjustment calculations are covered more completely in following sections.

When producing a Material and Labor estimate, the Estimator must be familiar with crew size
and productivity rates. The crew size is the number of men and machines that are necessary to
accomplish a particular task. For example, constructing granite block curb may require a mason
foreman, a small back hoe with operator, and a mason's assistant. This masonry crew, in this
geographical area, is estimated to costs $ 2,000 per day. The productivity rate is the amount of
work that can be accomplished in a given time period. The example masonry crew may have a
productivity rate of 700 linear feet per day. If the project requires 3,000 linear feet of block curb,
then the estimator knows he will need the crew for more than four (4) days – say a 5 day job.
Thus the labor for this aspect of the project is $10,000. The Estimator must now determine the
cost of the material. In this example the granite blocks cost $2.50 per linear foot, for a material
cost of $7,500. Therefore, this line item of the project is estimated to cost $17,500.
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Cost Estimating: Fundamentals Page 17 of 25

The process of backfill, restoration, top-soil & seed, and clean up still need to be done. This will
most probably be done with a different crew having a different composition of manpower and
machinery.

Thus it can be seen that Material and Labor estimates require the Estimator to have the most
intimate and detailed knowledge of the construction process. I once estimated the cost of a
small renovation to enclose a machine in a pharmaceutical production facility. After the estimate
was made, I learned much to dismay that the machine being enclosed could not be turned off
during the construction process and specific levels of dust control were required while the work
proceeded. Needless to say my original estimate was worthless.

Vendor Estimates

Vendor estimates are prepared by a vendor or subcontractor and are made for a specific part of
the work. No estimator is expert in every field so vendor estimates are a common practice.
However, the Estimator must remember that a vendor estimate is no more accurate than the
scope used in its preparation. A benchmark vendor estimate is not appropriate for inclusion in a
Unit Take-Off estimate. Therefore, communication with the vendor or subcontractor is a critical
issue. Remember, good estimating takes time and effort. Vendors generally do not want to
prepare a UTO estimate unless there is a reasonable chance of them getting the job. Be sure to
know how the vendor or subcontractor prepared his estimate before accepting it into your work.

Contingency

A contingent event is something unforeseen and not planned that occurs. A contingency is an
amount added to the estimated cost of a project to cover contingent events. Contingents are
often based on the direct cost of a project since soft costs can usually be estimated more
accurately. Note the operative word is “usually.”

Contingency amounts vary inversely to the scope. Estimates based on low scope require high
contingencies due to the high level of uncertainty. On the other hand, Estimates based on
detailed plans and site investigations have a high scope and require less contingency.
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Cost Estimating: Fundamentals Page 18 of 25

Incorporating contingency amounts into an estimate is controversial. Owners do not like to see a
line item for “contingency.” They feel that they are paying for something that may not occur.
Budget directors, on the other hand, appreciate a contingency amount since it helps them to
stay within budget. Of course, on low scope estimates made during the early stages of a project,
it is the Estimator's responsibility to inform the OCC of the uncertainty in the estimate and the
contingency is a good way to do it.

Many government projects calculate the final payment based upon the actual as-built quantities.
Therefore, any overages will be accounted for. Also, such projects often have a change order
process whereby unexpected items can be authorized as the project progresses. In such
circumstances, lower or no contingency may be in order.

The Estimator must use his good judgment concerning contingencies: their amount, how they
should be incorporated into the estimate, and if they should be presented as a line item.
Remember! Estimates without a contingency is fine as long as nothing goes wrong – but
something always goes wrong.
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Cost Estimating: Fundamentals Page 19 of 25

Inflation Calculations

When you pay more today than yesterday for the same item – that’s inflation. Inflation is not a
problem if you prepare your estimate today using up-to-date prices and the job will be bid and
start tomorrow. However, inflation plays a role in most projects.

1. The planning process for a project may take a year or more. Early estimates
must assume inflation to the time the bids are taken.

2. Pricing data may not be current. Prices should be inflation adjusted when used.

3. In a forensic situation the Estimator may be asked to estimate the value of

making repairs for a loss that occurred sometime in the past.

Inflation is often regarded as increasing prices uniformly across the board at a constant
rate. Calculating a Future Value from a Present Value can be accomplished by using the
following formula.

FV = PV * (1+i/100)N Where “FV” = Future value

“PV” = Present value
“I” = Inflation rate per period in %
“N” = Number of periods into the future

It is important to make sure that the inflation rate and the number of periods is in the same time
units. If the inflations rate is expressed in years, then the number of periods must also be in
years. If the Estimator desires to work in months, then yearly inflation rates must be divided by
12 to obtain monthly rates. The following illustration is a handy chart that lists the value of
(1+I/100)N for various values of I and n.

Sometimes a single inflation rate does not accurately represent the conditions. For example,
concrete may be expected to experience a low inflation rate while asphalt pavement, a
petroleum product, may require a higher rate. In such cases the items should be adjusted
individually. Adjusting each line item in an estimate separately can be time consuming if the
estimate is being prepared with paper and pencil. However, if a spread sheet program is being
used to prepare the estimate, then an inflation rate and separate adjustment can be made for
each line item without difficulty.
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Cost Estimating: Fundamentals Page 20 of 25

Completing the Estimate

Remember, you’re doing an estimate, and that estimate represents your best effort at reaching
a projected project cost.

Once you have placed a value on all of the proposed work to be done, you are ready to add all
of the numbers up. You may do this manually or with computer assistance. The total number
will be the estimated cost of doing the project.

But you’re not done yet. Each and every locality within the United States has been given a cost
factor which represents which is basically a percentage ratio based on the national average to
do the same work at different localities throughout the country. You need to include that cost in
your estimate if you have not adjusted each line item individually.

What about overhead? You need to know either the actual cost for overhead for your company,
or the reasonable value of overhead in your locality. Overhead costs for small contracting firms
includes rent, utilities, insurances, office help, vehicles, owned equipment, tools etc. Be sure to
include these costs.

There are also additional costs involved in obtaining permits, as well as architectural and
engineering fees. Some of these are paid to governmental entities such as the city or town you
are working in. Some permit fees are quite steep and leaving them out of a cost estimate could
be an expensive lesson. Some architects and/or engineers have already contracted with the
owner and been paid by the time you are asked to estimate the cost of the work. Find out. Also
find out if the architect or the engineer will be inspecting the work, and if so, will they be
charging a fee. Some architects and engineers stay on the job in an advisory capacity. Find
out if they will be charging a fee for that. All of these costs need to be included in your estimate,
no matter how you reached it.

Finally, there’s profit on a job. Once again, this is a percentage ratio of national average and
may vary. If may also vary as a result of economic times. Contractors tend to take more profit
when jobs are plentiful and everyone is busy, and less profit when jobs are scarce. Make sure
you know what percentage to add to the job.

Once you have added up all your numbers, you have completed your costs estimate. Put your
work into a presentable format for presentation.

Conclusion

Cost estimates are used at every phase in project development from concept through to bidding
and into construction. The Estimator plays an important role in moving this process along.

There are different types of cost estimates; some are simple and easy while others are more
complex and time consuming. General categories include: (a) Benchmark estimates, (b) Square
foot estimates, (c) Assembly estimates, (d) Unit take-off estimates, and Material & Labor
estimates.

The complexity of the estimate varies with the scope (level of detail) available. The greater the
scope, the more complex is the estimate.

The scope of the project increases as the project moves forward. Low scope is available at the
concept stages and increases with greater project development. The Estimator should choose
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Cost Estimating: Fundamentals Page 21 of 25

the estimating method to match the scope.

Now that you have completed this course you are ready to apply what you have learned. For
some of you this course has been a refresher, while for others it was an introduction. Since
estimating is an art and a science, the only way for the Estimator to improve is to practice what
they have learned. Each one of you will develop your own methods which I hope will prove
successful.

Reference Materials:

Merritt, Loftin & Ricketts. Standard Handbook for Civil Engineers. Fourth Edition. McGraw-Hill,
New York, NY 1996;

RS Means. Building Construction Cost Data. 66th Annual Edition, Reed Construction Data,
Kingston, MA 2008;

2005 National Renovation & Insurance Repair Estimator. Craftsman Book Company, Carlsbad,
CA 2005;

Harris, Cyril M. Dictionary of Architecture & Construction. Third Edition. McGraw-Hill, New York,
NY 2000;

Thank you for your time. If you have any questions, please contact RedVector Client Support at
1-866-546-1212.
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Cost Estimating: Fundamentals Page 22 of 25

Cost Estimating Exam

1. Cost estimating is:

A. A fine art
B. An exact science
C. A combination of art and science
D. A mathematical exercise

2. Scope is defined as:

A. The size of the project
B. The amount of detail available to base an estimate
C. The type of work the project includes
D. The number of vendors that are needed

3. When are estimates needed?

A. At the concept stage of a project
B. During the planning phase of the project
C. When the project is ready for bid
D. All of the above

4. The Estimator needs to know his client because:

A. The client can tell the Estimator about his budget
B. Different clients require different types of estimates
C. The client can help promote his business
D. The Estimator needs to tell the client what he wants to hear

5. The best cost data is:

A. Nationally published cost data
B. Data supplied by the client
C. Data supplied by another contractor
D. Data collected by the Estimator

6. Nationally published cost data:

A. Is a good source of data when properly used
B. Is only used by architects and engineers for a ball-park estimate
C. Is not used by serious estimators
D. Is only used by contractors

7. The Estimator needs to understand the project because

A. All construction projects are one of a kind
B. Projects have similar components but they are all different
C. The Estimator must bring the estimate in under budget
D. All of the above

8. The Estimator is not expected to

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Cost Estimating: Fundamentals Page 23 of 25

A. Have a mental picture of the entire project to the extent the scope allows
B. Consider the project staging so he knows how this affects costs
C. Contact the lowest cost of material and labor for each stage
D. Include soft costs in his estimate

9. Divisions are defined as:

A. Classification of the work by type
B. The number of workmen needed at any one time
C. Jobsite separations
D. The various types of materials required

10. The benchmark quantity for an 8 inch water pipeline estimate is

A. Cubic yards of trench excavation
B. Length of pipe
C. Number of water valves
D. Number of houses being serviced

11. True or False: Benchmark estimating used on projects with high scope produces an
estimate with low uncertainty.
A. True
B. False

12. True or False: Square foot estimating is used in building construction and is similar to
benchmark estimating except that it is based on a building type.
A. True
B. False

13. True or False: The key to accurate square foot estimating is to understand the type of
building the owner or customer envisions and the quality of the final product desired.
A. True
B. False

14. What is an assembly?

A. The cost of labor required to assemble an element of the project
B. A meeting of workmen to discuss jobsite safety
C. A system of component parts whose labor and materials is combined
D. A committee of estimators working on a project

15. The judicial use of assembly estimating can produce a more precise estimate than simple
square foot estimating because:
A. Vendors often provide estimates for different types of assemblies
B. It is the combined work of a group of estimators
C. Assembly estimates take more work to produce than square foot estimates
D. It is generally based on increased scope
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Cost Estimating: Fundamentals Page 24 of 25

16. Unit Take-Off (UTO) estimates are made by:

A. Carefully analyzing the architectural or engineering plans
B. Making quantity estimates of the various items to be constructed (take-off quantities)
C. Applying unit pricing to the various items to be constructed
D. All of the above

17. When are Unit Take-Off estimates made?

A. Early in the planning process because clients require them
B. Late in the planning process because a high level of scope is required
C. Early in the planning process so accurate budgeting can be made
D. Late in the planning process so sub-contractors have enough time to respond

18. When analyzing plans for quantity take-off, it is most important to

A. Know which way is north
B. Know the page number of the plans
C. Know the plan scale
D. Know the plan date

19. When analyzing plans for quantity take-off, it is also important to

A. Be sure the scale on all the sheets is the same
B. Calculate the quantities in the same units as the costs
C. Never calculate in metric units
D. Always work from left to right

20. Material and Labor estimates are

A. Are the least detailed estimating method
B. Are the most detailed estimating method
C. Do not include soft costs
D. Must be used on government projects

21 Material and labor estimates do not require the Estimator to be familiar with
A. Different crew sizes for different jobs
B. Productivity rates
C. Material costs
D. Assembly cost data

22. Which of the following is true about contingencies?

A. They should never be used
B. They should be used due to uncertainty in the estimates
C. They should never be used early in the project process
D. They should be used due to rising costs

23. Which of the following is true about inflation?

A. It is an economic factor
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Cost Estimating: Fundamentals Page 25 of 25

B. It is a material expansion factor

C. It is too many workmen on the job
D. It is a factor you can’t estimate

24. Contingencies should:

A. Decrease with project scope
B. Increase with project scope
C. Always be listed as a line item
D. Never be listed as a line item

25. Inflation cannot:

A. Be calculated with a mathematical formula
B. Be applied uniformly to the estimate
C. Be applied differently to individual line items
D. Be ignored