Benefits of Independent Construction Estimating: Labor & Costs
Whether it’s a luxury resort, a convention center, a hospital, a themed entertainment park, or some other large-scale project, the complexities of commercial construction create a challenge for owners and developers looking to stay on budget as well as for construction companies seeking to make winning and profitable bids.
In both cases, strategic construction estimating is the key to gaining an actionable understanding of cost and managing that cost through the project timeline for optimal ROI and profit.
In this two-part series, we’ll explore the ways in which strategic cost estimating can save time and money in all stages of commercial construction, from conceptualization to completion, starting with an overview of the areas in which cost estimating provides much-needed clarity on what to expect in terms of expense.
Labor constitutes a significant portion of any commercial construction project, and estimating its expense requires a comprehensive and nuanced approach that encompasses a variety of factors including:
- Overall estimate of labor hours needed for project completion.
- The impact that factors like climate, time of year, and project-specific conditions may have on labor productivity.
- Wage scale based on complexity of project and skill level of required laborers, accounting for adjustments in hourly rates between general laborers and specialty craftsmen.
- Federal and state payroll taxes as well as benefits.
- The potential need for overtime and associated rate increases.
- The ability to apply all of these calculations to a particular region or company rather than rely on generic labor productivity and compensation data.
All of the considerations spelled out above for labor cost estimating are in play for subcontracted work as well, with the added layer of complexity that comes with dealing with a third party. Mechanical, electrical, and plumbing (MEP) estimating is particularly crucial to an accurate assessment of the cost involved in the specialized systems handled by subcontractors. Strategic construction estimating provides critical insight into MEP and other subcontractor expenses from project estimation and bid reviews to ongoing cost management.
Materials & Equipment
While these costs may seem relatively straightforward, there are many factors that impact the potential expense associated with materials and equipment, and many of them carry the additional challenge of frequent fluctuation in price and ease of acquisition.
When it comes to materials, strategic construction estimating will take into account:
- The market fluctuations of needed materials as determined by varying supply and demand in different regions.
- The amount of materials required and the interplay of volume and bulk pricing.
- The logistics and cost of shipping the materials, factoring in the feasibility of various shipping methods based on weight of materials, distance, length of transport time, and any special conditions such as temperature and protective packaging required by the materials.
- Costs associated with any international shipping needed, including currency exchange rates, import taxes, and other applicable fees.
Accurately estimating equipment costs also requires consideration of multiple factors such as whether the equipment will be rented or is already owned, the general capacity of the equipment, and whether project or region specific conditions will affect the equipment operating at full capacity.
Indirect costs cover a vast array of project expenses, and the more complex the project, the greater the variety and number of indirect costs you are likely to incur. Accurate construction estimating will make a comprehensive inventory of these costs, as to leave any of them out would result in unwelcome surprises throughout the project timeline with each unanticipated expense.
Indirect costs can include fixed as well as site-specific expenses like transportation to and from a worksite, the necessity of building an access road, permits, on-site utility fees for the duration of the project, land acquisition, and more.
The number and complexity of factors to be considered in the cost of commercial construction makes it imperative for owners, developers, and contractors looking to save time and money to work with a firm that specializes in strategic construction estimating for large-scale commercial projects. In our next installment, we’ll discuss the benefits that accurate cost estimating brings for increasing commercial construction project planning, profitability, and ROI.