Estimating 101- Some basics

 

  
  As with any industry, there are some terms that pertain to construction and estimating. This quick guide will give you a rundown on some basic terminology you should be familiar with.

Actual Cost- the cost you pay out for any item listed on your estimate, not the price listed on the estimate.

Change Orders- a contractual change to the terms of the project. A change order is usually requested by the property owner and negotiated with contractor. These changes should be made in writing.

Common Tasks- These are tasks common to typical projects you do on a regular basis. Knowing the costs of these tasks will help in your estimating.

Construction Estimate File- a collection of past estimates and results of the complete projects that go with them. This file can be used to recall the past and help estimate future jobs.

Contractor Fee- a monetary amount added to a project, to pay for contractor performance

Cost Accounting- the process that constantly checks estimated direct and indirect costs against the actual costs and business expenses. This can continually help you manage what your should be bringing in to make a profit.

Direct Costs- costs of material, labor, subcontracted labor.

Estimate Checklist- A list to help remind you what information needs to he gathered for specific jobs. You can make this up yourself, or refer to a manual or software.

Indirect Costs- Costs of doings business, or your overhead. This can include advertising, tools, vehicle maintenance and more.

Just In Time Purchasing- an ordering and delivering process that has the needed materials arriving onsite, as they are needed. This prevents some overhead.

Limited Price- a price quoted to you, which is only good for a limited time. This can be good when giving estimates to secure a job.

Mark-up- The amount added to the direct cost to produce your total price. This is usually a standard percentage.

Open-Ended Pricing- a price quote with no time guarantee, meaning the amount could change at any given time.

Pricing Strategy- The manner in which you recover project and business expenses, and how a price for a specific project will pay for any of these costs.

Profit- The amount of income received after operating costs have been paid. Profit, obviously, is a necessity for maintaining capital and stability.

Site Inspection Check-list- A list designed to review the construction site for items that you may need to include in the estimate. You do not want to miss anything that may add cost to the project.

Unit Costs- Costs you can identify separately within a specific project. Instead of telling someone an interior wall will cost $XYZ, you can break it down to top plates, bottom plates and corners.