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The Best Way to Determine Construction Costs

Poking around on Reddit the other day, we came across this question:

Reddit question box

We found it fascinating that the three answers given were actionable, yet none were the best method. Since we literally wrote the book on software for the complete design system for post frame construction, we decided to join the conversation. First, we’ll break down the methods suggested, then we’ll introduce you to SmartBuild Systems.

Construction Cost Estimation

Construction cost estimation is the process of determining a project’s scope and feasibility by forecasting the expense of building the structure. The estimate serves one of the three basic functions:

  • Design
    • Screening/magnitude estimates
    • Preliminary/conceptual estimates
    • Detailed/definitive estimates
    • Engineer’s estimates
  • Bid
    • Subcontractor quotes
    • Quantity takeoffs
    • Construction procedures
  • Control
    • Budget for financing
    • Budgeted cost after contract, prior to construction
    • Estimated cost to complete during construction

The first method of construction cost estimation suggested on Reddit is not only the most tedious but also extremely prone to errors.

Estimation Spreadsheets

Typically created in Excel, an estimation spreadsheet is essentially a checklist maintained by hand. The sheet includes everything from general requirements to framing and roofing, as well as other considerations necessary for the estimate. Most of these spreadsheets use formulas for tracking cost estimates, actual costs, variances, payments, and balances. Regardless of how detailed the notes, scope, and takeoffs are – human error is always a factor when using spreadsheets. Estimating by hand takes hours and substantially reduces contractor closing rates.

The second suggestion made on Reddit for construction cost estimation is extremely accurate, yet quite laborious.

Stick Estimating

Stick estimating is the process of counting and listing every single project component and material, as well as every hour of labor needed to complete each part of the project. Additionally, the estimate must also detail every necessary subcontractor, rental, and list permits. This process can take weeks, which probably won’t win you many jobs. It’s important to remember that stick estimating can lead to major mistakes if scope items are missed or project plans are incomplete.

The third approach to construction cost estimation recommended on Reddit is the fastest and most accurate method, with one caveat

Unit Cost Estimating

Unit cost estimating is just what it sounds like – the process of pairing unit costs with each part of the construction process:

  • Compiling all line items for the project
  • Attaching a unit cost to each line item
  • Totally the numbers and reviewing
  • Applying markup to yield the final price

The user also suggested creating your own unit cost database to make the process easier (then included three pages of formulas and research assignments that looked anything but easy!)

SmartBuild Systems (the best method)

When it comes to post frame/pole barn construction, it gets no easier than SmartBuild Systems. Our software utilizes the unit cost estimating technique in conjunction with your distributors’ entire in-house inventory database! We also create entire part-number systems, as well as standard sales contracts and bid form templates for the distributor. If your distributor manufactures their own metal sheathing, trim, and trusses, the SmartBuild database also includes their price quote and color scheme.

But SmartBuild isn’t just cost estimating software, it’s an entire design system that:

  • Builds a 3D model right in front of the buyer’s eyes
  • Populates the sales contract
  • Compiles the bid and order using the custom database
  • Calculates the price including materials, labor, and sales tax
  • Builds a cut list for sheathing and trim
  • Automatically generates construction drawings
  • Creates a description of the building
  • Emails and prints a copy for the buyer on the spot

If you’re looking for construction software that reduces the time spent on each sale by 60% and can increase your deal close rate by 50%, you’re looking for SmartBuild!

Contact us for a demo and free trial today!