ELEMENTS OF A COST ESTIMATE

Quantity Takeoff: The foundation for a successful estimate relies upon reliable identification (takeoff) of the quantities of the various materials involved in the project.

Labor Hours: Labor hour amounts can be developed by crew analysis or applied on a unit man-hour basis. The use of a labor dollar per unit of work (ex: $15 per cubic yard for grade beams or $20 per cubic yard for walls) is only applicable when the cost history supports the data being used. The estimator must make allowance for the varying production capability that will occur based upon the complexity of a project.

Labor Rates: The labor rate is the cost per hour for the craftsmen on the project. To determine any craft rate, whether union or open shop, the estimator starts with the basic wages and fringe benefits.


  • To the wages and fringe benefits, the estimator must add payroll burdens. These are FICA (Social Security), FUI (Federal Unemployment Insurance), SUI (State Unemployment Insurance), WC (Worker Compensation) and others mandated by legislation and/or company operations. These burdens, plus the base wages and fringe benefits, determine the hourly cost of a craft classification (i.e., carpenter, pipefitter, etc.).
  • The hourly rate can also involve a mixed crew where a mix of different crafts for a work crew for the performance of the work.
  • Overtime or the lack of overtime is another consideration in determining the calculation of the hourly rates. A project that is scheduled for completion using a forty hour work week (Some areas may have a standard 35 hour week) will have a modest amount of overtime costs required in the estimate. A project that is scheduled for extended 50, 60 or even 70 hour work weeks will have a substantial amount included for overtime and loss of productivity.

Material Prices: Material prices, especially in today’s current market, fluctuate up and down. The estimator must both understand and anticipate the frequency and extent of the price variations and the timing of the buying cycle. Material prices may be affected by:

  • purchase at a peak or slack time of the year for the manufacturer
  • material availability
  • the size of the order
  • the delivery timeframe requirement
  • physical requirements for delivery, such as distance, road size, or site access
  • payment terms and history on previous purchases
  • sole-source items
  • exchange rates (if the material will be imported into the U.S.)

Equipment Costs: Equipment rates depend on the project conditions to determine the correct size or capacity of equipment required to perform the work. When interfacing with other equipment, cycle times and equipment capacity control the costs on the project. Costs will also differ if the equipment is owned by the contractor as opposed to rented.

Subcontractor Quotes: A subcontractor quote, like the general estimate, contains labor, material, equipment, indirect costs, and profit. It is dependent upon having the quantities, labor hours, hourly rate, etc., prepared in a reliable manner just like any other part of an estimate. The amount of the subcontractor quote is also dependent upon the payment terms of the contract, and previous payment history between the subcontractor and general contractor. Bonding costs should also be considered.


Indirect Costs: Indirect costs consist of labor, material, and equipment items required to support the overall project.

  • For the owner: design fees, permits, land acquisition costs, legal fees, administration costs, etc.
  • For the contractor and subcontractor: mobilization, staffing, on-site job office, temporary construction, temporary heat/cooling, and temporary utilities, equipment, small tools and consumables, etc.

Profit Amount: Apply appropriate or contracted profit rate uniformly to all contractors and to original bid and change orders

Administrator Author

Leave a Reply

Your email address will not be published.

CAPTCHA *