Construction cost estimate
A construction cost estimate is built on the bill of quantities: for each item, you take its quantity —the output of the plan takeoff— and its unit price, multiply them to get the amount, and the sum of all the amounts is the direct cost of the project. Indirect costs, financing, profit and additional charges are then applied to that subtotal to reach the total budget.
It serves as the economic reference for the whole project: it sets the contract amount, it is the basis for controlling spending during construction (comparing budgeted against actual), and it is the starting point for the progress billings that are invoiced as the work advances. A poorly quantified estimate, or one with outdated prices, is the most common cause of cost overruns.
In public works, the estimate is a central requirement: to bid on a tender, the contractor submits its budget based on the bill of quantities published by the awarding agency, with each unit price fully analyzed. In private projects the level of detail varies, but the structure —items, quantities, unit prices and amounts— is the same.
Formula
Example
A project with three items: 120 m² of wall at $480/m² = $57,600; 45 m³ of concrete at $3,200/m³ = $144,000; 8 tonnes of steel at $32,000/tonne = $256,000. The direct cost adds up to $457,600; applying 20% for indirect costs, financing and profit, the total budget comes to roughly $549,120.
| Line item | Budget | Spent | Progress | Status |
|---|---|---|---|---|
| Concrete and foundation | $612,000 | $598,000 | On track | |
| Steel structure | $486,000 | $502,000 | Over budget | |
| MEP systems | $398,000 | $240,000 | In progress | |
| Masonry | $354,000 | $160,000 | In progress | |
| Finishes | $520,000 | $70,000 | In progress |
Frequently asked questions
How is a construction cost estimate calculated?
You multiply the quantity of each item (obtained from the takeoff) by its unit price to get the amount, add up all the amounts to reach the direct cost, and then apply the indirect costs, financing and profit.
What is the difference between a construction estimate and a bill of quantities?
The bill of quantities is the list of items with their unit and quantity; the construction cost estimate is that same list already priced, that is, with the unit price and amount of each item and the total for the project.
What does a construction cost estimate include?
It includes the direct cost (materials, labor and equipment for every item) plus the indirect costs, financing, profit and additional charges that make up the unit price of each item.