A 5-Level Estimation Plan: Tips for Construction Companies

The building industry is about accurate budget planning where all the expenses are over the control of the construction estimators. If any of the imperfections in the estimations take place, both the tender performance of the contractor and its profit margin are at the risk.

The budget plan of the construction company should cover direct and indirect costs. The initial estimating process is based on the determination of all the spending patterns required for the residential or commercial building project.

A New Normal of the Modern Construction Estimating Routines

To be sure that the construction process will be free of extra expenditures and bring guaranteed profit, high-quality contractor estimating software is used. Most of the calculations are undertaken automatically if the required parameters and details of the project are specified correctly.

Online tools as estimating software for contractors take into account both direct (material, labor compensations, equipment rentals, purchase, and maintenance) and indirect costs (administrative remunerations, quality control payments, utilities, fees, and permits).

Although the wide range of digital solutions presented on the tech market for contractors and other players of the building industry sector, the construction estimators should keep track of the tactics and practices that make their measurements more accurate. 

A 5-Level Estimating Plan in 2021

For example, the most hot-topic approach to the estimating process today is the 5-level estimate plan provided by the ASPE (American Society of Professional Estimators). This method allows estimators to reduce the risk of failures and calculate all the expenditure items faster and more efficiently.

Level 1: Rough Construction Project Estimates

This is the starting stage of the estimating process. All the calculations are rough and far from accurate. All the measurements are based on the initial design draft and planned expenses (according to the insights provided by marketing, accounting, and other departments of the company). 

This type of estimate is also called the Order of Magnitude. It is recommended to take into account the specifics of the building project at this very stage (residential or construction). The difference of the showings presented in rough estimates from the final budget plan should be no more than 60-70%.

Level 2: Intermediate Estimates

This stage is suitable for giant construction projects where each detail should be taken into consideration. For example, the architect has updates to the design that change the previous estimating figures. Most commercial projects require intermediate estimates before the preliminary phase of the budget planning. 

Level 3: Preliminary Construction Project Estimates

The main figures for the estimating process at this stage are the financing flows that are going to support the project performance. It is necessary to understand if the contractor has the investors, subcontractors, solely consumers that provide funds for building, etc. Almost all the financial data entries are available in the tender documentation.

Level 4: Substantive Estimates

The design of the construction project is usually approved during this phase. That is why the focused attention of the estimators is paid to the architect’s insights. Also, all the key objectives are determined. The more detailed picture of the building project gives the opportunity to get more accurate estimating showings that should not vary from the final budget plan by more than 20%.

Level 5: Definitive Construction Project Estimates

All the cost baselines (material, labor costs, other expenditures) are ready to be included in the budget plan and form the set of expense patterns required for the construction process. The preparation for bidding and tender routine takes place when the estimating report is ready. 

Finally, the budget plan is analyzed by the risk managers and approved if all the figures meet the objectives of the building company and the client. All five levels of the estimating process are usually included in the modern software for construction estimators. This way the budget-planning routines, bidding, and tender performance will take place faster and more effectively for the contractor. 

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