Constructing a new residential or commercial property is challenging, particularly when estimating construction costs. Efficient pre-construction planning is vital for managing expenses effectively, especially given Texas’s regional cost variations. By engaging in strategic and thorough pre-planning, contractors can sidestep common pitfalls in construction estimation and make well-informed decisions.
Let’s explore some of the essential tips for accurate construction cost estimating in Texas:
Keys For Effective Texas Construction Cost Estimating
Stop estimating the old-school way
The days of estimating construction costs by hand are over. To grow your business and secure more projects, you must improve your bidding process. Using paper, drawing sheets, and colored pencils is not enough anymore, especially in Texas’s fast-paced construction environment and variable prices in different areas.
We recommend using advanced tools and construction cost-estimating software for better accuracy than manual methods. This will help you win more projects and deliver your services on time. Using digital takeoff software like PlanSwift and Bluebeam can significantly reduce the time spent on cost estimation and make your processes more efficient.
Estimate your job
You must rely on something other than subcontractors for the numbers they provide. If you intend to maintain a competitive edge, entrusting such a crucial task to individuals who need more professionalism and experience than you possess will lead to a disconnect between you and your success.
Find your estimates’ actual costs.
In previous tips, we discussed how to perform takeoffs, but the most crucial aspect is preparing your assemblies. What are assemblies? In construction, assemblies consist of small sections grouped under a single-item job. For example, within the roof of a building, you might find various assemblies such as framing, insulation, paint, and more.
Many construction contractors and estimators base their project estimates solely on preset rates rather than the costs of the items and assemblies involved. This practice has become common, leading to estimates that rely on measuring dimensions while overlooking the unit prices of assemblies.
It is essential to have accurate estimates in place before negotiating prices with the general contractor. If a general contractor requests a price reduction, you should be well-informed about the costs involved and whether those prices can be adjusted without negatively impacting your budget.
Understanding the costs associated with these items is crucial when summing up indirect expenses, such as labor, overhead, permits, supervision costs, and contingencies. This knowledge will help you identify which costs are necessary and which are merely adding extra expenses to your construction project.
Prepare your pricing before you get proposals from subcontractors
Estimating expenses beforehand is crucial for several reasons. First, when contractors take the initiative to calculate their estimates, they position themselves to bid on more projects and ultimately win them. This proactive approach can also attract more subcontractors eager to work with them.
Furthermore, preparing these rough estimates in advance allows contractors to submit contracts with greater confidence and insight. This preparation makes it easier to compare various subcontractors’ proposals against the original estimates, ensuring that decisions are well-informed.
Lastly, understanding the direct costs associated with each item in a construction project grants contractors a clearer picture of their financials. With this knowledge, they can negotiate overhead prices more effectively, knowing the effort and resources each task requires.
In Texas, for example, many subcontractors tend to add a margin of 10-15% for their overhead and an additional 10-20% to the total estimate, making it beneficial for contractors to use tools like R.S. Means or National Cost Estimator for their calculations, thus allowing for more strategic negotiations.
Don’t aim for perfection.
As we finalize our construction cost estimate in Texas, we must avoid a common mistake: spending too much time trying to perfect each bid. This step involves reviewing all pricing details, such as labor costs, supervision fees, overhead, and profit margins. Adjusting these figures based on local market rates and the project’s location is essential.
This process requires careful evaluation. You need to decide whether to lower your proposal cost, compare your bid with those from other subcontractors, and consider adding extra funds to cover unexpected expenses.
However, it’s crucial not to get lost in the details while aiming for the perfect bid. The main focus should be submitting more bids, not just perfecting one. This strategy follows the “law of large numbers,” meaning consistent efforts lead to success. By submitting more bids, we improve our chances of winning projects, which helps our business grow.
Build in space for negotiation.
The final tip we’ll explore is the importance of submitting your bid for the final project. It’s essential to remember that the bid you ultimately submit does not necessarily reflect your final price. In Texas’s competitive, cost-conscious market, clients frequently request discounts, regardless of how competitive your initial pricing may be. Therefore, ensure your initial bids are structured flexibly to accommodate potential reductions without compromising your profit margin. This approach will help you avoid the stress and challenges of operating under tight budget constraints.
Conclusion
Following the tips above, you can streamline your business and boost your sales quickly. If you don’t have enough time to do this single-handedly, consult any professional or construction estimating services near you.