Steps to estimate construction projects
- Choose the Right Work to Bid
- Reviewing Construction Specifications
- Reviewing Construction Drawings
- Performing a Construction Takeoff
- Creating your Construction Estimate
- Determining Overhead and Profit
- Building your Construction Proposal
- Construction Contract Basics
- Handling Change Orders
- Construction Estimating Software
Hiring a professional for home remodeling work can be a frustrating process for a homeowner. It’s probably rare for you to deal with large-scale home repair or construction contracts, yet you’re facing a contractor who likely issues several such contracts each week. With this disparity in experience, it’s easy to feel like the deck is stacked against you as you evaluate and negotiate contracts with a pro. But you can quickly gain confidence by learning the basics of the two ways in which professional contractors estimate costs when creating contracts: fixed-price proposals (also known as bid proposals), and estimate proposals.
A fixed-price proposal is one in which the contractor views the situation, assesses the amount of work and materials that are required, then quotes a single flat-rate price to complete the work. This type of proposal is also called a bid-style proposal or all-inclusive pricing proposal.
In an estimate-style proposal, every labor activity and material in the project is listed in painstaking detail. You are billed for the materials used, actual hours worked, and work performed by subcontractors. The contractor’s fee is expressed in the form of a percentage of the project cost. This type of contract is also called a time-material or cost-plus contract.
This is similar to estimating using a unit-pricing guide, except that the contractor creates his own cost book. Rather than trust numbers from a book, a contractor uses his own historical data for labor costs and the latest quotes from the lumberyard for materials. Using worksheets (or estimating software) contractors are then able to create their own unit costs for individual items such as a square foot of installed hardwood flooring or roofing shingles, or for more complex “assemblies,” such as a linear foot of 2×6 exterior wall, including insulation, drywall on the interior and siding on the exterior.
To generate a materials list, contractors do a takeoff from the plans – either manually, using software, or some combination. Many lumberyards will do free materials takeoffs for contractors, but few rely on these without rechecking the numbers.
Questions to Keep in Mind as You Accept Bids
Now that you’ve drafted a proposal, it’s time to solicit your bids. As you begin accepting bids, keep the following in mind to help narrow down the pool of contractor candidates:
- Which type of contractor do you want to hire—general, specialized, or a combination of the two?
- Is the contractor licensed, bonded, and insured?
- Will the contractor come and evaluate the home before submitting a bid, or is it done online or over the phone?
- Do they have references?
- Will they clean the work site at the end of each day?
- Can the contractor communicate in a timely manner?
Get at least three contractor bids to give yourself more options—this will help you hire the right person for the job. Be sure that all of your contractor bids are in writing, as an officially documented agreement just in case you need to have that record if a disagreement comes up.