What Are the Elements of a Construction Cost Estimate?

What Are the Elements of a Construction Cost Estimate

A professional estimator demands to have basic knowledge before creating an estimate. Few essential things are demands to have an accurate estimate for different estimating services like material takeoff, quantity takeoff, framing takeoff, etc. Following are a few key terms and concepts to deal with an efficient construction cost estimate.

List of Critical Terms for a Construction Cost Estimate

  • Quantity takeoff
  • Labor Hour
  • Labor Rate
  • Material Prices
  • Equipment Costs
  • Subcontractor Quotes
  • Indirect Costs
  • Profits
  • Contingencies
  • Escalation
  • Bonds
  • Capital Costs
  • Operations and Maintenance Costs
  • Variances

Quantity Takeoff

A quantity takeoff develops during the pre-construction phase, which includes materials and labor demands to complete a project.

Labor Hour

Labor hour is also known as man hour, and it is considered as a unit of work to measure the output of a particular person to work for an hour.

Labor Rate

A labor rate is a certain amount per hour that pays to a skilled craftsman. It also includes the basic hourly rate and benefits with the additional costs of overtime and payroll burdens like worker compensation and unemployment insurance. It will assist you in maintaining the track of wages and labor hours

Material Prices

A cost of material is eventually prone to fluctuate based on market conditions and different factors that seasonally vary with the cost estimators to look at historical cost data and other buying cycle phases to calculate the expected material prices.

Equipment Costs

Equipment costs refer primarily to running and cost the renting amount of heavy machinery like cement mixers and cranes. It’s essential to note the equipment usage that influences how quickly you can complete the project and an efficient use of equipment that impacts many costs directed with the outside running of equipment.

Subcontractor Quotes

Contractors always approach to hire multiple specialist subcontractors to fulfil parts of construction because it adds the subcontractor’s quotes to the contractor’s total estimate. It is helpful to use a tracker and collects the subcontractor documentation at a particular place.

Indirect Costs

Discussing indirect costs will show you expenses that are not directly associated with the construction work like administrative costs, minute types of equipment, transparent costs, temporary structures, design fees, permits, legal fees and other types of expenses that rely on a construction project.


To generate profit, a contractor has to add a margin to the entire cost of work. Many subcontractors follow the same practice while preparing their quotes.


There must be many contingencies while delivering the accurate estimate because of different unforeseeable factors like materials wastage. A particular estimate will demand to have a predetermined collective budget for other added costs


It refers to having the natural inflation of costs over the past time, and it is efficiently vital to consider future long-lasting projects. Different projects have escalation clauses to address the mechanism of how to handle this particular inflation.


A reliable owner will demand a contractor to arrange himself for the issuance of the performance bond in favor of a certain project owner. A bond functions in a particular way as a kind of guarantee to deliver. It should also consider a contractor fail to complete the project according to different terms and conditions of the contract. An owner compensates the monetary losses up to the amount covered by a performance bond.

Capital Costs

Capital costs are associated with establishing a facility, and it includes the cost of acquiring land, the cost of conducting feasibility studies and pre-design phase, pay architects, engineer and specialist members of the design team. The total cost of construction covers the following things

  • Material
  • Equipment
  • Labor
  • Insurance fees
  • Taxes
  • Hiring a commissioner
  • Inspection of structure
  • Administrative
  • Supervision
  • Permitting


Many project owners allocate construction budgets with an extensive cost estimate after having a professional estimating service. It is practical, and cost estimates tend to underestimate the actual construction costs due to many reasons.