Understanding the Different Types of Construction Estimates

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On March 13, 2025

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Construction estimates are the backbone of a successful building project. When done properly, estimates help contractors win more bids and achieve desired business goals. Several types of construction estimates are used at different stages of construction projects. Each type serves a unique purpose, ensuring effective budget management throughout the project lifecycle.
Let’s explore them together and understand what role they play to keep your project’s budget on track:

Preliminary Cost Estimate

A preliminary estimate, known as the rough order of magnitude estimate, is made during the project's pre-construction phase. It helps investors, developers, and owners evaluate the project's feasibility at the initial stages and helps estimators decide whether the project is worth investing in.

Important Features:

Based on the limited project details or drawing plans
Precision range: -30% to +50%
Helps to analyze the project’s practicality

2. Quantity Estimate

Quantity estimates are used to analyze the required material and labor for the building project. They allow successful project completion without any shortage or excess of material and labor. Accurate quantity estimates help avoid wastage, as the right amount of materials is ordered.

Important Features:

Ensures precise measurement of resources
Improves the project efficiency
Accuracy Rate: -!0% to +25%

3. Bid Cost Estimate

A bid estimate is a detailed proposal of projected costs a contractor submits to win a contract. It includes a complete breakdown of direct and indirect costs, overheads, labor wages, and profit margin. The owner uses this proposal to compare bids and choose the most suitable one for the job.
Important Features:
Precision Rate: -5% to +10%
It includes all the contractor’s costs plus overheads & profit margin.
Minimizes financial constraints

4. Controlled Cost Estimate

A controlled cost estimate highlights the project’s cost based on scope to avoid financial constraints. It acts as a foundation for decision-making in a project. In contrast to preliminary estimates, a control estimate is more comprehensive and refined. It is developed when the project scope is clearly defined.

It mitigates financial risks.
Project managers can easily plan for the unforeseen conditions.
Accuracy Range: -10% to +20%

5. Detailed Estimate

A detailed estimate is also called a definitive estimate. This comprehensive type includes a detailed breakdown of materials, labor, equipment, overhead, and contingencies. It demands an in-depth review of project documents and deep collaboration with subcontractors to cover every cost.

Important Features:

Assist in final budgeting and bidding
Precision range: 5% to +10%
Most comprehensive estimate
It is a resource-intensive and detailed quantity analysis

Three Reliable Approaches for Cost Estimates:

Bottom-up estimate

It is an effective technique that splits a project into smaller parts to estimate time, cost, and resources. It helps develop well-defined schedules and budgets, especially when the project scope details are available. You’ll get an estimate for the entire project by adding all costs from the bottom to the top to reach an overall project estimate.
Precision range: 5% to +10%

Parametric estimate

It is a quantitative analysis of all resources needed to complete the project; including costs, time, materials, and human resources. This type of estimate is derived from past projects; so you can use the historic data for the upcoming projects. This data-driven approach helps make accurate cost projections in less time than other subjective methods.
Accuracy Range: -25% to +25%

Three-point estimate

It is a project management technique employing different scenarios to analyze the duration and cost of a project task. The main objective of a three-point estimate is to improve the accuracy of project estimates. It also identifies potential risks and uncertainties to develop contingency plans accordingly.
Accuracy Range: 95%

What are the Cost Components Associated with a Construction Estimate?

Direct Costs – Cost of materials, labor, and equipment
Indirect Costs – Cost of utilities, legal fees, permits, taxes, etc.
Labor Costs – Cost of paying your team, including wages, taxes, and overtime
Subcontractor Costs – Cost of contracted work, including labor, materials, and equipment
Escalation Cost: Increased costs due to Inflation, currency fluctuations, and other market factors.
Contingencies and other allowances

Factors affecting the choice of estimate:

Project Stage:
The choice of estimate type depends on the project phase. A preliminary estimate is desirable for the initial phase. A detailed estimate becomes suitable as the project proceeds and adds new information. Similarly, a quantity estimate is needed to calculate material and labor. Finally, a bid estimate becomes relevant during the procurement stage.
Project Complexity: Small-sized projects require less detailed estimates due to less risk involvement. In contrast, in-depth, detailed estimates are needed to mitigate the risks of complex projects.
Cost and Time restriction:
Cost and time largely influence the choice of an estimate for a building project. For projects where time and cost are limiting factors, detailed estimates might not be desirable.
Risk Tolerance:
The choice of estimate also depends on a project's risk profile. Detailed cost estimates are beneficial for high-risk projects to avoid any financial surprises.

Conclusion:

It’s essential to choose the right type of estimate for each stage of a construction project. Each approach has its benefits and limitations. By selecting the right estimate type, you can manage your project’s budget and achieve your business goals.

If you're looking for accurate construction estimating services, please contact us. Our estimators have a clear understanding of all types of construction cost estimates. Our experts know which estimation method aligns with the project scope and scale and avoids financial constraints. We help you prevent cost overruns and ensure successful project completion within a quick turnaround of 24-48 hours. Also, our team is available 24/7 for customer support.