Basic Principles of Estimating
Prof. Awad S. Hanna
Estimating
A prediction of probable cost.
Is figuring out how to put the pieces
together in the most economical
manner.
Estimating is both art and science.
Prof. Awad S. Hanna
Estimating (cont.)
Identify and quantify the pieces-takeoff.
Identify construction methods.
Engineering - Will it be stable during
construction?
Productivity
Prof. Awad S. Hanna
Bidding is NOT the same as Estimating
Identify RISK
How do you get paid?
Prof. Awad S. Hanna
Successful Estimating
Contractors are not in business to win
bids.
Contractors are in business to make
money.
Estimating is the base of a company’s
success.
Prof. Awad S. Hanna
Estimating for Profit
Good estimating minimizes contractor’s
risk and facilitates project management
and defines the scope of work.
The estimate is the plan that furnishes
the field people with all the details in a
controlled and prearranged format.
Prof. Awad S. Hanna
Estimating Requires:
Skills
Effort
Above all, an organized system that will
prevent errors and omissions.
Prof. Awad S. Hanna
Estimating is very expensive;
therefore, we must use out time
wisely and effectively if we are to
be successful.
Prof. Awad S. Hanna
Cost of Estimating
Chart 1
55
50
A
hours
45
40
B
35
30
25
C
20
15
10
100
200
300
400
Size of Project in Thousands of Dollars
A
B
C
Simple project
Medium complexity
Difficult project
Prof. Awad S. Hanna
500
hours
Cost of Estimating (cont.)
170
16
0
150
140
130
12
0
110
100
90
80
70
60
50
40
30
Chart 2
A
B
C
1.5
2.0
2.5
3.0
Size of Project in Millions of Dollars
A
B
C
Complex
Medium complexity
Simple
Prof. Awad S. Hanna
3.5
Profit Should Correlate to Risk
Job Comparison
Compare two jobs of identical direct cost,
yet very diverse in overhead and risk
factor:
Job “A”
Job “B”
Material
$200,000
Labor
20,000
Subcontractors
100,000
General Expenses
30,000
Subtotal
350,000
Overhead @10%
35,000
Profit @10%
38,500
Selling Price
$423,500
Prof. Awad S. Hanna
$100,000
230,000
10,000
10,000
350,000
35,000
38,500
$423,500
Profit Should Correlate to Risk (cont.)
Job Comparison
# labor
5
5
6
6
5
5
7
7
7
5
5
4
1
2
3
4
5
6
7
8
9
10
11
12
10
10
2
3
11
12
week
12 weeks 65 labors
# labor
15
2
3
3
2
2
3
1
2
3
4
5
6
15
7
8
12 weeks 65 labors
Prof. Awad S. Hanna
9
10
week
Profit Should Correlate to Risk (cont.)
Materials
Low to medium risk
Labor
High risk
Subcontractors
Low risk
General Expenses
Low risk
Prof. Awad S. Hanna
Accuracy is Critical for Success
A typical project can be broken down as
follows:
Material
40-45%
Labor
35-40%
Equipment Expenses 8-10%
Overhead
10%
Profit
2%
Prof. Awad S. Hanna
Common Estimating Mistakes
Misread or misinterpreted specifications,
drawing, or any other contract document
Takeoff omissions or overlaps
Missing quotes
Estimating by unit prices
Using the percentage method to establish the
cost of certain systems
Prorating indiscriminately
Crumbling under pressure to procure work
Prof. Awad S. Hanna
Common Estimating Mistakes (cont.)
Cutting prices to meet or beat someone else’s
quote
Underestimating the complexity of a project
Expecting and excessive amount of favorable
changes
Overemphasizing volume purchasing
Undertaking a project with incomplete bid
documents
Scaling drawings
Prof. Awad S. Hanna
How to Improve your
Estimating Procedure
Company labor tables and current material
prices should be stored in your database.
Manual estimating is not cost effective and it
is subject to more errors and omissions.
Computerized estimating should automate
and expedite the manual estimating process.
Establish the company labor unit sand labor
factoring tables.
Maintain current material pricing.
Establish an estimate review procedure.
Prof. Awad S. Hanna
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