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How to price construction project

Updated: Aug 30, 2019

Construction estimate esential componets.

The quotation is not the only factor you need to look at when pricing for the job but only half of the success. Another crucial element is the execution of the project, and this is the area where most of the contractors fail. I want to explain a significant relationship between pricing and delivery of your services to make the profits.

The key to success is to deliver the project on time and budget in line with your estimate. First, the essential factor is the overheads that you have to account for when pricing for the job. Resources such as labourer, materials and plant must be correctly calculated, but this will not guarantee the success of your project without correct execution.

Things to consider when estimating the labourer.

Construction labour is the riskiest resource on our list and most challenging to predict. The human factor plays a huge part in this section and could be very unpredictable. However, knowing your team and productivity of your tradesmen will have a significant impact on the profitability of your business. You must always remember to delegate tasks correctly and execute them within the estimated timeframe. Otherwise, it will eat up your profits if you do not pay attention to the execution.

Estimate construction labourer
Estimate construction labourer

How to estimate materials cost.

Material cost is less complicated to estimate than a labourer, and the best method is always to measure and calculate the quantities. You can always prepare a quantity list and check the prices with your local builder's merchant. Don't forget to add 6 to 10 per cent wastage cost for offcuts and anused materials that you will not be able to return. Specification of your project is crucial here as it may make a big difference in cost when purchasing the materials for the project, so you have to make sure you priced for correct materials in your estimate.

Building materials estimate
Building materials estimate

How to calculate the plant cost for your project.

In most domestic construction projects you will have to allow for rubbish removal plant such as skips, grab lorry or man and van type of services. Depending on your project, you may also need scaffolding or temporary roofing, and you can quickly obtain this quote from local subcontractors. Remember to check licencing fees that may apply if you are setting up scaffolding on the public pathway. Another type of plant is mechanical and lifting equipment such as diggers, dumpers and lifters. You can get the cost estimation form local hire companies. The plant cost will heavily depend on the accessibility of your project, and often in busy urban areas, you can expect licence cost to be high.

Estimate construction plant
Estimate construction plant

Subcontractor and specialist costs.

As the main contractor, you will be using subcontractors on the majority of the projects. This part is easy to estimate, but the critical element is to work on fixed price base. Also, take int consideration the time frame and specification you agreed to avoid any surprises and additional cost. Make sure you give your subcontractor plenty of time in advance to look through specification before they provide you with the quotation for their part.

How to calculate your profit margin.

In this section, you have to look more closely and calculate all the cost associated with running your business. In other words, you have to include all operational expenses plus profits you want to make after completing the project. Operational expenses are unique to every business but here are some examples of key expenses category you need to include. First, you need to look at the management part of your business. How demanding is the project or client and how much time will require to execute the job effectively. Immobilization and transportation cost could also be very demanding and time-consuming. One more thing to remember is also to allow a portion of the money to pay the taxes. Finally is time for you to decide how much money you want to keep after paying for all the above expenses for bonuses or reinvestment.

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