How To Better Estimate Construction Jobs and Stay Within Budget

You just landed a contract for a major commercial development – an exciting opportunity but also a big step up from your typical construction project. The client wants an accurate cost estimate. You know how to estimate construction jobs, but this is different. With the project’s size and complexity, you’re worried that any figure you provide might be more guesswork than precision.

If you’ve ever experienced the consequences of a bad estimate, you know how critical accuracy is to profitability and success. Poor estimates can lead to cost overruns, missed deadlines, and damaged client relationships. In all, it’s a lot of direct costs to your construction business and adds stress to you.

So, what’s the solution? In this article, we’ll cover best practices for improving job estimates, monitoring actuals in real-time, and leveraging technology to stay on budget. Plus, we’ll show how ContractorBI makes it easier than ever to ensure your next construction job stays on budget and delivers the results your clients expect.

The Challenge of Getting Job Estimates Right (and How To Overcome It)

The construction industry is full of challenges, and estimating construction costs can be a major sticking point. An accurate construction estimate is crucial for setting the right expectations, securing financing, and achieving a project’s scope. Without it, construction companies like yours risk unexpected costs, diminished profit margins, and even project delays. Studies have also shown that management-related issues cause one-third of cost overruns – which means good planning could have avoided them.

Perhaps this is the first project of this scale your company has worked on, or material costs are fluctuating so fast you can’t pin down what they’ll be when you need them. Labor shortages also have a huge impact on development costs, which can blow up your budget. Then there’s always the potential for human error, complicating processes like this.

Contractors generally understand the importance of creating accurate estimates, but it can be a struggle for anyone to handle the detailed understanding needed to calculate overhead, unit costs, and additional potential costs for a particular project. For specialty contractors and general contractors alike, it’s essential to have the right tools and processes in place to generate more accurate estimates.

Best Practices for Monitoring Job Estimates Versus Actuals

1. Start With a Detailed Understanding of the Project’s Scope

An accurate construction estimate begins with a clear and detailed understanding of the project. This includes reviewing site conditions, construction materials required, labor requirements, permit fees, and unit prices.  As part of this process, compare the project’s scope to similar prior jobs to identify trends, potential challenges, and benchmarks for labor and material costs. A preliminary estimate is a good idea to outline initial project costs and refine them as more details become available.

2. Learn From Historical Data To Improve Estimates

Analyzing past projects is an important step in refining cost estimates and forecasting. Historical data can provide insights into labor hours, material costs, overhead expenses, and project performance trends. Use this information to help identify what worked, what didn’t, and where you can improve.

To make this process even more effective, match the current job’s scope to similar past projects based on job type, market segment, customer, past estimator, project manager, or building owner. ContractorBI excels in this area by allowing you to filter and analyze historical data using these specific parameters, enabling you to create highly relevant and accurate estimates tailored to your project.

However, when dealing with projects significantly different from your previous work or in fluctuating market conditions, historical data alone will not suffice by itself. In such cases, leverage real-time data and additional insights to fill in the gaps.

3. Incorporate Real-Time Data Into the Estimating Process

While historical data helps improve your process, it’s real-time data that keeps your current projects on track. Relying solely on past information can lead to estimates that don’t account for changing conditions, such as more expensive material prices or labor shortages.

Tools like ContractorBI also provide real-time data on labor hours, material usage, and subcontractor costs. These insights allow you to adapt quickly, preventing budget overruns and helping make sure your estimates align with current market conditions.

4. Regularly Compare Estimated Costs Vs. Actual Costs

Throughout the project, compare the estimated cost against actual performance. Focus on key cost factors like labor hours, material usage, and unit costs. This ongoing review allows for adjustments that keep the project on track and within budget.

With ContractorBI, you can take this process further by leveraging financial job performance metrics to analyze estimates versus actuals for similar jobs. Break down costs by cost type, cost category, and cost codes to gain a deeper understanding of where variances occur and how to address them. This detailed level of analysis improves accuracy for the current project while providing insights that refine future estimates and enhance overall profitability.

5. Collaborate Across Teams

Foster collaboration from the ground up by empowering your team with the tools they need for seamless communication.

Field teams, estimators, and project managers should all have access to the same real-time, accurate data to stay aligned and address challenges as they arise. Software like TopBuilder integrates directly into daily workflows, centralizing data from job sites, estimating processes, project updates, and more.

By streamlining tasks such as capturing leads, creating proposals, managing timelines, sharing documents, tracking accounting data, and measuring success, everyone stays connected and on the same page.

6. Leverage Smart Construction Analytics Tools

Using the right tools and technology is a game-changer for accurate and efficient estimates. Think of manually calculating estimates like trying to dig a foundation with a shovel – technically possible, but painfully slow, labor-intensive, and prone to mistakes. Estimating is a complex process that requires precision, and relying on outdated methods can cost you time, money, and even your sanity.

Instead, take advantage of smart construction tools like ContractorBI, which streamline the process, reduce errors, and provide data-driven insights. With technology designed specifically for the construction industry, you can tackle even the most complicated estimates with confidence and ease.

In addition to refining project estimates, ContractorBI enables you to analyze payment and financial history for the customer responsible for approving your bid and paying the bill.

How ContractorBI Simplifies Cost Tracking and Improves Accuracy

For construction companies looking to streamline their estimating process and improve accuracy, ContractorBI makes all the difference. It simplifies cost tracking, provides actionable insights, and ensures that every project estimate is rooted in real-time data. Here’s how ContractorBI can help you create estimates that align with actual costs.

The more than 45 real-time dashboards pulling data from accounting, project management, and estimating tools allow you to track estimated hours and costs versus actuals with intuitive visualizations.  For example, you can track estimated labor hours versus actual hours worked or analyze how material costs fluctuate over the course of the project.

By comparing estimated costs with final expenses, ContractorBI identifies discrepancies and highlights opportunities for improvement. This feedback loop feature supports continuous improvement over the long term, beyond just this one project – helping you refine your estimate template and improve accuracy for future projects.

Unexpected costs are inevitable in construction, but with ContractorBI, you can address them before they escalate. For instance, if a sudden labor shortage increases labor costs, ContractorBI can help you adjust schedules or reallocate resources to minimize budget impacts.

You can also use this feature to identify hidden opportunities. For example, if the cost of a high-end material drops mid-project, ContractorBI alerts you, enabling you to provide additional value to a client without exceeding the estimated cost.

Smart Estimating Made Easy With ContractorBI

Accurate construction estimates are the foundation of any successful project. By refining your estimating process, tracking costs in real-time, and using ContractorBI, you can ensure every project delivers strong margins while meeting client expectations. Whether you’re a general or specialty contractor, investing in technology is necessary to not only stay competitive, but set yourself apart from your competitors in the industry.

Take your estimating and budgeting process to a new level. Learn more about ContractorBI and schedule your demo today!