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Every construction project whether it’s a small or large involves money. If you ever worked on construction project finance, you might be aware how complex and difficult it is to manage the expenses. From laborers, materials to contractors, construction expenses are always complex and difficult to handle.
In that case, having a budget and financial planning is essential for any project. The project budgeting and cost estimating streamines your overall project and breakdown the expenses in the parts. So you’ll know which part consumes the most expense and be able to track the expenses. In this blog, we’ll guide you through how you can master the project planning:
Set Project Objectives
First of all in construction estimating, you have to create objectives on which you want to work. The objectives can be of anything. It can be the objective to keep the expenses low, build a quality building, complete the project as soon as possible or anything. You need to specify the project objectives and explain what you want with that project. Moreover, the objectives also tell you how you can manage the project and budget the project accordingly.
| Objective Type | Description |
| Financial | Objectives related to financial outcomes and performance |
| (e.g., increasing revenue, reducing costs, improving ROI) | |
| Strategic | Objectives aligned with the organization’s long-term goals |
| and overall strategy (e.g., market expansion, competitive | |
| advantage, brand positioning) | |
| Operational | Objectives focused on improving operational efficiency and |
| effectiveness (e.g., streamlining processes, reducing | |
| bottlenecks, enhancing productivity) | |
| Customer | Objectives aimed at improving customer satisfaction and |
| loyalty (e.g., enhancing customer experience, increasing | |
| retention rates, improving service quality) | |
| Quality | Objectives centered around delivering high-quality |
| products or services (e.g., reducing defects, improving | |
| product reliability, achieving quality certifications) | |
| Time | Objectives related to project timelines and deadlines |
| (e.g., completing the project within a specified timeframe, | |
| meeting project milestones) | |
| Scope | Objectives focused on the project’s deliverables and |
| scope boundaries (e.g., delivering all planned features, | |
| ensuring adherence to project requirements) | |
| Stakeholder | Objectives aimed at satisfying the needs and expectations |
| of project stakeholders (e.g., addressing stakeholder | |
| concerns, obtaining stakeholder buy-in) | |
| Social | Objectives related to social impact and responsibility |
| (e.g., promoting sustainability, supporting community | |
| development, ensuring ethical practices) | |
| Innovation | Objectives centered around fostering innovation and |
| creativity within the project (e.g., introducing novel | |
| solutions, encouraging experimentation) | |
| Risk Management | Objectives focused on identifying and mitigating project |
| risks (e.g., minimizing potential disruptions, | |
| implementing risk response strategies) |
Scope of the Project
Score of the project defines how and what type of things you want to add in your project. It refers to SOPs or rules through which you’ll run your project. Moreover, the scope of the work is also defined by the total budget.
More the budget ∝ Efficient scope of the project
These are the factors that influences the scope of the project:
Available Resources: Available resources refers to the total number of labors, materials, raw materials, time and location of the project. With this way, you can estimate what scope you want to set for your project.
ETA: Some clients may put a restriction or some give you free hand for the work. If there’s a targeted ETA, then you may want to set the scope accordingly. However, if you’ve got a free hand on the time section then you can ignore this section.
Main goals: As mentioned in the 1st heading, must consider the main goal of the project. Additionally, You or your client may want the project to be completed in the least time possible or your client may want to get the highest build quality on priority. As a result, It all depends on the priorities that you or your client wants.
Estimate Overhead Costs
To estimate these costs, identify various categories like administrative expenses, insurance. As well as, Equipment maintenance, utilities, and project management fees. Determine the appropriate method to allocate overhead costs, such as direct labor hours, direct labor costs, or a percentage of direct project costs.
Additionally, you can calculate overhead rates by dividing total overhead costs by the selected allocation base, such as direct labor costs incurred over a specific period. Apply the determined rate to the estimation process and multiply it by the corresponding allocation base, such as labor hours or material costs. Additionally, You should regularly review and adjust overhead rates to maintain accuracy and align with changing overhead expenses in your project budgeting.
Perform Construction Takeoff
To perform construction takeoff effectively, start by carefully reviewing the project plans. As well as, specifications, and any relevant documentation. This step helps you understand the scope of work and identify the specific items and quantities to be measured. It’s essential to pay close attention to details and clarify any uncertainties or errors with the project stakeholders.
Once you have a clear understanding of the project requirements, use digital construction takeoff software or traditional manual methods to measure and quantify the materials needed. Digital takeoff tools provide efficiency and accuracy by allowing you to extract quantities directly from digital plans, while manual methods involve measuring and counting quantities manually.
FAQ
1. What is construction estimating, and why is it important?
Construction estimating is the process of predicting the costs of a construction project, including the cost of labor. Further, materials, equipment, and other expenses. Moreover, Accurate estimating is crucial for ensuring that a project is completed on time and within budget.
2. What factors should I consider when creating a project budget?
When creating a project budget, there are several factors to consider, including the size and complexity of the project, the location of the project, the availability of labor and materials, and any special requirements or regulations that may apply. You’ll also need to consider indirect costs, such as insurance, permits, and overhead.
3. How do I accurately estimate the cost of labor and materials for a construction project?
To accurately estimate the cost of labor and materials for a construction project. Moreover, You’ll need to have a detailed understanding of the project scope, including the type of work required. Further, the quantity and quality of materials needed, and the amount of time required to complete the work.
4. What are some common mistakes to avoid when creating a construction estimate?
Lastly, One common mistake to avoid when Construction Estimating is failing to account for all of the costs associated with the project. As well as, including indirect costs and unexpected expenses.