Estimating the construction project cost can become complicated as many factors influence it. To adequately estimate the cost of construction projects, you need to have proper training and experience. In this article, we will list the factors you should consider before estimating the cost of your construction project.

Estimate cost of construction projects

The following factors should be kept in mind while trying to calculate the construction project cost estimate:

  • Cost of similar projects: For an estimator, the best method to determine the estimate of a specific construction project estimate is to look at other reference projects with a similar scope. If you can find a project similar to yours, it provides valuable insights into estimating by helping you understand final cost items and related expenses within the project.
  • Material costs: One of the most variable factors in calculating the estimated cost of the construction project is the cost of materials. Not only does the estimator have to factor in the cost of the materials and supplies themselves, but they also have to consider the shipping charges. Additionally, these expenses must be factored in long before the estimation process begins, as materials are needed to begin the actual process.
  • Wage costs: The local government usually specifies the local labour rates. However, when calculating the labour cost for a project, consider if you need a specific skill set. Hence, it is always helpful to look at the design of your construction project and inter-relate it with labour costs.
  • Site condition: Project site conditions can positively and negatively impact construction costs. The estimator must assess the condition of the soil and categorise it as either appropriate, poor or workable. Wetlands can further increase the cost of construction projects. Sometimes, the soil condition is appropriate, but conflicting utilities can increase the cost of the project, as these utilities need to be mitigated before the project actually starts. Examples of conflicting utilities include overhead lines, cables or buried pipes. The environmental sensitivity should also be determined, and the estimator should check the groundwater or river stream crossing on the construction project. When discussing environmental sensitivity, endangered species habitats and similar conditions should also be explored. It is also beneficial to check archaeological surveys to note if any archaeological sites are near or on the site, as this can create legal ramifications in the future.
Estimate cost of construction projects
  • Inflation factor: Inflation is essential when considering a construction project’s cost estimate. The estimator must utilise similar projects in the past as a basis for calculating the construction cost index. Additionally, utilising national news and analysing market trends is necessary to tabulate any inflation in the construction industry. Generally, economists are good at predicting any inflation, so the estimator should keep an eye open for fluctuating market trends.
  • Bid timing: The bid time can significantly impact the construction project cost estimate, as bidding early can help you save more. Additionally, seasonal variations can modify bid timing costs, such as conflicts in the construction industry or other bid openings in the project.
  • Project schedule: The project schedule can impact the cost estimate significantly, and the estimator must consider the nature of the project schedule before attempting to estimate the cost. For example, if a specific project requires an aggressive timeframe, the price invariably increases, as significant liquidated damages may occur to complete the project within the pre-determined deadline. However, if the schedule is reasonable, the contractor will not fear material cost inflation and prioritise this project. Hence, most bidders inflate their bids to protect against aggressive timeframes and consequent inflation.
  • Quality of plans and specifications: A well-sought-after plan protects the project against inherent risks and adverse events. If every detail of the project is carefully considered and a plan is created to mitigate all these issues, generally, there are no fluctuations in the cost estimate.
  • Reputation: The reputation of the engineering firm or the project engineer is reflected in the bid price. Hence, someone with a good reputation will have a reasonably priced bid.
  • Regulatory requirements: Sometimes, regulatory approvals may be costly, and therefore, the estimator must ensure that the project is adhering to all necessary obligations before commencing the actual project.

Construction cost estimating strategies

The list of variables that could alter the cost of a construction project is endless. However, there are five key strategies commonly used in the estimating process, including:

  1. Order of magnitude: This method helps provide a rough estimate to the stakeholders and decision-makers by correlating project costs to the magnitude of the scope.
  2. Schematic design estimate: In this method, estimations are made around the architecture, overall structure, mechanical and electrical aspects, and the plumbing system.
  3. Preliminary estimate: This estimate takes place in the conceptual stage, where the expected cost will depend upon the available information regarding the preliminaries, structure, finishes and contingencies.
  4. Construction document estimate: Here, the estimate is informed by the specifications of the construction project and is based upon the finalised project designs and key deliverables
  5. ┬áBid estimate: This estimate reflects the contractor’s desire to secure the project and an estimate of all tools at disposal.
Construction cost estimating strategies

If you plan to do construction in Australia, we suggest you also read the article “how to decrease risk in construction site?” from the Edara App blog.


Many variables can impact the construction project estimate, including regulatory requirements, the engineer’s reputation, project schedule inflation, etc. Many strategies are utilised to estimate the cost of a construction project, including considering the order of magnitude, the preliminary estimate, the construction document estimate or the bid estimate.