What Is Construction Cost Estimating?
Construction cost estimating is the process of forecasting the total costs required to complete a construction project. It involves evaluating all expenses—from materials and labor to equipment, overhead, and contingencies—so that owners, contractors, and project managers can plan, budget, and execute with confidence.
A well-prepared estimate ensures that a project is financially viable, supports accurate bidding, and helps prevent cost overruns during execution.
Key components of a construction estimate include:
- Direct costs – Materials, labor, equipment, and subcontractor fees
- Indirect costs – Permits, insurance, project supervision, utilities, and administrative expenses
- Contingencies – Budget buffers for unforeseen events, design changes, or material price fluctuations
- Profit margins and markups – Additional amounts added to ensure business sustainability and competitiveness
Estimates are used throughout the construction lifecycle, from early conceptual planning to detailed bid proposals, and are essential for cost control, risk management, and client transparency.
Unlike static spreadsheets, modern tools like Smartsheet for Construction make it easier to build, share, and refine estimates collaboratively—keeping everyone aligned as projects evolve.
Types of Construction Cost Estimates by Project Phase
As a construction project moves from concept to completion, cost estimates evolve in detail, accuracy, and purpose. These estimates correspond to key project phases—planning, design, bidding, and execution—and help stakeholders make informed decisions at every stage.
Smaller jobs (like a bathroom remodel) may require just one estimate. But for larger or more complex builds, you’ll likely create several estimates as the scope becomes clearer and more refined.
Here’s how construction cost estimates align with each phase of the project lifecycle:
Planning and Feasibility Phase
At this early stage, the goal is to assess viability and shape expectations.
- Conceptual Estimate
A high-level projection based on similar past projects or rough metrics (e.g., cost per square foot). Used before drawings or specs exist.
Use case: Deciding whether to move forward with a commercial buildout. - Feasibility Estimate
Evaluates whether a project is technically and financially viable, factoring in preliminary costs, timelines, and potential ROI.
Use case: Developers evaluating land use options. - Preliminary Estimate
A more detailed early forecast using partial design data or historical benchmarks. Helps refine the project plan.
Use case: Revising scope after initial stakeholder feedback. - Budget Estimate
Establishes a working project budget and supports financing efforts. Often based on early drawings and past project data.
Use case: Submitting estimates for lender approval.
Smartsheet for construction makes it easy to create and share early-stage estimates using historical project templates and collaborative input forms.
Design Phase
As designs become more detailed, so do the estimates.
- Detailed Estimate
Breaks down projected costs by category—materials, labor, equipment, subcontractors—based on developed design documents.
Use case: Creating a refined estimate for internal planning and approvals. - Definitive Estimate
A near-final estimate that reflects completed design and serves as the official project budget.
Use case: Approving construction funds before procurement. - Engineer’s Estimate
A technical estimate prepared by engineers to serve as a benchmark for comparing contractor bids.
Use case: Public agencies issuing RFPs.
Bidding Phase
At this point, the focus shifts to competitive pricing and proposal submission.
- Bid Estimate
A contractor’s formal bid, based on full project specifications, used to compete for and win the project.
Use case: General contractor submitting a lump-sum bid for a school renovation. - Negotiated Bid
Created collaboratively between contractor and client, often in noncompetitive or design-build situations.
Use case: Owner and builder agreeing on a cost-plus contract.
Construction Phase
Now the estimates are used to monitor progress and manage financial control.
- Control Estimate
Compares actual project costs to planned estimates in real time. Helps flag budget overruns and make timely adjustments.
Use case: Tracking job costs weekly with cost variance reports. - Estimate at Completion (EAC)
Projects the total cost at project end, using actual costs to date plus projected costs for remaining work. The formula is EAC = Actual Cost + (Remaining Work ÷ CPI).
Use case: Forecasting final costs for a delayed project with rising material prices.
With Smartsheet, contractors can monitor actual vs. estimated costs in real time and generate automatic EAC reports using live project data.
ASPE Classifications: Aligning Phases with Accuracy Levels
The American Society of Professional Estimators (ASPE) uses a five-level system to classify estimates by detail and accuracy, rather than by project phases. Use ASPE’s standards alongside phased estimates to get clear expectations for cost accuracy at each stage. Doing so will help you set a realistic project budget from start to finish.
The ASPE levels are:
- Level 1: Order of Magnitude Estimate (plus or minus 20-30 percent accuracy): Similar to the conceptual estimate, this provides a broad early estimate.
- Level 2: Schematic Design Estimate (15-25 percent): Similar to the preliminary estimate, this estimate refines costs as you nail down project details.
- Level 3: Design Development Estimate (10-15 percent): Similar to the detailed estimate, it provides a clearer budget as designs solidify.
- Level 4: Construction Document Estimate (5-10 percent): Similar to the definitive estimate, create this to set the final project budget before construction.
- Level 5: Bid Estimate: This estimate matches the bid estimate, which is the contractor’s detailed proposal for the project.
Construction Cost Estimating Methods (and When to Use Each)
Different estimating methods are used depending on the size, scope, and stage of a construction project. Choosing the right approach can save time, improve accuracy, and increase your chances of winning a bid—especially for small contractors working with tight margins.
Here are four of the most widely used cost estimating methods in construction:
Analogous Estimating (Top-Down)
Uses the cost of a past, similar project to estimate the cost of a new one, with adjustments for differences in size, materials, or location. Best for early-stage planning or conceptual estimating when detailed information is limited.
Pros:
- Fast and simple
- Helpful for initial budgeting
Cons:
- Less accurate
- Relies heavily on past data being relevant
Use case: A contractor who recently completed a 2,000 sq. ft. retail buildout may estimate a new 1,800 sq. ft. project by adjusting the original cost based on square footage.
Square Foot Estimating
Calculates costs based on average price per square foot for similar project types in a given region. Best for feasibility studies or quick ballpark figures.
Pros:
- Quick to calculate
- Useful during early conversations with clients
Cons:
- Doesn’t account for project-specific complexity
- Regional cost variations can skew accuracy
Use case: A small general contractor estimating a single-family home addition based on local cost-per-square-foot averages.
Unit Cost Estimating
Breaks the project into individual units (e.g., per linear foot of pipe, per cubic yard of concrete) and assigns a cost to each based on labor, materials, and equipment. Best for medium-sized projects with known quantities.
Pros:
- More detailed and accurate
- Easier to scale or adjust line items
Cons:
- Requires detailed scope and quantity takeoffs
- More time-intensive than square foot or analogous
Use case: A contractor estimating the cost of installing 500 linear feet of fencing, including posts, labor, and hardware.
Detailed (Bottom-Up) Estimating
Calculates the cost of every material, task, and labor hour required to complete the project, then rolls them up into a total. Best for complex or high-stakes projects where precision is critical.
Pros:
- Most accurate method
- Useful for formal bids and client trust
Cons:
- Time-consuming
- Requires complete drawings and specs
Use case: A small commercial builder preparing a detailed proposal for a tenant improvement project with a strict budget and defined scope.
Want to go deeper?
Learn more about these methods in our complete guide to construction estimating methods.
How to Estimate Construction Costs: A Step-by-Step Guide
Estimating construction costs requires more than guesswork. It demands precision, real-world insight, and structured planning. Below is a proven step-by-step process that contractors and estimators follow to generate accurate, defensible estimates for projects of any size.
Steps in Construction Cost Estimating
1. Review the Project Plans and Site Conditions
Start by analyzing blueprints, specifications, and any other design documentation. If possible, visit the job site to understand conditions that could impact labor, materials, or equipment.
“Blueprints are helpful, but they don’t tell the whole story,” says Aaron Lipman, owner of Two Brothers Foundation Repair. “I once estimated a repair based on plans alone, only to find a massive tree root under the surface during excavation. That surprise could have derailed the job if I hadn’t accounted for extra labor and tools."
Smartsheet Tip: Attach site photos, plans, and notes to your estimating sheet so your team can reference them later in one place.
2. Perform Quantity Takeoffs
Break the project down into measurable components—like square footage, cubic yards of concrete, or linear feet of piping. This process, called a quantity takeoff, is the foundation of your cost estimate.
“Measure everything carefully,” says Brendan Anderson of Brix Systems Roofing. “When I started, I underestimated material a couple of times — it was a nightmare scrambling to get more supplies mid-project. Now, I measure at least twice and always add a little buffer.”
Smartsheet Tip: Use built-in formulas and linked sheets to calculate quantities and auto-update totals as designs change.
3. Research Material, Labor, and Equipment Costs
Gather up-to-date prices for:
- Materials (plus delivery and tax)
- Labor rates (per hour or unit)
- Equipment (rental, fuel, maintenance)
Use supplier quotes, historical project data, and regional benchmarks. Building your own cost database can save time on future estimates.
“Succinctly list every cost.” says Mike Falahee of Marygrove Awning Co. “When someone can see exactly where their money is going, they like it. For instance, in my quotation for a Marygrove-louvered roof, I always include the costs of the motorized component separately. Trust starts to grow.”
4. Choose the Right Estimating Method
Pick a method that matches the project’s stage and complexity:
- Square Foot – fast feasibility studies
- Unit Cost – mid-level detail using known rates
- Detailed (Bottom-Up) – full estimates with line-by-line costs
See our full guide on estimating methods
5. Add Contingencies and Profit Markups
Add a contingency buffer (typically 5–15%) to account for unexpected changes—like price increases, delays, or site surprises.
“Always include a contingency budget (usually five to 10 percent) to cover unforeseen expenses.” says Lanyon Heinemann of JMK Contractor. “This tip has saved me more than once when projects faced scope changes or material price increases."
Also include markups for profit, overhead, and risk. Be transparent and consistent.
6. Review for Accuracy
Double-check all math, quantities, and pricing. Validate complex line items with suppliers or specialists. Ensure nothing was overlooked—especially indirect costs like permits, supervision, or insurance.
7. Document Assumptions and Exclusions
Clearly note what’s included—and what’s not. Exclusions (like landscaping or interior finishes) help prevent scope creep and miscommunication.
Smartsheet Tip: Use comments or attachments to log assumptions and exclusions right within the estimate.
8. Present and Finalize the Estimate
Summarize key costs and categories in a clean, professional format. Review it with the client and get formal sign-off before starting procurement or scheduling.
9. Track Actuals vs. Estimates During Construction
Once the project begins, compare actual spending against your original estimate to stay on budget. If needed, revise your Estimate at Completion (EAC) based on real-time data.
Smartsheet makes this easy with:
- Built-in dashboards
- Budget vs. actual tracking
- Automated alerts for cost overruns
Construction Estimating Starter Kit for Small to Medium Businesses
This free, ready-to-use starter kit is designed for small and medium-sized construction businesses that want to streamline their estimating process—without starting from scratch.
What’s included in the kit:
Basic Construction Estimate Template (Excel )
A clean, simple one-sheet estimator designed to capture core job details and cost breakdowns. Includes placeholders for company branding and client contact information. Perfect for small projects or contractors who need a quick estimate format to send to clients.
Contractor Estimate Template (Excel & Word)
An estimating template designed for general contractors managing multi-phase construction projects. Best for contractors managing end-to-end estimates, including planning, site prep, earthwork, utilities, and finishes.
Roofing Estimate Template (Excel & Word)
A trade-specific estimator focused on roofing projects, including fields for inspection details, materials, labor, and exclusions. Ideal for roofing contractors bidding repairs, re-roofs, or new installations.
New Home Construction Estimate Template (Excel)
An estimating template built for full residential builds, covering everything from grading and excavation to cabinetry and HVAC. Great for builders estimating entire residential construction projects from the ground up.
Commercial Construction Estimate Template (Excel)
An estimator that includes categories unique to commercial builds, such as environmental review and engineering services. Tailored for commercial contractors managing office, retail, or public sector construction bids.
Everything comes in one easy-to-download file—no signup required.
Download the Construction Estimating Starter Kit
Download the Construction Estimating Starter Kit for Small to Medium Businesses
Looking for even more estimating templates? Check out our complete collection of construction estimate templates for additional formats, specialties, and project types.
Ready to Go Beyond Static Files?
These Excel and Word templates are a great starting point, but as your projects grow more complex, so do your estimating needs. Smartsheet makes it easy to:
- Collaborate with your team in real time
- Track actuals vs. estimates with live dashboards
- Automate approvals, alerts, and updates
- Keep everything organized in one connected workspace
Build smarter estimates without the spreadsheet chaos. Try Smartsheet for free.
Real-World Construction Estimating Examples by Project Type
Every construction project is unique, but the process of estimating costs follows consistent best practices. Below are real-world examples that show how to estimate costs for different types of construction projects, including the method used, key inputs, and typical cost categories.
These examples illustrate how to apply the concepts and templates in this guide to real-life jobs, whether you're remodeling a home or bidding on commercial work.
Example 1: Residential Home Renovation
Renovating a 1,200 sq. ft. single-family home, including kitchen and bathroom updates, flooring replacement, and minor structural work.
- Estimating Method: Unit Cost Estimating
- Key Inputs:
- Square footage of demo and rebuild areas
- Labor rates for plumbers, electricians, and general contractors
- Material costs for cabinetry, tile, fixtures, and flooring
- Sample Cost Categories:
- Demolition and debris removal
- Materials (kitchen/bath finishes, flooring, paint)
- Labor (hourly and subcontractor-based)
- Permit fees and contingency buffer
Example 2: Commercial Office Buildout
Interior buildout of a 3,000 sq. ft. office space, including HVAC installation, lighting, drywall, and finishes for a growing tech company.
- Estimating Method: Detailed (Bottom-Up) Estimating
- Key Inputs:
- Line-by-line breakdown of scope items (mechanical, electrical, plumbing, finishes)
- Project schedule and phasing plan
- Vendor bids and historical cost data from similar projects
- Sample Cost Categories:
- Mechanical systems and ductwork
- Electrical installation and lighting
- Flooring, partitions, and painting
- Equipment rental and project supervision
Use Smartsheet to assign estimating tasks to team members, attach bid documents, and track budget approvals in one shared sheet.
Example 3: Infrastructure Improvement Project
City-funded road resurfacing and drainage improvement for a 2-mile stretch of roadway.
- Estimating Method: Parametric + Engineer’s Estimate
- Key Inputs:
- Cost per linear foot of asphalt overlay
- Labor hours for civil crew and traffic control
- Specialized equipment costs (pavers, milling machines)
- Sample Cost Categories:
- Asphalt materials and trucking
- Subcontracted drainage work
- Traffic signage and detour setup
- Inspection and compliance costs
Want to build estimates like these? Download our free Construction Estimating Starter Kit to get editable Microsoft Excel and Word templates for residential, commercial, and infrastructure projects.
Factors That Influence Construction Estimates
Even the most detailed construction estimate can be thrown off by external factors beyond your control. That’s why professional estimators don’t just calculate—they forecast. Below are the key factors that can affect construction costs, with real-world examples to help you spot them early.
1. Site Conditions
The state of the job site can significantly affect prep work and overall costs.
Example: Uneven grading, poor soil quality, or hidden underground obstacles (like tree roots or old foundations) can lead to extra excavation and stabilization costs.
Pro Tip: Log soil test results, photos, and inspection notes directly in your estimating sheet for future reference.
““In Houston, the clay-heavy soil shifts with changes in moisture.” says Aaron Lipman of Two Brothers Foundation Repair. “Even with a perfect plan, you might discover new cracks or shifts that need extra work. Setting aside 10 to 15 percent of the budget for surprises helps everyone avoid stress.”
2. Design Completeness
The less defined the design, the more room for error in your estimate.
Example: Early-stage designs may leave out key details like custom finishes, load requirements, or structural supports—leading to costly revisions or change orders later.
Best Practice: Tie your estimate to the current design phase and clearly state what assumptions were made.
3. Local Labor and Material Costs
Prices vary widely depending on your region and the current market.
Example: A roofing contractor in Montana may pay significantly less for labor than one in coastal California. Material availability, union labor, and delivery costs can also shift the bottom line.
Best Practice: Track rates by region and trade so your team can estimate consistently across locations.
4. Timeline and Seasonal Changes
Your project schedule can directly impact labor availability, material costs, and even productivity.
Example: Rushing a job to meet a seasonal deadline may require overtime pay, premium materials, or expedited shipping. Winter conditions can also slow down exterior work.
Pro Tip: Always include seasonal buffers in your schedule and contingency plan.
5. Subcontractor Availability
Your ability to secure reliable subcontractors—on time and at a fair price—can make or break the estimate.
Example: During construction booms, skilled trades (like electricians or HVAC specialists) may be booked months in advance, leading to premium rates or delays.
Solution: Get firm quotes and availability confirmations before finalizing the estimate.
Common Elements in a Construction Estimate
Construction estimates feature different levels of detail, but share common elements. The most basic estimates break down labor and material costs, additional costs such as permits, and a buffer. Failing to consider such items can harm profitability or client trust.
Some types of estimates are only for internal use, such as those that show markups and profit margins.
Here’s a list of the common elements in typical construction estimates:
- Labor Costs: The cost for workers such as carpenters, electricians, plumbers, and other skilled labor needed for the project. Calculate the cost as hourly rate multiplied by hours worked.
- Materials: The cost of all building materials, such as concrete, wood, steel, paint, roofing, and finishing materials. Calculate this cost as unit price multiplied by the number of units.
- Equipment: Costs for renting or buying machinery and tools, including maintenance and fuel.
- Subcontractor Fees: Payments to specialized contractors (e.g., HVAC, plumbing) hired to handle specific project parts.
- Permits and Fees: Local government fees for permits, licenses, and inspections to meet legal requirements.
- Overhead Costs: Indirect costs, such as site office expenses, utilities, and administrative support.
- Insurance and Bonding: Costs for insurance coverage and bonds to protect against potential risks and liabilities.
- Site Preparation: Expenses for preparing the site, such as land clearing, grading, demolition, and setting up utilities.
- Contingency: Additional funds set aside to cover unexpected costs or changes during the project.
- Profit Margin: The contractor’s markup added to the total estimate to ensure profitability.
These elements help form a complete picture of the project’s expected costs, making it easier to plan and budget accurately.
How to Build a Construction Estimate in Excel
To write a construction estimate, it's easy to start with a template. Here are the steps using a flexible contractor’s estimate template
- Download the basic construction estimate template . (The starter kit above also contains this template.)
- Open the template.
- Add your logo and fill out the info at the top of the form.
- Continue filling out the template by adding any typical costs. Copy the most useful version of your template for ongoing use.
- To estimate a job, fill in the scope and list each line item in its category. The built-in formulas total everything up. See the example below.
- Print to PDF to email the estimate, or print a paper copy. Organize all your invoices in a computer or physical folder for easy reference.
How to Build and Manage a Construction Estimate in Smartsheet
Whether you're estimating a small residential remodel or a light commercial job, Smartsheet gives you a faster, more collaborative way to manage construction estimates. Here’s how to bring your estimating workflow to life in Smartsheet.
Step 1: Build Your Estimate Sheet in Smartsheet
Start by replicating the structure of your Excel-based estimator inside Smartsheet:
- Create a new sheet from scratch or import your Excel file (such as the Basic Construction Estimate Template).
- Set up the core columns:
- Task or Item Name (e.g., drywall, framing, tile)
- Description
- Quantity, Unit Cost, and Total Cost (use formulas like =[Quantity]*[Unit Cost])
- Category (for grouping: labor, materials, etc.)
- Project Phase (optional: planning, execution, etc.)
- Assigned To (for collaboration)
- Projected vs. Actual Cost (for tracking)
- Status and Comments
- Apply column formatting (e.g., currency, dropdowns) for consistency and accuracy.
Step 2: Collaborate with Your Team in Real Time
Smartsheet lets multiple stakeholders work in the same sheet without conflicts or versioning headaches.
- Share the sheet with team members (e.g., estimator, PM, finance) with role-based permissions. For example, the estimator inputs labor costs, while the PM reviews quantities, and the finance lead adds markup—all in parallel with full version history.
- Use row-level comments to ask questions or leave notes for each cost item.
- Add attachments like vendor quotes or photos directly to relevant line items.
- Create filtered views for each stakeholder—estimators see inputs, PMs see roll-ups, finance sees totals.
Step 3: Automate Approvals for Cost Changes
Avoid missed budget updates by automating review workflows when estimates shift.
- Create a "Variance" column using a formula: =[Actual Cost] - [Projected Cost]
- Add a "Needs Review" checkbox that flags any line with a variance above a certain threshold.
- Set up an automation rule: When “Needs Review” is checked → Send approval request to the project owner or financial controller. For example, if drywall installation ends up costing $1,200 more than expected, Smartsheet flags it and auto-notifies the PM to review and approve the overage.
- Use form responses or update requests to gather quick responses and comments from approvers.
Step 4: Track Actuals vs. Estimates Across Projects
Build visibility across all estimates in flight.
- Add summary fields to track total estimated vs. actual costs per category.
- Use dashboards to roll up financials across multiple estimate sheets. Visualize
- Cost breakdowns by labor/materials
- Real-time budget variances
- Approvals pending by project
By starting with a familiar estimate format and enhancing it with Smartsheet's collaboration and automation capabilities, your team can:
- Save hours reconciling emails and spreadsheets
- Catch budget risks before they become problems
- Keep stakeholders aligned every step of the way
Smartsheet Is the Smart Way to Manage Construction Estimates
Looking to take your estimating process to the next level? Smartsheet gives construction teams a better way to build, store, and manage cost estimates without juggling disconnected files or outdated spreadsheets. From creating shareable estimates and tracking vendor costs to monitoring budgets in real time, Smartsheet helps you stay organized, aligned, and on budget across every phase of the project.
Try Smartsheet for free and start building estimates that scale with your business.