What Are The Methods For Estimating Construction Costs?

09 March 2023

Estimating construction costs is a key element in any building project. With accurate estimates, it's possible to build a project on budget and time. But how do you accurately estimate the cost of a construction project? This blog post will explore the various methods used for construction estimating costs. From top-down to bottom-up approaches and everything in between, read on to learn how these methods help form more accurate cost estimates, so your building projects can stay on track.

The importance of cost estimation in construction:

There are seven reasons why determining the construction estimating costs is necessary:

1. Cost estimation helps to identify potential risks and develop strategies to reduce them. It is important to avoid costly surprises during the later stages of construction.

2. Cost estimation helps to create realistic project timelines and budgets, ensuring that projects are completed on time and within budget.

3. It allows contractors to anticipate what materials and labour will be needed for a project and any additional costs that might arise due to unforeseen circumstances.

4. Cost estimates can help contractors negotiate contracts with suppliers, as they know the costs associated with each item being purchased or contracted out for the project.

5. Cost estimates also provide insight into whether a contractor is providing competitive bids for materials and services related to the project.

6. They can also provide information about how much a contractor should bid on certain projects to maximize profits while still meeting deadlines and staying within budget restraints.

7. Cost estimates allow contractors to identify areas where they can realize cost savings, such as renegotiating contracts with suppliers or utilizing alternative materials or construction methods that may be more cost-effective while still achieving the desired results from the project.

Common methods for estimating construction costs

There are several methods used to find the construction estimating cost of a project. The most common methods are

1.      Cost per square foot:

This is one of the simplest estimation methods and is often used for small projects. The cost is calculated by taking the project's total cost and dividing it by the total square footage. For example, if a home has 1,000 square feet and costs $100,000 to build, the cost per square foot would be $100.

2.      Cost per unit:

This method is similar to the cost-per-square-foot method, but instead of using square footage, it uses the project's number of units (e.g., rooms, doors, windows, etc.). 

3.      Rough order of magnitude (ROM) estimation:

This method is usually used for large projects where more accurate estimates are more difficult to obtain. The ROM estimate is based on an expert's opinion and is typically expressed as a range (e.g., $50 million to $70 million).

4.      Detailed estimating:

As its name implies, this method provides a more detailed estimate than other methods and is often used for larger projects requiring more accuracy. This estimate considers all known factors affecting the project's cost (e.g., materials, labour, equipment, etc.). A professional estimator usually does a detailed estimate.

5.      Computerized estimating:

This method uses computer-aided design (CAD) and specialized software to generate highly accurate estimates for large projects. It considers all the factors that can affect the project's cost, such as materials and labour costs.

Factors Affecting the Accuracy of Cost Estimates

The accuracy of cost estimates can be affected by several factors, including the type of project, the stage of development, the level of detail, the experience of the estimator, and the availability of accurate data.

Project type: The accuracy of cost estimates can vary depending on the type of project. For example, estimating costs for a new building is typically more difficult than estimating costs for a renovation or addition to an existing building.

Stage of development: The accuracy of cost estimates can also vary depending on the stage of development. For example, early-stage estimates are often less accurate than later-stage estimates.

Level of detail: The level of detail in an estimate can also affect its accuracy. More detailed estimates are usually more accurate than less detailed estimates.

Experience: The experience of the estimator can also have an impact on accuracy. Estimators with more experience often produce more accurate estimates than those with less experience.

Availability of data: Finally, the availability of accurate data can also affect the accuracy of cost estimates. If data is unavailable or unreliable, it can make it more difficult to produce an accurate estimate.

How to choose the right method for your project

There are many different methods for estimating construction cost and the right method for your project will depend on several factors. Here are some things to consider when choosing a method:

1. The size and scope of your project: Different methods are better suited for different-sized projects. For example, the unit cost method is often used for small projects, while the bottom-up method is better suited for larger projects.

2. The level of detail you need: Some methods are more detailed than others. If you need a very accurate estimate, you'll want to choose a method that provides more detail.

3. The amount of time you have: Some methods are quicker to use than others. If you're on a tight deadline, you'll want to choose a method you can complete quickly.

4. Your budget: Some methods are more expensive than others. If you're working with a limited budget, choose a less expensive method.

5. Experience Level: Some methods are simpler to use than others. If you're new to construction cost estimation, you'll want to choose a simpler method.


Determining the construction estimating the cost of a construction project can be a daunting task. However, with the right methods, it is possible to determine the cost of your project accurately. Each method has its pros and cons; considering our Bidding Estimating professional that helps you understand which works best for you will help ensure that you have an accurate estimate of your project's budget before beginning work.