Have you ever paid £17 for pick n mix sweets at the cinema because you just kept piling more into those gigantic cups? Making an estimate is a tricky business, especially in the construction industry. How can construction companies be sure that the money they ask for at the beginning of the project will be enough to see them through to the end? And don’t forget the profit margin must be included too. Accuracy is everything. The construction estimate directly impacts the profit margin for the company leading the build and is vital to the viability of their business.

The four steps of construction estimating

Firstly, the project manager or team must identify every task that needs to be completed and create a detailed work breakdown structure. The next job is to create a scope of work: an important construction document that establishes an agreement between property owners, contractors and subcontractors. Then, the materials, machinery and labour requirements for each project task on the scope of work must be estimated. After that, a material take off and a bill of quantities can be assembled. Put simply this is a list of materials with quantities and types, for example, specific grades of steel. The project manager is now ready to make the construction estimate.

The pre-construction phase 

The purpose of construction estimating is to create a document that can be used when bidding for projects. Construction projects are complex and all costs, both direct and indirect, need to be considered. Of course the building must be planned and designed, the raw materials costed, permits, equipment hire and labour must all be assessed. These are all subject to a certain amount of variation, for example the price of steel and concrete has shot up in the last few years. Workforce costs will increase if the building work takes longer than expected. When things go wrong, it can lead to construction disputes and companies going into administration. No pressure then.

How HS2 got it so badly wrong

The failure of the HS2 is an example of how construction estimating can go badly wrong. In 2009, Labour PM Gordon Brown launched HS2 with a bold plan to connect London and the cities of the north of England with a high speed rail link. The estimate of £7 billion was made for the London to Birmingham leg of the project. In 2023, Rishi Sunak announced that the plans to extend HS2 beyond Birmingham would be abandoned, due to the spiralling costs of the project. Still unfinished, the cost of the London to Birmingham stretch is estimated to be between £45 to £54 billion. 

HS2 boss Sir Richard Thompson told the BBC in January:

“The cost of delivery is more than the government budgeted, and that is before you begin to account for the extraordinary construction inflation over the last three years or so.” He added that “HS2’s costs had risen so much over the past decade because of poor cost estimating, changes to the project’s scope, some poor delivery and the impact of inflation.”

The art of construction estimation is certainly a highly skilled one. And there are some factors such as wars, a global pandemic and political instability that cannot be predicted accurately.

At Veritas Surveying Limited in Manchester we are construction claims consultants with expertise in quantity surveying, JCT contracts, payment notices, pay less notices and construction adjudication.

At Veritas, we make the complex simple.