Construction estimating for a small builder is one order of work: write the scope down, count the quantities, price the labour, add allowances and overheads, then check the total against the last similar job you finished. Do it in the same order every time and you can repeat it.
This is a method, not a price list. It gives no rates, because rates depend on your region, your trades and the month. It is general information, not advice for a particular job.
Start with a scope you can write down
Most estimates go wrong before any maths. The scope was vague, so two people priced two different jobs.
Write the scope as a list a stranger could price from:
- What is being built or changed, with the drawings and their dates.
- The specification: materials, finishes, fixtures, brands where they matter.
- What is excluded. Be blunt.
- Site conditions you know about, and the ones you do not.
- Who applies for approvals and who pays.
The Victorian regulator’s checklist for builders says the work, drawings, specifications and special requirements should be fully described, and that the required permits are either obtained or the contract says who is responsible for obtaining them. The NSW Government page says a written quotation should list all the work and all the materials, with specifications that match the client’s brief. If the client’s brief is thin, your price will be wrong whichever way you do the sums.
Quantities and what to count twice
Take quantities from the drawings, section by section, in the order the job is built. A fixed order stops you missing whole areas.
Count twice where the cost lives:
- Ground and footings. The QBCC says builders have reportedly overcharged for earthworks and footings, and that a builder should provide a soil test and contour survey unless the client has one. Price from site facts, not hope. Ask who pays to remove spoil.
- Anything repeated. Windows, doors, fixtures. A miscount of one item is multiplied.
- Wastage. Add it to materials, and keep the percentage the same from job to job so you can learn from it.
- Things that sit outside the drawings. Certifications, inspections, fees and dumping. The QBCC tells homeowners to ask whether these are covered.
Keep a take-off sheet for every job. When you review the job afterwards, the sheet shows where the miss was.
Labour and who does what
Split the job into the work your own crew does and the work trades do. Price them differently.
Your own labour. Hours times your real cost per hour, including the on-costs you pay, not the wage alone. Be honest about site hours, travel, setting up, waiting and clean-up. The Victorian small-works page tells tradespeople to say whether a quote includes transport to the job and to buy materials, labour and apprentice costs, call-out fees and weekend or public holiday rates.
Subcontractors. Get written prices on the same scope and the same drawings. Note what each includes and excludes, how long the price holds and when they can start. If a trade’s price is verbal, treat it as soft.
Use the same scope document for every trade. Otherwise you compare prices that cover different work.
Allowances, contingency and overheads
Allowances. Where the client has not chosen yet, use a provisional sum or a prime cost item. The Victorian checklist says these must be clearly labelled and given reasonable cost allowances, and that site conditions such as rural or steep locations should be allowed for. Say in writing what happens if the real cost is higher or lower.
Contingency. A margin for the unknown. Decide the amount from how much you do not know, not from a habit. A job with a soil report and a full set of drawings needs less than one with neither. The QBCC tells homeowners to ask whether contingencies are included and how much, so be ready to explain yours.
Overheads. Your office, vehicles, insurance, tools, licence fees, software, and your own time on pricing and admin. They exist on every job whether you list them or not. Work out a yearly total, then work out what each job should carry. A builder who prices direct costs only is paying overheads out of profit.
Markup versus margin. A 20 per cent markup on cost is not a 20 per cent margin on price, and mixing them up quietly costs money. Decide which figure you are using before you add anything on top. The arithmetic, with a worked example, is in markup vs margin.
Checking against your last similar job
Before the number goes out, test it. Pull up the last job of a similar type and size and compare, section by section.
- Is the total in the same range once you allow for differences in size and finish?
- Does any section differ a lot from last time? If so, why?
- Did the last job run over on a section? If yes, has that lesson gone into this price?
- Do the labour hours look like hours you actually worked?
After every job, record the actual cost by section next to what you estimated. That record is what makes the method repeatable. Over a dozen jobs, it is worth more than any published cost guide.
Accuracy matters when the word on the page is estimate. Consumer regulators in New Zealand and Western Australia both expect an estimate to be worked out with care, and the New Zealand page gives a general range for how far the final price should land from it. Those rules, and how to label your number, are in quote or estimate.
When to charge for the estimate
A rough estimate at a site visit costs you an hour. A priced, checked estimate for a house build can cost days: drawings, take-offs, trade prices, a site check. If the client is comparing five builders and you are the only one doing this properly, you may be paying for their education.
The alternative is to give a rough range for free and charge for the firm number. The paid stage buys the soil test, the survey, the drawings read-through, the trade prices and the written scope. At the end, the client has a price you can stand behind, and you have been paid for the hours it took. See charging for preliminary work.
Once a price is out, the work shifts to following it up. PreBuild Systems also follows up quotes for builders and trades.
Sources: QBCC, NSW Government, Consumer Affairs Victoria checklist and Consumer Affairs Victoria small works.
Common questions
How do I estimate construction costs for a house?
Write the scope, take quantities from the drawings, price labour and trades, add allowances, contingency and overheads, then check against a similar finished job.
How accurate should an estimate be?
New Zealand’s Consumer Protection page says the final price should generally be within 10 to 15 per cent of an estimate. Other places do not set a figure on the pages read here.
What is the difference between markup and margin?
Markup is added to cost. Margin is the share of the price that is profit. A 20 per cent markup gives a margin of about 16.7 per cent.
Should I charge for an estimate?
For a rough range at a site visit, many do not. For a priced, checked estimate that takes days, many do. Tell the client before you start.