What Goes into Calculating Commercial Construction Costs

Commercial construction cost estimation is a data-driven process. The better the data, the more accurate the estimate. Because of the phased nature of commercial construction design and development, that also means there are several iterations of cost estimation. With each estimate, your budget becomes increasingly accurate as more information about the project is known.

While the earliest estimates are often based upon very little project data, as the project design becomes finalized, so too does the budget tighten up. Here is what goes into calculating commercial construction costs in Miami from preliminary construction cost estimation down to the control cost estimate that’s used during construction.

How are Commercial Construction Costs Calculated?

General contractors rely on experience and data to create project cost estimates. There are five main types of construction cost estimates. They may be called slightly different things, but the same general principle applies when calculating costs at each budgeting level. Below are different types of cost estimates used at various stages of a project’s lifecycle.

  1. Preliminary cost estimation – This is the highest level of cost estimation. Because very little actual project data is available, contractors rely on software and comparable projects they’ve recently completed as a starting point for developing the estimate. Preliminary estimates are useful for project owners when assessing whether a project will be financially feasible.

  1. Detailed estimate – This estimate relies on a complete or near-complete design so that the elements of work can be quantified line item by line item. A total project cost is calculated by pricing out the cost of materials, equipment and labor.

  1. Quantity cost estimate – This is a unit-based method of estimation. Each part of the project becomes a quantifiable unit, and all those units are then added up to get the final cost.

  1. Bid or tender cost estimate – A bid estimate is submitted to a client with the hopes of winning the job and is often used as the basis for the contract. These cost estimates are quite accurate (usually with -5 to -15% on the low side and +5 to +20% on the high side) and include a project’s indirect costs, including overhead, margins, administrative costs, etc.

  1. Control cost estimate – The final estimation class is the control and it’s used during construction to track spending.

Understanding project costs is critical to any commercial construction project, and the more accurate your estimate, the better. By working with an experienced and local general contractor, you can be assured you’ll get the most accurate budget and honest advice every step of the way.

For help understanding cost estimate classes or deciphering an estimate you’ve already received from another GC, give us a call at Seacoast Construction. We’re happy to explain what we see and offer up our professional opinion at no cost to you. Get in touch to schedule a free consultation to discuss your Miami buildout. 


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