Construction Estimating COST ESTIMATES and Construction Proposals are two completely different Process Concepts. So many people, in many different trades, often get those two concepts confused.
The Construction Estimate is always the contractors’ RAW cost for direct labor, material, sub contracts, and equipment. Then once the contractors establishes those costs does he or she add the other overheads, profit and tax to develop an ESTIMATED selling price. The Construction Cost Estimate then leads to a possible selling price. Beyond that process is when a contractor looks at the market and competition to determine the final bid price once he/she knows BEFORE, what the project is going to COST them. It is the Construction Estimate that determines the final PROPOSAL.
All too often a contractor submits RETAIL proposals for their type of work without a proper analysis of what the work is COSTING them. That term “… what the work is COSTING them” is the main challenge to so many contractors. Sometimes & rarely, when the scope of work is small, repetitive, and historically tracked for job cost, can a contractor pick a price out of the sky and make money for that type of work. HOWEVER, much more often than not, that approach almost never works, and puts so many contractors at a huge financial risk.
So it is extremely important that a contractor FIRST starts with an appropriate construction cost estimate process as described above that develops into a selling price, “Your Proposal”
Please review any one of our 12 Construction Estimating Software Processes at AskTheEstimator.com or on the left hand side of this screen that will help you get onto the right track to Consistent & Profitable projects.
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