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When it comes to estimating residential construction costs, most
small and medium construction contractors find themselves in a state
of flux. They work hard on collecting and collating data, but end up
with little or no profits. To top it, they are operating in a
fiercely competitive industry that's in the middle of a slump, what
with the recent bust-up of the sub-prime mortgage lenders. To
convert his estimates into actual sales invoices, a construction
contractor has to be on the ball while estimating a residential
construction project and here is a small primer on how a contractor
must build his estimate.
PART A: Typical residential construction costs
1. Location and environmental costs
Before beginning to work on the actual construction, a contractor
should survey the residential plot upon which the building will be
constructed. There may come up some building constraints due to
various factors, such as the location of the construction site and
even environmental factors, e.g., the land being located in a
"wetland" kind of area. Other times, a contractor may be asked to
clear the site by demolishing an existing structure. These factors
add to the construction cost. It is, therefore, important that a
contractor be thorough with his research so that these additional
costs can be built into the residential construction estimate.
2. Construction costs
Normally, a contractor is given a house design and asked to give an
estimate of the construction cost based on material costs and labor
costs. While giving a residential construction estimate, a
contractor must break up his quotation into:
a. Foundation: This includes mainly the cost of concrete used in
laying the foundation of the house as well as in footings, walls,
slabs and columns, plus the expenditure on the machinery used.
b. Heating/Cooling: Furnace costs, central air conditioning costs,
ductwork, number of furnaces, and air conditioning units required go
to make up the heating and cooling costs of a home.
c. Framing: Framing cost comprises firstly the cost of wood used in
the building – construction of walls, roofs, floor joists and
ceilings consumes a lot of wood. Apart from wood, these structures
also consume a whole lot of metal.
d. Flooring: Flooring cost includes costs related to any item used
for covering the floor of a home – such as vinyl, tiles, carpet and
even sub-flooring material such as carpet pads.
e. Exteriors: This includes the cost of the material required to do
the exterior of a home, be it bricks, stones, stucco or a
combination of these.
f. Interiors: Any material required to bring the inside of a home to
a finished state should be included in the estimate, for example,
kitchen cabinets, bedroom cabinets, wall paints, or anything extra
desired by the client.
g. Windows: Windows consume wood, glass and small hardware sundries
that must all be factored into the quote.
h. Electric work: The cost of electrical work includes the costs for
wiring, outlet points, lighting fixtures and connections from the
main power supply.
i. Plumbing: This includes the cost for preliminary works such as
connection to sewage lines and connections from water lines, and the
cost of plumbing fixtures for the bathrooms, kitchen and utility
room.
j. Appliances: A contractor is expected to finish a home with
certain appliances such as a gas range, dishwasher and a garbage
disposal facility, so he should build these costs into his estimate.
If any other appliances are needed, they can be added on.
Estimating residential construction costs is not a precise exercise.
There are bound to be ups and downs because a contractor relies on
too many variable factors. Therefore, it is prudent that the
contractor builds in a contingency reserve, an escalation clause and
a market condition allowance into his estimate. A contractor must
also be careful if he is outsourcing any of the construction
services – and he must insist on written commitments and penalty
clauses with his suppliers.
PART B: Other costs a contractor must be wary of
Normally, a small or a medium construction contractor will plug in
the usual construction costs into his estimates. He must also take
care to ask the client if he is expected to perform any or all of
the following services:
1. Getting the site ready for construction.
2. Handling permit costs, liaison work with the authorities and
paying the requisite fees.
3. Demolition of existing building/structure.
4. Landscaping.
5. Modifications to the house plan after construction has started.
(This is a rarity, but, still, there's no harm in asking.)
Once the contractor has factored in all the visible and invisible
costs, he must begin estimating the residential construction costs,
add his margin and hope that the client accepts his estimate. Since
a contractor has a whole lot of things to do and manage before and
during construction, it will do him a world of good if he gets
everything organized and planned flawlessly. And, he can plan
immaculately by buying himself construction software that will help
him strategize and execute his plans without a hitch, without any
hiccups in the schedule. Moreover, his estimation of the residential
construction costs will be accurate and fluctuations, if any, will
be controlled and ironed out because the residential construction
estimate software will give the contractor a solid grip on his
business.
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