A well-organized cost breakdown structure (CBS) is the foundation of accurate estimating and effective project management. This guide covers how to structure your estimates for clarity, accuracy, and usability.
What Is a Cost Breakdown Structure?
A cost breakdown structure organizes all project costs into a hierarchical system that supports estimating, bidding, and project control.
Purpose of CBS
| Purpose | Benefit | |---------|---------| | Organized estimating | Complete, systematic coverage | | Clear communication | Owner/team understanding | | Project control | Cost tracking baseline | | Historical data | Future estimating reference | | Change management | Clear scope identification |
CBS vs. WBS
| Element | Focus | |---------|-------| | Cost Breakdown Structure (CBS) | What costs money | | Work Breakdown Structure (WBS) | What work is performed | | Combined | Comprehensive project organization |
CSI MasterFormat Structure
Division Overview
The Construction Specifications Institute (CSI) MasterFormat provides industry-standard organization:
| Division | Description | |----------|-------------| | 00 | Procurement and Contracting | | 01 | General Requirements | | 02 | Existing Conditions | | 03 | Concrete | | 04 | Masonry | | 05 | Metals | | 06 | Wood, Plastics, Composites | | 07 | Thermal and Moisture Protection | | 08 | Openings | | 09 | Finishes | | 10 | Specialties | | 11 | Equipment | | 12 | Furnishings | | 13 | Special Construction | | 14 | Conveying Equipment | | 21 | Fire Suppression | | 22 | Plumbing | | 23 | HVAC | | 26 | Electrical | | 27 | Communications | | 28 | Electronic Safety and Security | | 31 | Earthwork | | 32 | Exterior Improvements | | 33 | Utilities |
Benefits of CSI Organization
- Industry standard recognition
- Matches specification organization
- Facilitates subcontractor coordination
- Enables historical cost comparison
- Supports owner requirements
Work Breakdown Structure
WBS Hierarchy
Level 1: Project
Level 2: Phase/Area
Level 3: System
Level 4: Component
Level 5: Element
Example WBS
1.0 Office Building Project
1.1 Site Work
1.1.1 Earthwork
1.1.1.1 Clearing
1.1.1.2 Excavation
1.1.1.3 Grading
1.1.2 Paving
1.1.2.1 Base course
1.1.2.2 Asphalt paving
1.1.2.3 Striping
1.2 Building Structure
1.2.1 Foundations
1.2.2 Structural Steel
1.2.3 Floor Systems
1.3 Building Envelope
...
Cost Categories
Direct Costs
Costs directly attributable to project work:
| Category | Description | |----------|-------------| | Labor | Crew wages, benefits, burden | | Materials | Permanent materials installed | | Equipment | Owned and rented equipment | | Subcontractors | Contracted work |
Indirect Costs
Costs supporting but not directly performing work:
| Category | Description | |----------|-------------| | General conditions | Site management, temp facilities | | Insurance | Project-specific coverage | | Bonds | Performance and payment bonds | | Permits | Building and specialty permits |
Markup Components
| Component | Purpose | |-----------|---------| | Overhead | Company operating costs | | Profit | Return on investment | | Contingency | Risk allowance |
Detailed Cost Elements
Labor Cost Structure
Labor Cost = Hours × Rate × Burden
Where:
- Hours = Quantity ÷ Productivity
- Rate = Wage + Benefits
- Burden = Taxes, Insurance, etc.
Labor Cost Breakdown: | Element | Components | |---------|------------| | Base wage | Hourly rate | | Fringe benefits | Health, retirement, training | | Payroll taxes | FICA, FUTA, SUTA | | Insurance | Workers' comp, liability | | Union contributions | If applicable |
Material Cost Structure
| Element | Description | |---------|-------------| | Base cost | Unit material price | | Quantity | Required amount | | Waste factor | Typical 5-15% | | Taxes | Sales tax if applicable | | Freight | Delivery costs |
Equipment Cost Structure
| Element | Owned | Rented | |---------|-------|--------| | Hourly rate | Depreciation + O&M | Rental rate | | Operating costs | Fuel, oil, maintenance | May be included | | Mobilization | Delivery cost | Delivery cost | | Operator | Included or separate | Separate |
Estimating Format
Summary Level Format
| Description | Labor | Material | Equipment | Subcontract | Total | |-------------|-------|----------|-----------|-------------|-------| | Site Work | $50,000 | $120,000 | $45,000 | $0 | $215,000 | | Concrete | $180,000 | $95,000 | $35,000 | $0 | $310,000 | | Structural Steel | $0 | $0 | $0 | $425,000 | $425,000 | | ... | | | | | | | Subtotal | $500,000 | $400,000 | $150,000 | $800,000 | $1,850,000 | | General Conditions | | | | | $185,000 | | Total Direct | | | | | $2,035,000 |
Detail Level Format
03 30 00 - Cast-in-Place Concrete
03 31 00 - Structural Concrete
03 31 00.10 - Footings
Labor: 240 hrs × $65/hr = $15,600
Material: 45 CY × $185/CY = $8,325
Equipment: 24 hrs × $45/hr = $1,080
Subtotal: $25,005
03 31 00.20 - Foundation Walls
Labor: 160 hrs × $65/hr = $10,400
Material: 32 CY × $195/CY = $6,240
Equipment: 16 hrs × $45/hr = $720
Subtotal: $17,360
Schedule of Values
Purpose
The schedule of values allocates contract value for payment purposes.
Format Requirements
| Element | Description | |---------|-------------| | Line items | Match contract scope | | Values | Portion of contract price | | Total | Equals contract amount | | Detail level | Per owner requirements |
Sample Schedule of Values
| Item | Description | Value | % of Contract | |------|-------------|-------|---------------| | 1 | General Conditions | $185,000 | 9.1% | | 2 | Site Work | $215,000 | 10.6% | | 3 | Concrete | $310,000 | 15.3% | | 4 | Structural Steel | $425,000 | 20.9% | | ... | | | | | | Total Contract | $2,035,000 | 100% |
Bid Form Requirements
Matching Owner Format
When owners provide specific formats:
- Match their line items exactly
- Ensure totals reconcile
- Follow rounding rules
- Complete all required fields
Unit Price Schedules
| Item | Description | Unit | Qty | Unit Price | Extended | |------|-------------|------|-----|------------|----------| | 1 | Rock excavation | CY | 100 | $85.00 | $8,500 | | 2 | Unsuitable soil removal | CY | 200 | $35.00 | $7,000 | | 3 | Imported fill | CY | 150 | $45.00 | $6,750 |
Alternates Structure
| Alternate | Description | Add/Deduct | Amount | |-----------|-------------|------------|--------| | Alt 1 | Premium flooring | Add | $45,000 | | Alt 2 | Additional parking | Add | $125,000 | | Alt 3 | Delete landscaping | Deduct | ($35,000) |
Technology and Tools
Estimating Software Features
| Feature | Benefit | |---------|---------| | Assembly databases | Consistent cost structures | | Automatic calculations | Reduced errors | | Report generation | Flexible output formats | | Historical data | Reference for new estimates | | Integration | Connect to accounting/PM systems |
Spreadsheet Organization
If using spreadsheets:
- Consistent cell formatting
- Clear section headers
- Protected formulas
- Audit trail capability
- Version control
Best Practices
Consistency
- Use standard codes across projects
- Maintain consistent level of detail
- Apply same methodology
- Document assumptions
Completeness
- Check for all scope items
- Review for gaps and overlaps
- Cross-reference specifications
- Verify all divisions covered
Accuracy
- Verify calculations
- Check unit prices
- Confirm quantities
- Validate subcontractor coverage
Documentation
- Record all assumptions
- Document pricing sources
- Note clarifications
- Maintain backup detail
Common Mistakes
| Mistake | Prevention | |---------|------------| | Missing scope | Systematic specification review | | Inconsistent units | Standardized formats | | Calculation errors | Multiple verification | | Unclear organization | Standard CBS structure | | Lost detail | Proper documentation |
Related Articles
- How to Calculate Construction Bid Markup
- Construction Estimating Software Comparison
- Quality Assurance in Construction Bidding
Frequently Asked Questions
Should I use CSI format even if the specs aren't organized that way? CSI provides a standardized framework that aids communication and historical comparison. Adapt as needed but maintain consistency.
How detailed should my CBS be? Detail level depends on project complexity and your needs. More detail improves accuracy but requires more effort. Balance based on project value and risk.
How do I handle work that spans multiple divisions? Define clear boundaries and document them. Coordinate with subcontractors to ensure complete coverage without overlaps.
Should my CBS match my schedule WBS? Ideally yes, for integrated cost and schedule control. This enables earned value tracking during construction.
How do I handle allowances in the CBS? Create specific line items for allowances, clearly marked and tracked separately from fixed-price work.
