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Estimating & Bidding

Cost Estimate

In Plain English

A calculated prediction of how much a construction project will cost.

Definition

A cost estimate is a quantitative assessment of the probable total cost to complete a defined scope of construction work. Estimates range from rough conceptual projections to detailed line-item budgets and are refined as design progresses. Accurate cost estimates are essential for project budgeting, bidding, and financial control.

Why It Matters in Bidding

The cost estimate is the financial foundation of every bid; if the takeoff quantities, unit prices, or markup are wrong, the contractor either loses the job or wins it and loses money. Estimate accuracy also drives go/no-go decisions, bonding capacity, and how much contingency a bidder must carry against scope and pricing risk.

Example

Before submitting on a 60,000-square-foot warehouse, the estimator built a detailed line-item cost estimate from the takeoff, layered in subcontractor quotes for steel and MEP, and added a 4% contingency to cover incomplete civil drawings.

Related Terms

EstimateEstimatorQuantity TakeoffBudget Estimate

Frequently Asked Questions

Estimates progress from order-of-magnitude or conceptual estimates with wide accuracy ranges, through schematic and design-development estimates, to detailed bid-level estimates built from full quantity takeoffs. AACE defines five classes tied to design maturity, with Class 5 being earliest and least accurate and Class 1 being the most detailed and reliable.
Beyond labor, material, and equipment for the work itself, a complete estimate carries general conditions, overhead, profit, bonds, insurance, permits, escalation, and contingency. Omitting these indirect and soft costs is a common reason bids look low on paper but produce losses. Allowances for unresolved scope should also be clearly identified.
A detailed bid-level estimate built from complete drawings and firm sub quotes typically targets accuracy within a few percentage points. Accuracy depends heavily on design completeness, the quality of takeoff data, and how many subcontractor numbers are firm versus budgetary. Tight bid markets shrink the cushion, so precision in the takeoff becomes critical.

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