All About Construction Costs

We just wrapped up the construction phase of a basement renovation at the end of February. Not only were we on schedule, but we also came in 4.4% under budget!

This project was a costs-plus pricing structure, which means we passed all construction costs onto our client, plus charged a fixed contractor fee. The only way to do this kind of pricing structure and stay at or under budget is to really be on top of construction costs.

The following outlines how we handle construction costs through the proposal, pre-construction and construction phases of a project.

Ballparking Construction Costs

When we present a proposal to a prospective client, we include our process, scope of work, proposed timeline, general contractor fee, payment schedule, and a Preliminary Cost-to-Build Estimate for the construction costs. In the preliminary estimate are line items for the anticipated scope of work based on a review of the plans. These are ballpark numbers that can be utilized by prospects as they shop for a contractor to hire for their project.

In order to precisely estimate the specific project, we need to review the plans many times, meet with the client, identify all the scopes of work for each trade, conduct walkthroughs, meet with subs, prepare bid request packages, perform materials takeoffs, get client selections, etc. All of this requires a significant amount of our time (about 2-6 weeks depending on the project). For this reason, we only perform the detailed cost to build estimating process once a client has decided to work with us.

Estimating Construction Costs

Once a client has signed on with us, we begin what we consider to be the most critical phase of any project: the Pre-Construction Phase.

Before construction ever begins, we create a detailed project plan that focuses on scope, costs and schedule. We itemize the scope of work for all trades and perform material takeoffs so that our bid packages to subcontractors and suppliers accurately reflect what needs to happen during construction. Every construction cost gets entered into our Project Estimate in our construction management software Buildertrend.

At the end of the Pre-Construction Phase, we submit the Final Cost-to-Build Estimate to our client. Their approval kicks off the Construction Phase and the estimate becomes the budget.

Budget vs Actual Construction Costs

With our construction management software, we are able to easily convert the subcontractor and supplier bids into purchase orders. We actively track all costs and continuously compare them to the budget. Our software allows us to see where we are over and under budget on any given line item, and we communicate this to the client regularly.

Every two weeks we submit to our clients:

• A detailed Project Update showing schedule updates, action items and budget vs actuals

• Invoice with actual construction costs incurred to date plus sales tax

• Copies of all the bills and receipts associated with the costs on invoice

• Signed Waiver of Release

Clients can also log into their Buildertrend Portal to view invoices, payments and the budget at any time.

One of our biggest goals as a GC is to come in at or under budget. We have built and renovated so many of our own projects over the years that we know how important it is to hit the numbers, and we strive to do this for our clients. This requires careful planning, great systems, streamlined workflows, accurate accounting and strong organization skills.

Get started on your project estimate.

Request a free discovery call with Kevan.