ESTIMATING FOR OWNER BUILDERS

In This Article
Start With A Checklist
Material Takeoffs
Choosing Suppliers
Subcontractor Bids
Price Guarantees
Estimating Carpentry
Tracking Bids
Actual vs. Estimated Costs        View all ESTIMATING articles

Estimating is part art and part science. Even professionals often differ by 10% or more on estimating a job. Since estimating is a challenge even for experienced contractors, you can expect it will be more of a challenge to you as an owner-builder or owner-contractor.

START WITH A CHECKLIST
Let’s assume you are planning to do most of the work with subs (rather than swinging a hammer yourself). Start with a list of the main work categories that you need to include. It’s best to start with a template or checklist to help you come up with a complete list. As a starting point, you can use the items in the BuildingAdvisor Estimating Spreadsheet as your checklist. The list  is organized roughly by the order of construction and also by trade. So, for example, all plumbing is grouped together even though the line items are done at various points in the job sequence.

The Estimating Spreadsheet serves as a checklist,  estimating tool, and budgeting tool for tracking costs as the job proceeds. View or download the BuildingAdvisor Estimating Spreadsheet.

Spreadsheets are the most widely used approach to estimating among contractors today. I’ve designed this spreadsheet with enough detail to help you include all the significant costs, but have kept it compact enough to be user-friendly to beginners.

Most main headings in the worksheet, such as “Rough Framing” or “Roofing” are generally handled by a single subcontractor. In that case, you can just enter one number across from the main heading, such as Roofing, covering all materials and labor in that category. If you are buying some or all of the roofing materials yourself, enter the material costs separately, along with “Roofing labor only.”  Just make sure that the roofing subcontract covers in writing all the items listed under roofing. Confirm with the sub what materials and equipment (staging?) are included in his bid and what you will need to provide.

Similarly, with framing, you can enter just one value for “Rough Framing,” if one subcontractor is providing all the materials and labor.

You may want to break some categories into smaller ones, for example, a separate line item for each floor covering type, or you may combine several that are bid together, such as a foundation contractor who is handling  the excavation, formwork, concrete, and backfill.

Use the items in the worksheet as a checklist to make sure you are not leaving out anything important. Go through the list item by item and make sure that everything is accounted for. Each item should either be

  • Covered by a bid from a subcontractor or supplier
  • Something you are planning to do yourself,  or
  • Not applicable to your project (mark the item NA)

MATERIAL TAKEOFFS
You will probably be purchasing the main building materials – lumber, doors, windows, etc., while some materials such as roofing shingles, plumbing, and electrical supplies may be provided by subcontractors and included in their bids.

To get a bid on the project’s building materials, you will need to compile a complete list of materials called a “takeoff.” If you are using a stock plan, you can usually get a takeoff from the plan company for a fee. Also some lumberyards will do a free takeoff from the blueprints. While these can be helpful as a starting point, it’s unlikely that the plan company and the lumberyard will come up with the same takeoff. Another lumberyard will come up with yet another list.

For one thing, the stock company will not know what codes and standard practices are for your area. For an accurate takeoff, and to solicit competing bids on material, you should do your own takeoff – or pay someone experienced to do so who understands local building practices, material waste factors, and the little (but often costly) items that are easy to overlook. This could be your architect, designer, draftsperson, or construction manager if you are working with one.

With your detailed list of materials, you can get apple-to-apples comparisons from competing lumberyards. You may get a better price and better service by working with one lumberyard, and it is certainly the most convenient way to operate. But if there is a substantial savings on a big ticket item like windows and doors, you will need to split up your order to take advantage of  the savings.

CHOOSING SUPPLIERS

As your own contractor, you will most likely be buying all lumber and basic building materials yourself and should negotiate for the best prices you can get. Don’t expect much of a discount on lumber and basic building materials, but you should be able to get contractor pricing on windows and doors, skylights, appliances, and specialty items.

It addition to the lowest price, you will want to work with a lumberyard that will guarantee its prices the longest and one that will let you open a contractor’s account, allowing you to pay monthly. Otherwise you may need to come up with the cash until your construction loan draw is disbursed. Most yards will guarantee prices for 30 days, but see if you can get a quote extended until the materials are delivered. In times of volatile prices on basic commodities like lumber and drywall, you may only get a 7-day quote, making it difficult to budget.

Discount home centers. It’s worth getting prices from the “contractor’s desk” at your local mega home center as well. In general, contractors work with contractor yards as they tend to provide better materials, free delivery, and faster and better service than home centers, where you may have to climb up a 20-ft. ladder to see what a screen door looks like. But if you have the time to poke around a home center, you might find that the discounts are worth the hassle for certain items

Home centers, on the other hand, can sometimes save you a lot of money on certain items. My suggestion: price the materials package both ways – at a couple of retail lumberyards and a home center. Weigh issues of quality and customer service, and go with your best option. You might end  buying  nearly everything from a contractor yard, but get all your granite tops, cabinets, and 6-panel solid-wood pre-hung interior doors from a home center at prices the contractor yard couldn’t touch.

Wholesalers. Also, don’t hesitate to walk into wholesalers that deal primarily with the trade. When I was starting out as a contractor, I found I could save 30% on hardwood plywood by buying from a huge regional wholesaler which was mostly shipping truckloads to lumberyards and cabinet shops. I also got big discounts from a window wholesaler and hardware supplier that dealt strictly with “the trade.” For the most part, if you walk in and act like you know what you’re doing, these places are happy to have your business. And since you are acting as your own contractor, for all practical purposes, you are in business (and you can get business cards printed to prove it!)

Items to look for at wholesalers and specialty suppliers include windows and doors, lighting fixtures, cabinets and countertops, appliances, ceramic tile, flooring,  and plumbing and electrical supplies. Some wholesalers will sell directly to consumers; some won’t or will charge a higher price. Since you’re acting as a the general contractor on this job, don’t hesitate to tell them you’re a contractor if asked.

With big ticket items like windows, it’s worth calling a supplier ahead of time to see what price they quote to anyone walking in off the street. Then see what price you can get by walking in the door as a contractor. If you’re buying a lot of materials, don’t hesitate to bargain. It doesn’t hurt to ask “Can you do any better on the price?” Often they can and will.

I am no longer in the business, but still do work on my own house. In the past couple of years, I’ve purchased windows at wholesale prices from a contractor lumberyard, plumbing fixtures at wholesale prices from a trade-only plumbing supply house, and electrical supplies from a trade-only electrical supply house. Don’t be shy – just walk in and ask for what you want. If the price is high, ask for better pricing. The more you are buying there, the more leverage you have.

Get it in writing. Finally, make sure that all your quotes are in writing. This is probably the biggest shopping trip of your life and mistakes do happen. You will need to check the invoices each month against the quotes to make sure you got what you ordered at the price you were promised. Special-order items are especially prone to error – and you don’t want to be stuck with the wrong color of pre-stained siding, the wrong sized windows, or any number of mistakes that can and do happen between order and delivery.  

GETTING SUBCONTRACTOR BIDS
The best place to get subcontractor names is from other subs. If you already know a good plumber, electrician, or carpenter, that’s the best place to start. Ask who they would recommend for various trades you will need. As with much else in life, the good guys know who the other good guys are. Also subs who have worked together on other jobs are more likely to work together efficiently and cooperatively.  (For example, you won’t have two subs arguing over who get to run his pipe or duct through a certain joist bay.)

Contractor-oriented lumberyards, and specialty suppliers (masonry, windows, floor coverings, etc.) also will have a list of names, but may be reluctant to recommend one over another.

Also look in your own neighborhood. Whose trucks do you see around? Ask your friends and neighbors who they have used and how it went. If there are new homes going up in the area, stop by and see who is handling the excavation, foundation, framing, and other subtrades. Collect business cards and phone numbers to add to your pool of potential subs. .

When soliciting bids, you may find that one sub can provide more than task (installing, sanding, and finishing hardwood floors, for example), which will probably save you money compared to hiring two separate subs.  Still, it worth getting at least two bids for each job – and always get them in writing with sufficient detail that you know exactly what is included and excluded from the bid. Compare competing bids to make sure they are apples-to-apples.

Make sure you get fixed bids, not labor-and-materials or “cost-plus” estimates. You may find yourself paying a plumber or electrician $75 an hour to go to the supply house to get a common item that should have been in his truck. Or you may pay his helper $50 per hour to stand around waiting for the boss to give him something to do. The most efficient crew for most small jobs is a crew of one. If your sub wants to pay a helper to fetch his tools and get coffee, that should be his expense, not yours.

If you have already selected a particular product or material – for example, a specific architectural roof shingle – solicit bids on that specific item, so you can get apples to apples comparisons. If you need to use an allowance in your bid, say for carpeting or lighting fixtures that you have not yet selected, use the same allowance in competing bids. If the sub or supplier recommends an alternative to the product of material you have specified, get him to bid your original selection and the second one as an “alternate.” Later, you can select the alternate if you like without triggering a change order.

PRICE GUARANTEES
Ask all vendors and subcontractors to lock in their quotes for as long as possible, preferably until the time you will need the materials delivered. For commodities like lumber, plywood, and drywall, you may only be able to get a 30-day quote. Subcontractors may be willing to guarantee their labor rates for longer than the materials they are providing.  Depending on your time fame, it may be worth paying a little extra for a price guarantee that will cover your project.

ESTIMATING CARPENTRY
Most aspects of a job can be handled by subcontractors. It will be difficult however, to find a subcontract crew to handle all the carpentry throughout the project. In addition to the two big carpentry jobs: Rough Framing and Finish,  there will be many small tasks in between.  For example there will be incidental carpentry required from time to time to get ready for various subcontractors, who might need something cut, moved, or added to enable them to do their job properly.

You may be able to find a crew adept at both rough and finish carpentry who would bid the whole job start to finish. Or you may hire a framing crew to bid the rough frame, and a finish crew to bid the interior and exterior finish work. You would then need to have at least one carpenter available in between the rough framing and the finish work do the small odds and ends, and prep work needed by various subs, or due to small (or not so small) changes in the plan that often occur mid-project.

If you’re handy with a hammer and saw, you may want to do this miscellaneous carpentry yourself. On large developments where everything is handled by subs, I’ve seen the site superintendent pick up a hammer when needed for these small jobs. On your project I would make arrangements to have one person available by the hour, as needed, for these extras. If you hire an entire crew to do these small jobs, you will be wasting money since the most efficient crew for a small job is a crew of one.

Estimating incidental carpentry. It will be difficult for you to estimate the amount of miscellaneous carpentry on a large project. It will depend on the complexity of the job, how successful you were in assigning all the large tasks to either the rough or finish crew in their contracts, and the number of changes to the plan and job-site surprises.

In new construction or simple additions, I’d suggest using the rule-of-thumb: estimate the time needed for incidentally carpentry; then double it.

In large, complex remodeling jobs, finicky carpentry is the norm, making it difficult to estimate labor and difficult to subcontract the carpentry (and demolition). Unless you are handy with a hammer, you are better off contracting out the entire job on a fixed bid. See Estimating Remodeling.

My advice:  If possible find a crew that does both framing and finish work; if not, use two different crews (a good idea anyway if you have a lot of finicky custom woodwork on the interior). In either case, get separate bids for the rough framing and finish carpentry. Make sure the two contracts cover every rough and finish task on the estimating checklist. Then establish a separate contract with one of the crews to provide one professional carpenter on an hourly basis to do incidental carpentry as needed. You’ll need to find someone who is willing to show up on short notice for a few hours here and there. It is worth paying a little extra for this flexibility.

TRACKING BIDS
For a new home or large renovation project, I recommend creating a separate Itemized Bid Worksheet for each main estimating category, as well as a file folder for each category to store written estimates, brochures, and other paperwork. (View or download sample Itemized Bid Worksheet.) The Itemized Bid Worksheet categories match the Estimating & Budgeting Worksheet, but have space for multiple bids and notes for each item. The Bid Worksheets allow you to break down items as required and to compare prices from different vendors or subcontractors. Note, for example, that Countertops is broken into four categories and Ceramic Tile into two. If one vendor ends up providing all the countertops, then you can combine them into one item in your estimate.

As supplier and subcontractor bids come in, enter them into the Itemized Bid Worksheet, and keep their paperwork in the matching hard-copy folder.  GET ALL ESTIMATES IN WRITING. Equally important, make sure each estimate includes a detailed description of the work to be done, called the Scope of Work.  If you’re not sure if a certain is included in the estimate, ASK! DON’T ASSUME. Often the low bidder costs less because he is providing less work or lower quality material than the other guy. The best way to get apples-to-apples bids is to provide the same clear plans, specifications, and scope of work descriptions to all bidders.

You may need to add new items to the Bid Worksheet depending on the job. If you add items, remember to also add them to your Estimating & Budgeting Worksheet. Once you’ve selected a bid, mark it with an X and enter the amount in the Winning Bid column. In some cases, you may go with one of the higher bidders because you like their product or workmanship better, or for other reasons such as availability.

Once you have selected a bid for a an item, enter it into the Estimating & Budgeting Worksheet. Keep the paperwork on all bids in case you need to switch vendors or subcontractors for any reason (like the one you chose goes out of business, has scheduling problems, or just doesn’t show up.

The Estimating & Budgeting Worksheet also allows you to compare your estimate to actual costs as they come in, and to keep track of the variance (how much under or over budget you are). This will alert you to any potential problems before they snowball. If you are over in one area, you may be able to make cuts in another. Finally, the Worksheet allows you to track payments to vendors and subcontractors, keeping you apprised of what has been paid and how much is owed.

TRACKING ACTUAL VS. ESTIMATED COSTS
You can also use the Estimating & Budgeting Worksheet to track spending throughout the project, and to see where actual costs exceeded (or fell short of) estimated costs. Contractors call this process “job costing” and use it to hone their estimating practices and to identify areas where they are over budget and why. The individual variances will automatically be totaled, allowing you to see how much you are over or under budget at any point in the project. If you are running significantly over budget, you’ll need to think about where you can make cuts – or find additional funds.

Cost control is one of the biggest challenges of any building contractor. Many jobs come in overbudget and few come in under. Construction loans usually include a 5% “contingency fee” for overruns, but that’s being optimistic. Many factors can lead to cost overruns (see Estimating Errors). Most are preventable with good planning, but some like weather delays or price increases are unavoidable. Many are a direct result of the owners changing their mind during construction. Your best protection against significant cost overruns is good planning, careful estimating, and making any changes to the plan before you start digging.

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