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Learn the Lingo of Construction Project Costs

When you buy a jug of milk or a loaf of bread, the price is clearly marked. Even products that have negotiable prices, like cars and properties, can at least be seen, touched and inspected before you buy them.

But when you tackle a building or remodelling project, pricing is a lot harder to come by. It’s likely your project has never been built in exactly the same size, finishes, circumstances and location you have in mind. That makes your project entirely custom — and that means the price is, too. 

Arriving at a cost for a project involves creating plans and specifications, and requires lots of time, thought and shopping. The more detailed the plans are, the more accurate the price. 

So how do you get the accuracy you need when you ask about price? Start with an understanding of the process and the lingo. 

 

Estimates. At its core, every price a contractor provides is an estimate — of the labor and materials it will take to complete your project. In residential construction, an “estimate” (also known as a bid) generally is not a firm price. 

Estimates and bids are only as accurate as the information they’re based on. For instance, the least accurate estimate would be one based on square-foot pricing, a range of square-foot pricing or a typical cost for projects of that type. The result won’t tell you what it will cost, but it will tell you if your cost expectations are generally in alignment with the likely price. 

This level of accuracy also means that you’re likely to get a wide range of estimated costs when you consult with multiple contractors, as each will have a different interpretation of what you have in mind and a different way of creating a ballpark estimate. To use a car analogy: a Honda, BMW and Porsche might be the same size and weigh about the same, but they have very different price tags. 

 

A floor plan, also known as a schematic design, can be created by an architect, designer, design-build firm or even a homeowner. When you pay for plans, be aware of any contractual restrictions on the use of the drawings if you decide to hire a different firm to complete the plans or build the project. 

 

or the highest level of accuracy in your estimate, engineering must be completed and reflected in a construction plan; all finishes should be selected; and all bids should be secured from all the subcontractors. This final estimate usually has dozens of line items with specific costs for materials, labor and subcontractors, so you can clearly see the source of all the fees and how they add up to the bottom line. 

Because this level of estimating takes so much staff time, many contractors will provide this only once they are hired for the project.

When a contractor uses this estimate as a basis for a construction contract, it is usually called a time and materials or cost plus contract. The “plus” in the estimate is a contractor’s markup for overhead (sometimes called a contractor’s fee) that is applied to some or all of the costs of the project. 

How Much Will My Construction Project Cost?

 The level of detail required for a bid means that a firm price is usually not possible early in the planning process. The large amount of staff and subcontractors’ time required to complete a bid — particularly on large projects — may also cause some contractors to either charge a fee for providing a bid or decline to bid entirely until they are hired.


Of course, every contractor has different methods and means for providing estimates and bids, and is willing to provide a variety of estimating services either without charge or for a fee. This complicates the process for homeowners, particularly when they are considering a number of contractors, each of whom may have a different policy. But knowing the language and process of estimating helps make the first steps of exploring a project’s cost that much easier.

 

curtsey of: http://www.houzz.com/  

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