Construction Estimating: Outsource or In-House?

Are you ready to start working in commercial construction but not sure whether to hire an estimating team or outsource the preconstruction tasks? In general, it’s best for your company in the long run to handle takeoffs and estimating in-house. Here we’ll take a look at the role estimating plays in your business and weigh the risks of outsourcing.

How Important Is Construction Estimating?

The importance of cost estimating can’t be overstated. Your estimate is the backbone of the construction project, ensuring that nothing is missed before your crew ever steps foot on the jobsite. From determining direct costs like materials and labor to factoring in tax, overhead, and other non-measured costs, to adding markup to make a profit, cost estimating covers all your bases.

Challenges Construction Cost Estimators Face

Accurately determining project costs in advance is a skill that’s developed and honed over time, and it’s highly dependent on knowing the ins and outs of your company, crew, and connections. Here are a few obstacles you’ll encounter on the path to accurate cost estimates.

  –  Measuring and pricing out every part of the job. Missing one wall or window can result in a shortage of materials, delays in completing work, and added costs to your team. Who will be in the best position to pay close attention to plans?

  –  Factoring in labor. How skilled is your crew? How many workers are needed for specific types of jobs, and how much can a team of one, two, or three do in an hour? While a third-party could make an educated guess as to this rate, an in-house estimator will be more familiar with the inner workings of your crew.

  –  Accounting for overhead. What is your total cost of doing business, aside from project costs? How do you distribute that cost across jobs?

  –  Marking up project costs for profits. How will you reach your desired profit margin? Are there markups you prefer to add to individual materials or labor types? Do you add a set percent markup to all jobs?

  –  Handling change orders. Addressing change orders in a timely fashion is essential for avoiding added costs and project delays. Who will handle conveying change order information to your estimator, and how will you ensure a new takeoff and estimate are completed quickly for the updated plans and specs?

The Benefits of Keeping Your Cost Estimates In-House

While doing estimates yourself or hiring an internal estimator takes time and budget, the benefits outweigh the costs in the vast majority of cases. Here are some big advantages of having an in-house estimator.

  –  Retain ultimate control. With a third-party estimating service, you’ll be able to make changes and suggestions, but the ultimate deliverable isn’t owned by your company. With an estimator on your payroll, you can establish processes and workflows to best fit your business. You also keep access to and control over all of your data.

  –  Gain deeper insights from your historical data. Regular project reviews and data analysis will make your in-house estimating team stronger. By performing takeoffs, creating estimates, and comparing budgeted vs. actuals, your team will constantly improve its speed and accuracy.

  –  Grow and develop your pricing strategy. Your in-house estimator can make incremental changes from project to project, experimenting to increase win rates and ultimately charge higher prices. An outsourced service is less likely to be capable of intuiting when reputation and crew skill are at the next level.

Risks Associated with Outsourcing Your Construction Estimating Department

Outsourcing your estimates to a third-party vendor can open your company up to added risks that often aren’t worth it.

  –  You are responsible for mistakes, not your estimating service. In a world with ever-changing and increasing material costs, overlooking a measurement on plans or ordering the wrong materials can come with high costs, and it also reflects poorly on your company.

  –  Time is money. Particularly in the case of change orders, if you have to wait for a third-party to become available to do takeoffs on a new set of plans, you might not take priority for them, whereas your internal team will be able to jump on fast-turnaround tasks as needed.

  –  It’s difficult to learn from past projects. If your estimates are provided in a transactional way, you and your team can’t benefit from accumulated institutional memory, or collectively stored knowledge within your organization. Without critical thinking around labor rates, markup, and other aspects of an estimate, your historical data is less valuable.

Is It Ever a Good Idea to Contract with an Outsourced Estimator?

While it’s not an advisable long-term solution for the reasons above, there are some cases when taking advantage of a third-party to perform your cost estimates could be beneficial, such as if:

  –  You’re teaching yourself estimating, and you want to double check your work

  –  You’re unexpectedly short-staffed and in a tight spot for a job you really want

  –  You’re not fully committed to commercial work and want to test the waters first

In instances like these, an outside estimator could add short-term value to your business.

How to Do Construction Estimating In-House

If you’re unfamiliar with the process, it’s not too difficult to learn the basics. Start with these guides on how to do a construction takeoff and best practices for cost estimation.

For growth-minded companies, your best bet is to hire a skilled estimator. It will cost more upfront, but the benefits from having an expert on-staff will be exponential in enabling you to bid and win commercial work and establishing a positive reputation among general contractors in your region.

Finally, empower your team by providing them with the best tools for the job. Historically takeoffs and estimates were completed by hand or with a combination of outdated software and spreadsheets, but that no longer needs to be the case. To set yourself up for success from the beginning, choose a user-friendly, cloud-based platform that lets you perform fast, accurate takeoffs and smoothly use your data to create estimates and generate professional proposals all in one place.

Hint: that platform does exist – it’s STACK! Create your free account today.

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