Cost Models in Construction

 In Cost Estimating

Cost modelling in construction is used to determine the cost of building a particular structure. Cost models are typically required for a builder to obtain financing, factor into business plans, budgets, and other financial planning. At PCI, Inc. we have a long history of providing cost modelling for new construction, especially with medical construction.

Factors Taken Into Consideration when Cost Modelling

When creating a cost model there are a multitude of variables taken into consideration. Some of the most basic costs taken into consideration are:

  • Labor;
  • Steel;
  • Cement;
  • Parking structures;


The purpose of the quantity takeoff is to provide a complete list of materials, equipment and tasks for an accurate cost estimate. Industry practices have been established to maximize the speed, ease and accuracy of the takeoff process.

It is likely that the person preparing the quantity estimate will also prepare the cost estimate. If not, it is best to follow the takeoff preferences of the cost estimator to prevent confusion and misinterpretation. Use footnotes, symbols or sketches to clarify any ambiguities so the takeoff is as clear and informative as can be.

Takeoff From the Ground Up

A good approach to completing a quantity takeoff is to follow the order of the actual construction, from the footings up to the roof. This will provide a clear mental picture of the project. If a project consists of more than one building, perform a separate quantity takeoff for each building, since unit costs may vary from structure to structure.

Keep Scale in Mind

Check the plan, drawings and details carefully for change in scale, plans reduced from their original scale, notes such as “NTS” (not to scale) or discrepancies between plans and specs. As you go, it doesn’t hurt to do some mental arithmetic if a quantity or measurement seems fishy—drafters make errors too.

Costing the Estimate: Assembling the Pieces

At this point, you’ve dumped out your pieces, organized them and built your frame. Now it’s time to put the puzzle pieces together and apply costs to your takeoff quantities.

Types of Costs

All costs included in a unit price estimate fall into one of two categories: direct costs and indirect costs. Direct costs are those linked to the physical construction of a project. Material, labor and equipment prices are all direct costs, as are subcontractor costs. These are commonly called “bare” or “unburdened” costs.

Indirect or overhead costs are incurred in completing the project but are not applicable to any specific task. They may include items such as supervision, insurance, temporary facilities, professional services and contingencies. Indirect costs are separated into two categories:jobsite overhead and main office overhead.

Jobsite overhead costs are indirect costs associated with the jobsite. They can be estimated in detail but are typically calculated as a percentage of direct costs and included in CSI MasterFormat Division 1 of the estimate.

Main office overhead costs are associated with the operation of the contractor’s main or home office. Overhead costs are typically calculated as a percentage of the total project cost and added at the end of the estimate. Some costs, such as professional services, may be counted as either project overhead or main office overhead, depending on how the resource is used.

Construction Estimating: The Ultimate Puzzle

Estimating for building construction is the ultimate puzzle. Not only are there thousands of pieces to put together, you have to find them yourself—they don’t have the decency to come in a box. But like completing a puzzle, putting together an estimate requires patience, attention to detail and the discipline to orient yourself toward a goal and work toward it.For more tips and advice about mastering the construction estimating puzzle, get our guide.

Models typically function through the input of parameters that describe the attributes of the product or project in question, and possibly physical resource requirements. The model then provides as output various resources requirements in cost and time. Some models concentrate only on estimating project costs (often a single monetary value).

Other cost models are used to calculate costs of equipment, which provides more accuracy than models on a project level. Usage of these models is dependent on required accuracy and the phase of the project and its estimate. For help contact Clint at 480-415-0982 or email

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