Estimating Construction Costs

Work Experiences from a Carpentry Contractor

Estimating construction costs is the sum of two elements; materials and labor. On small carpentry projects, you can estimate the cost of materials without too much effort. But calculating the time required to perform a particular task can be difficult if you have never performed the work before. I was about to learn a hard lesson.

Estimating Construction Costs

Sometime in the mid-1980s

I woke up Monday morning to the sound of my cat sharpening her claws on the bare mattress of my new waterbed. I eased out from between the sheets and delicately detached Loretta's claws - before she poked a hole in the thin rubber mattress - and carried her into the kitchen for a can of stinky cat food. I also shared my house with Weiser, my 75-pound yellow Labrador that liked retrieving a Frisbee more than eating. I tossed him a few, then filled his bowls with food and water for the day.

It was a cloudy, cool early September morning in Austin, Texas - a welcomed change from the past few months of relentless summer heat. I made scrambled eggs and toast for breakfast. While eating, I began to think about my plan to meet Jay regarding estimating the construction costs of a stair job he had told me about during a going-away dinner for Steve last Thursday at Chuy's Mexican food restaurant. Jay was a framing subcontractor on the previous job and, somehow, landed a new position as foreman on a medium-sized condominium project. He probably got Steve's old job.

I had built many stairs and landings, working for Steve as a self-employed carpenter, but they all had similar dimensions and styles and were easy to estimate and mass-produce. Jay's stairs would no doubt be different.

Before meeting Jay, I grabbed a screwdriver and a ratchet wrench from my toolbox to adjust the points and carburetor on my Volkswagen van's temperamental engine, which would soon require a complete rebuild.

Jay's Stairs - Estimating Construction Costs

I took a shower and drove to the job site around 8 am. I was pleased to see my good friend Jack on the SkyTrak delivering materials to subcontractors, as he had done on our last job. Jay saw me park my van and began walking toward me. He was wearing a button-down long-sleeved white Polo shirt, starched and pressed Wrangler jeans, and brand new work boots - quite a shift from the faded blue-jean cutoffs and beat-up white leather tennis shoes he wore as a carpenter a couple of weeks prior.

"Hey Matt, it's good to see you," he hollered.
"Same here. I see you've got yourself some new duds," I said with a smile.
"Are you ready to have a look at my stair project?" he said, ignoring my comment about his new attire.
"Sure, let's see what you've got."

I wasn't sure how I felt about Jay. I didn't know him too well. Steve, the foreman on our last job, always treated me right and paid me well. I never had to estimate construction costs or do anything. The money Steve offered was always fair and in line with the work. Could I trust Jay to do the same?

Jay led me to a monstrous partially-built stair structure made of heavy 6x6 cedar posts, 4x10 cedar beams, 2x14 cedar stringers, 2x4 framing, 1x4, 1x6, and 1x8 cedar trim, and many 10" x 3/4" diameter lag bolts and screws. The project included two 30' x 4' landings on the first and second floors. There was an 8' x 4' outer landing between the first and second-floor landings and a short set of stairs between the ground level and the first-floor landing. A 'balloon framed' 2x4 partition, covered on both sides with T1-11 plywood siding, was sandwiched between the upper and lower stairs and stretched between the upper and lower landings. The worst part was how the 4x6 wooden handrail cap was attached to random 2x4 framing that poked up through the notched 1x8 trim. It was an awful design, but my subjective opinions wouldn't change the facts. These ugly stairs would be difficult and time-consuming to build.

How much would a project like this pay? 1000 dollars? 2000 dollars? I estimated the labor to build these stairs would take about three or four weeks, and if you factor in the weather, add another week. The stairs we were looking at were incomplete. That also raised a red flag. No one was working on them. Who had started these stairs and then left the job unfinished? What was their reason for leaving? Was it too much work for the pay?

"The job pays $450 per set of stairs. That includes the upper and lower landings, and all of the stair framing and trim," Jay said. "What do you think?"
My stomach dropped. Well, here's the answer, I thought. All work and no pay makes Matt a dull boy.
"You're kidding, right Jay?" I asked, reacting to his ludicrous proposal. "I don't have much experience estimating construction costs, but it looks like quite a job for $450. I'll have to think about it."
"Don't think about it too long," Jay replied, perturbed that I didn't jump on the opportunity. "We're behind schedule. If someone else wants the job before you make up your mind, I am going to have to give the work to them."
"Fair enough," I said. "I'll let you know tomorrow."

I left the job site not feeling comfortable about Jay's stair job. On the drive home, I began thinking about the whole thing. Can I trust Jay? He wouldn't cheat me, right? Steve never did. Why should Jay?

From the rear window of my dining room, Weiser saw me walk in the front door and over to the back door that led to my backyard. He frantically searched through the grass for his flying disk. In a flash, he located it and brought it to me. I tossed the Frisbee to him several times while putting together a rough mental schedule for each day's work.

Impossible! Those stairs could not be built in one week by one person. There were too many variables and too much work! Maybe someone else with more experience and a thousand tricks up their sleeve could have done the work and made money at $450, but not me. What am I thinking? Someone with more experience would never accept a job like this on these terms.

I should have decided to turn Jay down on his offer, but my lack of experience prevailed. I guess I'll try, I thought. Even if it takes me two weeks, I can still pay my rent on time. Besides, I need work and experience. Many many of the carpenters worked the previous job. It will be fun working with them again.

The next day I met Jay at the job site.

"Okay, Jay. I think it is a lot of work for the pay, but I will give it a try."
"Great," Jay replied. "I already mentioned that we are behind schedule on this job. If you can finish this one set (that someone else had already started), by the end of the week it would be much appreciated."

There I was, reluctant to accept the job on those lousy terms, and Jay was already giving me a deadline. Steve never did that. Not even once. Jay still thinks he is running a framing crew, and I am one of his new flunkies. He'll probably come up with some unflattering nickname for me that he will try to make stick with the rest of the crew.

"I'm not making any promises," I said.
"Get Jack to bring you some materials," Jay said as he turned and walked back toward the air-conditioned job shack.

Jay is not one of the guys anymore - he thinks he is a big shot now, I muttered to myself. While unpacking my tools at the location of the stair project, I saw Jack cruise by on the forklift and waved him down. Jack drove over and killed the Sky Trak's loud diesel engine.

"Hey Matt, how's it going?"
"I think I am already ready for a beer!"
"Oh no! What's the matter?" Jack asked.
"I don't know if I am going to like working for Jay. He talked me into building these stairs for almost nothing, and now he wants to treat me like one of his helpers."
"Yeah, that's the way he is," Jack said.
"Well, I agreed to give these stairs a try, so I might as well get started. Can you help me gather some materials?"
"You bet! Anything for my buddy, Matt," he said with a chuckle.
"I'm glad you are on this job, Jack. I have a feeling I'm going to need moral support."
"No problem, Matt. Let's start by having a beer today after work."
"Great idea! Let's do it!"

Jack started up the Sky Trak and put it in gear. I hopped up on the side step of the cockpit, and away we went, bouncing full-speed across the uneven job site.

Jack and I spent over an hour locating the materials I would need to construct the first and second-floor landings (my Day 1 plan).

Lesson: Factor in the time it will take to scrounge up materials for each day's work. Materials were not always on hand, and I would have to work on another part of the project until supplies were available. Working like this broke up the natural flow of construction and killed productivity. When estimating construction costs, you must consider the logistics of materials. The time required to purchase and stage materials for each day's work should also be part of the cost estimate.

I spent the rest of the afternoon setting the four 16' 6x6 posts and 2x10 beams that provided the basic framing for the 1st and 2nd-floor landings. I did not have the time (or the materials) to add the joists and decking for either landing. Completing this would have been required to keep to my Day 1 schedule.

I drove home that evening thinking that it would realistically take another full day to complete the decking on the two landings. That would put me a solid day behind schedule, and I had just begun the project.

As I pulled into my driveway, I saw Loretta sitting in the kitchen window, waiting for me to come home. Once inside, I fed her and Weiser, grabbed a beer from the fridge, and took a chair at my kitchen table. I thought intensely about estimating construction costs and what it would take to make a decent living in the construction business.

When you are a self-employed carpenter, productivity is your responsibility. When you need to take care of personal business, become ill, or need time for recreation, the work stops cold. When the work stops, so does your pay. There are no paid holidays, sick days, or vacations. Any paid time off comes out of the money you make while working.

Lesson: Construction tasks always take longer than you think they will. Some circumstances can impact your planning - the availability and quality of building materials, and the overall project scheduling, are common elements over which you have little control. And don't forget about the weather. Just one week of inclement weather can seriously impact your livelihood. To be successful as a self-employed carpenter, you have to make enough money on days when you can work to compensate for the days you can't.

As I proceeded further into the stair-building project, I discovered endless discrepancies between the architectural drawings and what would work. The only person that kept me from quitting outright was the project superintendent, Pat McCormick. He appreciated my ability to figure out solutions to the stair design's architectural pitfalls, and that was enough to keep me coming to work each day. It was a learning experience. Jay, on the other hand, lacked that essential leadership skill. Most of what came out of Jay's mouth was arrogance and horseshit.

At one point, I got low on money and could not afford a new battery for my Volkswagen van. I had to push-start it to get to work each day. Everywhere I went, I parked on top of a hill so that all I had to do to start the engine was, turn on the ignition, depress the clutch, put the transmission into 2nd gear, release the brake, and then, after gaining a little speed, quickly release (pop) the clutch, then VAROOM! Engine started. Luckily, I drove a vehicle with a standard transmission and lived in a hilly city. If I had lived in the flatlands, I would have had to plan another way to get to work.

Despite my desire to prove my carpentry abilities, I realized I was making a terrible mistake continuing to work on this project. Bills were due. Many were past due. It was time to quit and pursue profitable endeavors.

That was another dilemma - when you spend all your time working on an unprofitable project, you have no time to look for work that might get you out of that financial hole.

Lesson: Know when to quit. If you earn less money than you require to pay your bills, your plan needs adjustment. I waited too long.

Rather than quit, and leave my work unfinished, I met with Jay and agreed to stay on the job if he would be open to paying me hourly. He didn't like the idea.

"Jay, I can't afford to keep working on this project. Any reserves I had are long gone and I have no choice but to leave this job and find something else."
"We can't do that," Jay replied. "The job is not structured that way."
"Well then, I am done."
"You can't do that, we have an agreement, and you still have money tied up in unfinished work," Jay said.
"Maybe you didn't hear me, Jay. I can't afford to work for free anymore!"
"Well, I have another job that might help you get back on track. It involves building a bridge over a small crevice. You can easily build the bridge in a day and it pays $800. Are you interested?" Jay asked.
"I am, but what's the catch? You are paying me hardly anything to build these complicated stairs and now you are offering to pay me almost twice the money for a job that can be built in just a few hours."
"There's no catch, Matt. I can order the materials today and they should be here by early next week." he said.
"That doesn't help me much this week, but okay, I'll do it if I can get paid for it by the end of next week." I said.
"No problem." Jay promised.

I spent the rest of the week finishing up one of the stair units. On Friday, the materials arrived for the bridge. That's great, I thought. I can build this bridge and collect the $800 that will allow me to pay some past-due bills and buy a new battery for my van.

On Monday, I began working on the bridge. I couldn't quite finish it in a day as I had planned, but I was able to wrap it up by noon on Tuesday. I was still on track to get a decent paycheck on Friday.

On Friday, I arrived at the job site feeling good. It was nice not having to worry about money problems. I bought a chorizo-and-egg taco from the Roach Coach and rolled out my tools to continue building stairs. Around noon, Jay came by to give me my check. The details were listed: $150 for the final payment on the last set of stairs and $400 for the bridge.

"What's this 400-dollar crap?!" I shouted.
"That's your half of the bridge project." Jay squirmed. "Didn't you know you were splitting the money with me?"
"No! I didn't know that at all, Jay!! You never said anything about me splitting the $800 with you. You didn't even do one lick of work!" I said, shaking with anger.
"I get half for lining up the work for you." Jay said.
"Bullshit, Jay. You're just screwing me because you know you can. Well, those days are over. Find some other fool to finish your stairs. I'm out of here."
"If you walk now, you can't come back," he proclaimed.
"That's fine, Jay, I have no intention of coming back. Good luck with your project."
With that, I packed up my tools and left the job for the last time.

Though the tedious and unprofitable stair project was over, Jack and I remained buddies for many years. He was a great friend, but I lost touch with him sometime after I moved to Northern Virginia in 1987, and my efforts to locate him have been unsuccessful.

Lesson: Know who you can trust. If you are in doubt, it is probably best to walk away. If you decide to do the work, be sure your agreements are in writing. You should document every aspect of the work, even if you trust your customer implicitly. It helps to set expectations and keep everyone honest.

Mr. Hell

Years later, I had a similar experience doing business with Mr. Hell of Falls Church, Virginia. I wrote a contract to provide Mr. Hell with architectural drawings for a project to remodel an existing office building. The agreement contained a clearly defined payment schedule, but my client short-paid me at each phase (for this, I dubbed the sonofabitch, Mr. Hell). Nevertheless, I continued to perform the work on the six-week project and delivered the finished drawings on schedule. He agreed to look them over and send the final payment soon.

A few weeks went by, and no word from Mr. H-E-Double-Toothpicks. Finally, I called him to get an update. After a useless conversation about the weather and current events, he informed me that he had terminated the arrangement with his business partner and that there would be no remodeling project or final payment for my services. Blood rushed to my head, but I wasn't surprised by his response - he had already proven himself a cheat. Without saying a word, I hung up the phone. I wasn't about to waste one more second of my life talking to that shyster. Maybe I could have taken him to court, but it probably would have cost more money and time than I would have gained in a settlement. As painful as it was, I realized that the most productive path for me was to count my losses and move on.

It wasn't, however, a total loss. It was the first complete set of blueprints I had drafted for a project of that scale. The process of gathering data and making notes about the existing structure to later apply to my drawings, along with extensive building code research, was a learning experience I never forgot.

Estimating Construction Costs

Since the early 1980s, when I first began estimating construction costs, I calculated the cost of materials and labor on many small construction projects, decks, detached garages, and home remodeling, with relative success. The amount of money you can charge for your work depends, to some degree, on what the market will bare. When carpenters are in high demand, you can charge more for your services. But during economic downturns, when times are competitive (and your fellow contractors are bidding against you), you might have to lower your rates to get the work. No one likes these times, but unfortunately, they occur and are the nature of construction work.

There's no perfect formula for estimating construction costs that fit every situation, but some have worked for me over the years. When I estimate decks, for instance, I have found that by figuring out the total cost of materials, then doubling it, I could come close to the total bid. But before you submit that bid, consider the complexity of the deck:

Figure out how much time it will take to build each phase, compare it to the total bid and make adjustments as necessary.

Estimating construction costs on remodeling projects can be more difficult if your project involves demolition or modifying the existing structure. If you are removing a wall to expand a room, you need to determine if that wall is load-bearing. If so, you might need to add a beam to carry the weight between vertical supports. Add in additional fees for structural engineers, if required. One hundred years ago, walls in new homes were made of different materials than they are today. You won't know what is inside a wall until you cut into it.

In Northern Virginia, I once removed a wall that someone insulated with several 1926 editions of the old Washington Star newspaper (it was fascinating to see newspaper ads for new three-story Victorian homes in NW Washington D.C. selling for $8,000). The wall framing was not covered with Sheetrock, as we would use in construction today. The old rough-cut wooden wall studs were covered with wood strips, steel fabric, and plaster and were more laborious to remove than a wall constructed with modern materials. Demolition generally includes the removal of debris, which also adds cost to the project.

Estimating construction costs on free-standing new structures are the easiest. You don't have to worry about how you will tie into an existing building. You also don't have to worry about working around your customer's schedules while they are living on-site. One customer said, "You'll have to wait for my family to bathe and eat breakfast each day before you can start work. Will a 10 am start time work for you?" These kinds of obstacles are not only annoying but costly. While it would be great to make a good living working a five-hour day, it is not very realistic (at least, not in the construction world).

A general formula that I have used in the past for estimating most of my small projects:

(Cost of Materials x 15-20%) + (Estimated Hours x Hourly Rate of Each Worker) + (Overhead and Equipment Costs, etc.)

Document the scope of the work and explain to the customer that any alterations to the plan would be considered change orders and would add cost to the project.

Don't rush through the estimate. Take the time to consider all of the possibilities, including seasonal weather conditions (working in snow and ice can be herculean, compared to working on a dry summer day).

Sketch your project to help you (and your customer) visualize the finished product; it will help when estimating the materials and the number of hours it will take to build each phase. If you own a computer, you don't have to be an architect or certified draftsman to create a sketch or simple drawing to show your customers. There are several inexpensive (or even free) modeling software products available.

Advice for the Self-Employed Carpenter Estimating Construction Costs

Save enough cash to pay for at least two months of expenses. Three or four months would be better. You never know when bad weather or an economic downturn will affect your work. Putting extra money aside isn't always easy, but when you land that carpentry contract that pays well, resist the urge to buy a new flat-screen television and put the money in your rainy-day savings account instead. Once you have saved enough money to ride out potential hard times, that same flat-screen TV will be cheaper anyway.

Get health insurance! I once broke a bone on the first day of a project building a new art studio. The compound fracture of the fifth metacarpal on my right hand required surgery to pin the two pieces of bone together and put my arm in a cast for six weeks. I did what I could to keep the job going, but you can't do much with one hand. Fortunately, my customers understood my situation and tolerated the delay in the schedule without issue. The most painful part was that I owed $2,000 to the hand surgeon and $1,500 to the hospital (due to a lack of health insurance that I could have bought for $50 per month at the time).

As you gain more experience working on various carpentry projects, you will learn more about estimating construction costs. Take the time to make notes that you can use for future projects. Keep an extra cushion in your bank account - you won't feel the pressure to produce estimates that overlook important factors if creditors aren't breathing down your neck. And finally, try to avoid doing business with the unscrupulous Jays and Mr. Hells of the world.

~ Matt

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