Estimating Construction Costs

Work Experiences from a Carpentry Contractor

Estimating construction costs can be broken down into two primary parts, materials and labor. On small carpentry projects, you can estimate the cost of materials easy enough, but estimating the amount of time it will take to perform a certain task can be difficult, especially if you have never performed the task before. I was about to learn a hard lesson.

Estimating Construction Costs

Sometime in the mid 1980's...

I woke up Monday morning to the sound of my cat sharpening her claws on the bare rubber mattress of my new waterbed. I eased out of bed and delicately detached Loretta's claws from the 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 and began thinking about meeting Jay regarding estimating the construction of a stair job he had told me about during a going-away dinner for Steve last Thursday at Chuy's. Jay was a framing subcontractor on my last job, but 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 were all the same dimensions and style and, for that reason, were easy to estimate and easy to build. Jay's stairs would certainly be different.

Before meeting Jay, I grabbed a screwdriver and a ratchet wrench from my toolbox to make adjustments to the points and carburetor on my Volkswagen van's engine. I loved my VW, but it required daily adjustments to keep it running smoothly, and would soon require an engine rebuild.

Jay's Stairs - Estimating Construction Costs

I took a quick shower and drove to the job site around 8am. I was pleased to see my good friend Jack on the Sky Trak delivering materials to subcontractors, as he had done on our last job. Jay saw me park my van and began walking towards 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 framer.

"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 for the work I did. 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, and 2x14 cedar stringers, 2x4 framing, 1x4, 1x6, and 1x8 cedar trim, and many 10" x 3/4" diameter lag bolts and screws. There were two 30' x 4' landings at the first and second floor levels. There was one 8' x 4' outer landing that broke up the total height between the first and second floor landings, and a short set of stairs between the ground level and the first floor landing. There was a 'balloon framed' 2x4 wall, covered on both sides with T1 11 plywood siding that stretched between the landings and separated the upper and lower stairs. The worst part was how the 4x6 wooden handrail cap attached to random 2x4 framing that poked up through 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.

What 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 weather, add another week. The stairs we were looking at were incomplete, which 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, there'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, sounding a little miffed 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 at all 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 frantically scoured my back yard for his flying disk. In a flash, he located it and brought it to me. I tossed the Frisbee with Weiser for a while and began putting together a mental rough schedule for each day's work. In order to make an acceptable wage, I would have to build the whole thing in a week! This was my first stab at estimating construction costs.

Impossible! This job could not be completed in a 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.

At that moment, I should have made the decision 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 the work and the experience, and I already know many of the workers. It will be fun working with them again.

The next morning, 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 as hell to accept the job on those lousy terms, and Jay was already giving me a deadline. Steve never ever 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 towards the air-conditioned job shack.

Jay is not one of the guys anymore - he thinks he is some kind of half-ass 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 flagged 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 the 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 that I would need to construct the first and second floor landings (my Day 1 plan).

Lesson: If you are subcontracting carpentry work from another contractor, factor in the time it will take to scrounge up materials for each day's work. Many times, materials were not available and I would have to work on another part of the project until supplies could be ordered. Working like this broke up the natural flow of construction and killed productivity. When you are estimating construction costs, you must consider the logistics of materials. Purchasing and staging materials for each day's work is a required task to get the job done, and the time it takes should be included when estimating construction costs.

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

I drove home that evening thinking that it would realistically take another entire 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, then grabbed a beer from the fridge and sat down at my kitchen table. I thought about estimating construction costs and what it would take to make a decent living in the construction business.

When you are working as a self-employed carpenter, productivity is left entirely up to you. When you have to take care of personal business, or become ill, or just need a break, 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: When you are estimating construction costs, keep in mind that construction tasks always take longer than you think they will. There are a multitude of circumstances that can impact your planning - the availability and quality of building materials and the overall project scheduling, are common elements for which you have no control. And don't forget about 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 actually 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. 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 was unable to afford a new battery for my Volkswagen van. For two weeks, 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 flat-lands, I would have had to figure out another way to get to work.

Despite my desire to prove my carpentry abilities, I realized that I was making a huge 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 are spending all of 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 are making less money than you require to pay your bills and eat, obviously something needs to change. I waited too long.

Rather than simply 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 for my work. 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 dollars 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, like 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. Not having to worry about money problems can have a positive impact on your attitude. I bought a chorizo-and-egg taco from the morning Roach Coach, and rolled out my tools to continue building stairs. Around noon, Jay came by to give me my check. It was itemized. $150 for final payment on the last stair unit, and $400 dollars 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 dollars 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: It is not really part of estimating construction costs, but know who you can trust. If you are in doubt, it is probably best to walk away. If you decide to do the work, however, at least make sure all of your agreements are in writing. This should be done 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 drew up a contract to provide architectural drawings for a project involving the remodeling of an existing office building. Even though the payment schedule was clearly stated in the contract, my client always short-paid me at each phase (that's when I dubbed the S-O-B, 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 the arrangement he had made with his business partner had been terminated, and that there would be no remodeling project or final payment for my services. Blood rushed to my head, but I wasn't at all surprised by his response - he had already proven himself a cheat. Without saying a word, I hung up the phone. I wasn't going 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 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 would never forget.


Estimating Construction Costs

Since the early 1980's, when I first began estimating construction costs, I have estimated the materials and labor on many small construction projects including decks, detached garages, and home additions, with relative success. The amount of money you can charge for your work depends, to some degree, on what the market will bare. During boom periods, where carpenters are in high demand, you can charge a little extra for your services. But during economic downturns, when competition is tough (and your fellow contractors are bidding against you), you might have to lower your rates in order to get the work. No one likes these times, but they occur, and are unfortunately the nature of construction work.

There's no one perfect formula for estimating construction costs that fits every situation, but there are a few that have worked for me over the years. When estimating decks, for instance, I have found that 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 and compare it to the total bid and make adjustments as necessary.

Estimating construction costs on remodeling projects can be similar, but more difficult if your project involves some demolition or modification of the existing structure. If you are removing a wall to expand a room, for instance, you would need to determine if that wall is load-bearing. If it is, you will need to add a beam to carry the weight between vertical supports. Add in additional fees for structural engineers, if required. When working on old structures, you never know what is behind a wall or how it is constructed until you cut into it. Walls were constructed differently 100 years ago than they are today.

In Northern Virginia, I once removed a wall that was insulated with several 1926 editions of the old Washington Star newspaper. It was fascinating to see ads for new three-story Victorian homes in NW Washington D.C. selling for $8,000. What's more, the wall framing was not covered with Sheetrock as we would use in construction today. The old rough-cut wooden studs were covered with wood strips, steel fabric, and plaster, and was quite a bit more difficult to remove than a wall constructed with modern-day materials. Keep in mind that 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 are going to tie into an existing structure, or whether that structure can carry the load of the new construction. You also don't have to worry about working around your customer's schedule 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 10am 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.)
.

Clearly 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 is considerably more difficult than working on a dry summer day), etc..

Draw a sketch of your project to help you (and your customer) visualize the finished product. Doing this will make it easier to estimate the materials, as well as 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 sketch up a 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 a down-turn in the economy will affect your work. Putting extra money aside isn't always easy to do, but when you land that carpentry contract that pays well, resist the urge to buy a new flat-screen TV, 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.

Carry 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 were very understanding and tolerated the delay in 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 lack of health insurance (that I could have bought for $50 a month, at the time).

As you gain more experience working on various carpentry projects, you will get better at estimating the amount of time it takes to perform the different tasks. Take the time to make notes that you can use for estimating construction costs on future projects. Keep extra cushion in your bank account - you won't feel the pressure to produce estimates that overlook important factors if bill collectors aren't breathing down your neck. Finally, try to avoid doing business with the unscrupulous Jays and Mr. Hells of the world.

~ Matt


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