How to Estimate Construction Costs



10 minutes
Table of Contents

Any construction project's success depends on fast and accurate cost estimation. Without it, general contractors or estimators can easily underestimate the costs, leading to delays, cost overruns, and unsatisfied clients. 

For most industries, innovative tools can help. But the construction industry adopts new technologies slowly. As a result, it still requires weeks to estimate construction costs for a single project, taking a large amount of time from highly paid and highly educated estimators.

This delay is not only costly but can also:

  1. Reduce the number of bids you submit each year.
  2. Hides your submission among hundreds of other proposals.
  3. Make you appear less qualified than other bidders.

Fortunately, with today’s busy marketplace and tight labor force, AI estimating software steps up to automate the construction cost estimating process. This results in faster and more accurate construction estimating that can save contractors time and money.

In this article, discover how to estimate construction costs and how AI can help. 

Understanding Construction Cost Estimate

Estimating building costs involves predicting the costs of materials, labor, and equipment needed for a construction project. It's a complex process that requires careful planning and analysis of various factors, including project specifications, building codes, and local regulations.

Importance of Accurate Cost Estimation

A construction project's success depends on accurate cost estimation. It is possible to overrun the project's budget, delay the project, and dissatisfy the client by underestimating the costs. Alternatively, overestimating building cost estimates can make a project uncompetitive and result in losing the bid.

Accurate construction costs estimates enable estimators to prepare detailed project budgets, set realistic timelines, and avoid costly surprises later in the construction process.

AI-Driven Construction Cost Estimation: The Key to Faster and More Accurate Estimates

Two factors stop you from increasing your profit margins - the slow and costly preconstruction process, and inaccurate building cost estimation.

Deep-learning construction AI, like Togal.AI, can help run competitive construction firms through the following: 

  1. Speed Up the Preconstruction Process

Estimators spend around 45-60 minutes on a takeoff per plan page. This can easily add up to weeks of time to complete for an entire plan set. 

With AI estimating software, you can complete layouts in just under a minute. This allows you to reduce your overall preconstruction department time, costs, spend more time bringing higher value to clients, bid on and win more work. 

  1. Get Accurate Estimates

Don’t risk bidding too low for high-scaled projects and winning at the expense of losing money. 

With AI estimating software, you can eliminate error-prone calculations and interpret drawings with 99% accuracy, so you’ll consistently:

  • Produce building construction estimates with high levels of accuracy.
  • Reduce risks of cost overruns and losing money.
  • Consistently run profitable and predictable construction projects. 
  1. Focus On Value-Generating Activities

Approximately 60% of a general contractor and their team of estimators’ time is spent doing takeoffs. While this process is crucial to pricing a job, it generates minimal value.

With AI estimating software, like Togal.AI, you can automate and complete takeoffs in under a minute. This enables your team to focus on scoping, value-engineering, and identifying the right trade partners - potentially increasing your revenue long-term.

A 4-Step Guide to Estimating Construction Costs

Outlined below are the basic steps for estimating construction costs. 

  1. Prepare for Construction Cost Estimation

Follow the Preparation Process:

Take note of the following preparation process:

  1. List the scope of work including requirements, important details, and budget. Some of the things you need to familiarize yourself with are:

a. Project scope and size

b. Project expectations

c. Site layout and ongoing operations 

d. Permit applications

  1. Research the project owners to find out their project history and familiarize the team with their preferences.
  1. Visit the project site to identify factors that may impact the project. Some of the things you can look at are:

a. Soil quality

b. Weather conditions

c. Existing geographical challenges

d. Shipping and logistics

e. Storage capacity on site

f. Environmental regulation 

g. Site accessibility

  1. Analyze how the various components are priced in the project.
  1. Attend pre-construction meetings to clarify project details.

Gather Project Information

Gather all project information including project plans, specifications, and any other relevant documentation. Have a clear understanding of the project scope, including the expected timeline and milestones, to create an accurate cost estimate.

Identify the Scope of Work

To estimate construction costs accurately, identify the scope of work. This includes identifying all tasks, materials, and labor required to complete the project successfully. A detailed scope of work helps ensure that all costs are accounted for and that the project stays on track.

Review Project Plans and Specifications

Reviewing project plans and specifications is essential to identify all the materials and labor required for the project. This step helps estimate the costs accurately and can help prevent errors and omissions that can lead to cost overruns.

Identify Potential Risks and Contingencies

Identifying potential risks and contingencies is an important step in estimating construction costs. This includes identifying any potential challenges, such as regulatory or environmental issues, that may impact the project's timeline or costs. It is crucial to account for contingencies in the cost estimate to avoid unexpected expenses.

  1. Determine Costs for Materials and Labor

A. Estimate Materials Costs

Conduct Material Takeoff and Identify Required Materials

To estimate the cost of materials accurately, it is essential to identify all the materials required for the project. This includes not only the primary building materials but also any secondary materials required to complete the project, such as fasteners or adhesives.

Material takeoffs are critical in estimating material costs because they provide a detailed and accurate list of all the materials needed for the project. This information allows you to calculate the exact quantities and costs of each material, which is essential in developing an accurate cost estimate. 

Additionally, material takeoffs can help you identify any missing or overlooked materials, ensuring that you have everything you need for the project before you begin.

3 Types of Takeoffs:
Research Material Costs

Research current market prices for all required materials to ensure the estimate is accurate. This includes not only the cost of materials but also any shipping or handling costs.

Account for Waste and Other Factors

It is crucial to account for waste and other factors that may impact material costs, such as shrinkage or loss during transportation. Including these factors in the estimate helps ensure that the project stays on budget.

B. Estimate Labor Costs

Determine Labor Requirements

To estimate labor costs accurately, it is essential to determine the number of workers required to complete the project successfully. This includes identifying the skill level required for each task and estimating the time required to complete each task.

Research Labor Rates

Research current labor rates in the area where the project will take place to ensure that the estimate is accurate.

Account For Other Labor-Related Costs

Account for other labor-related costs, such as taxes, benefits, and insurance, in the estimate. Including these costs helps ensure that the estimate is accurate and that the project stays on budget.

Account for Additional Costs

Site Preparation Costs

Site preparation costs can vary widely depending on the location and type of project. Costs may include things like site surveys, grading and excavation, and utility installation. It's essential to research and estimate these costs accurately to ensure they are accounted for in the overall project budget.

Equipment and Tool Cost

Another significant cost consideration is the cost of equipment and tools necessary for the project. This may include everything from heavy machinery to hand tools. Estimating these costs accurately is critical to ensure that the project has the necessary equipment to complete the work and that it is financially viable.

Permitting and Regulatory Costs

Permitting and regulatory costs are often overlooked in construction cost estimation but can add significant costs to the project. It's crucial to identify all required permits and regulations that must be followed and account for the costs of obtaining them in the project budget.

Overhead Costs

Overhead costs refer to expenses that are not directly tied to a particular project but are still necessary to keep the business running. These costs may include things like rent, utilities, and administrative expenses. Accurately estimating overhead costs is critical to ensure that the project is financially viable and that the business can continue to operate.

Create the Construction Cost Estimate

Combine All Estimated Costs

Once all costs have been estimated, combine them to create a comprehensive project budget. This budget should include all costs, including labor, materials, site preparation, equipment and tool costs, permitting and regulatory costs, and overhead costs.

Account For Profit Margins

It's essential to include a profit margin in the project budget to ensure the business can continue to operate and grow. Profit margins should be included in the final estimate based on the company's policies and goals.

Present the Estimate to the Client or Project Manager

The final step in the construction cost estimation process is to present the estimate to the client or project manager. The estimate should be presented in a clear, professional manner and should include all costs and profit margins. Be transparent and honest in the estimate presentation to build trust with the client or project manager and avoid any potential disputes down the line.

To speed up this process, here’s what you can do:

  • Review your checklist to ensure you’ve fulfilled all requirements and proposal formatting. 
  • After submitting your bid, stay in touch with the project owners. This will help you stay top-of-mind while they review hundreds of other bidders. 
  • Keep track of your bid success rate. This will help you determine what works. In your next bid, you could use this data for a faster and more effective bid.

Leverage Construction Cost Estimate Templates

If you’re looking to estimate cost works faster and more accurately, then you’ll need to leverage a construction estimate template

This is because when you create estimates from scratch, it becomes a tedious and time-consuming process. Estimators often have to catch up with deadlines, especially when they need to fulfill multiple bids. 

With a template, you can estimate construction costs while you:

  • Look professional 
  • Save time
  • Stay organized
  • Avoid costly missed details
  • Find areas for cost optimization

Here are some of the construction cost estimates general contractors and estimators can leverage: 

  1. Basic Construction Template
Basic Construction Template
Construction Template

Source: SmartSheet

Download the template here. 

  1. Commercial Construction Estimate Template

Source: Shawn McCadden 

Request the template here. 

Residential Estimate Template

Residential Estimate Template
Source: SmartSheet Download the template here

If you want access to more free templates, simply visit our article on 5 free construction estimate templates here.

Streamline Your Pre-Construction With Cost Estimate Calculator

Interior Wall Framing Cost Calculator

Interior Wall Framing Cost Calculator
Source: Homewyse To learn more, read our article on interior wall calculators.

To learn more, read our article on interior wall calculators.

Drywall Cost Calculator by Omni Calculator

Drywall Cost Calculator by Omni Calculator
Source: Omni Calculator. Click here for more construction-related calculators by Omni Calculator.

Togal.AI ROI Calculator

Coastal Construction Group, one of the largest contractors in the SE United States with over 25 years of experience, recently reported a total of ~$1 Million in first-year savings at their Miami office with AI estimating software, Togal.AI. 

They averaged 10 bids a month and saved a total of 14.5 hours per plan set and 13, 920 hours per year. 

How much can Togal.AI save your company? Find out by computing the value with our ROI calculator. 

Togal.AI ROI Calculator
Source: Togal.AI

How to Estimate Construction Costs With AI

To win more bids, you need two things: 

  1. Great accuracy and detail of the cost estimates that you submit. 
  2. Submit high-quality proposals fast, participate in more bids, and increase the probability of winning more jobs. 

AI can help. Skip the tedious manual takeoff that can take weeks and switch to Togal.AI's AI estimating software. Togal.AI offers the most efficient and accurate takeoff process available.


Perform a Takeoff Analysis in Under a Minute!

With this fast and accurate AI estimating software, populate the polygons and object count necessary for the takeoff. Save more than 14 hours per plan set and enjoy 98% time savings.

99% Accuracy in Takeoffs 

Togal.AI eliminates manual and error-prone calculations by interpreting plans with 98% accuracy, reducing the risk of cost overruns for your construction projects.

Cloud-Based Collaboration

Togal.AI enables general contractors and estimators to simultaneously work and collaborate on a single project through the web-based platform, boosting their overall productivity.

Compatibility and Reliability

Togal.AI is compatible with any industry-standard drawing format including JPEG, PNG, TIFF, and JPEG.


Togal.AI is accessible from any device with the internet. Estimators can work on takeoffs and complete proposals from any location with ease. 

Accurate Object Detection

Togal.AI follows AIA measurement standards, automatically detects labels, and measures project spaces and objects in under a minute. 

3-Step Takeoff - Scan, Upload, and Click 

No need to use “rollers and rulers with a mouse”. Simply upload your building plan, and let Togal handle your takeoff in less than a minute. 

Manual Tools

The traditional way is hard to let go for some people. If you do not want an automated takeoff, you have the option to do manual takeoffs with Togal.

Revision Analysis is Easier 

Revision analysis will process in under a minute - not hours. 

Speed Up Your Bidding

You can submit more bids because you picked up 50% of your inefficient time doing manual take-offs. It also increases your chance to win more projects because the estimator can now focus on value engineering and finding ways to save the client money

Automatically Name Drawings

With Togal.AI, you can automatically name multiple drawings in seconds. Here’s how.


Togal.AI speeds up the takeoff process but does not replace the estimator. During the pre-construction process, the estimator analyzes the plans to identify potential problems or areas for efficiency.

It is the estimator's responsibility to review Togal.AI's takeoff and adjust it as necessary. Machines will never eliminate the need for humans but rather make the human workflow the most efficient and eliminate the most tedious and time-consuming tasks.

Estimate Construction Costs Faster and More Accurately With Togal.AI

Construction cost estimation is a complex process that requires careful planning and analysis of various factors, including project specifications, building codes, and local regulations. Accurate cost estimation is essential to the success of a construction project, as it enables contractors or estimators to prepare detailed project budgets, set realistic timelines, and avoid surprises later in the construction process.

AI-powered software such as Togal.AI can help contractors or construction cost estimators speed up the estimation process and make it more accurate, reducing the time and effort required for manual data collection and analysis.

  • Save roughly 30-minutes per sheet
  • Remove extra overhead and cut down on pre-construction costs 
  • Eliminate error-prone manual calculations

Experience how Togal.AI can streamline your preconstruction workflow, increase your submitted proposals and win more work.

Try Togal.AI today!