Quantifying a construction site

Accurately quantifying your site is necessary to guarantee the profitability of the work and avoid surprises. This article gives you tips for refining your estimates and strengthening the competitiveness of your offers.

What to take into account when estimating a construction site

Above all, estimating a construction site is a balancing exercise between several financial elements. The two formulas to remember are as follows (and we will detail them throughout the article):

1. Dry outlay = Material cost + Labor cost + Material cost.
   The dry outlay corresponds to the direct expenses related to a construction site.
2. Cost = Total Disbursement (Dry Disbursement and Construction Expenses) + General Expenses (Fixed Charges and Variable Charges).
   Cost of production refers to the total expenses required to complete a construction project.
3. Sales price excluding VAT = Cost of production + Gross profit.

The sales price excluding taxes is the amount invoiced for a construction or renovation project before taxes are added.

1. Dry disbursement: the basis for costing

The dry payout is the direct sum of all the costs associated with the physical completion of the work site. It includes:

• The cost of labor: These are the salaries of the workers, artisans, and technicians who will work on the construction site.
• The cost of materials: This is the price of the materials needed for construction or renovation.
• The cost of the material: they correspond to the expenses related to the equipment necessary to carry out the work.

The total disbursement includes construction costs.

2. Construction costs: expenses on site

Construction costs include necessary expenses to organize and manage the site on a daily basis. They include costs for the supervision of personnel not directly productive, as well as for general equipment not attributable to specific works. In addition, there are the costs associated with installation and dismantling of the construction site.

Construction costs also include expenses for health and safety, as well as dedicated insurance, logistics management, subcontracting, and essential services such as electricity and water supplies. Amounts vary depending on the complexity and duration of the project.

3. Overhead expenses: the costs of running a business

Overheads include all expenses that are not directly related to a specific project. They can be classified into two categories:

• Fixed expenses: recurring expenses that remain constant, regardless of the company's business volume (such as rent or insurance).
• Variable loads: costs that vary according to the activity of the company, such as travel expenses, communication expenses, or bank fees.

General expenses vary according to the building trades (structural work, painting, plumbing, electricity, etc.). For example, a carpenter who needs a workshop generally has more expenses than a painter who can do without one.

These costs can be expressed As a coefficient or as a percentage. In principle, they are calculated by the accounting department based on the results of the previous year.

4. The benefit: remuneration for entrepreneurial risk

The benefit is the money that is left over after all project costs are paid. He Reward the company for the risk taken by accepting a construction site.

We often talk about a profit margin, calculated as a percentage of the total cost of the project. It should be set for remain competitive in the market, while guaranteeing the financial viability of the structure and the remuneration of managers.

Calculate the cost of the dry outlay

The dry disbursement corresponds to the following formula: Labor cost + Material cost + Material cost.

Calculate labor costs

Labor costs can be the most important expense item on a construction site.

To calculate it, for each work, it is necessary to multiply The hourly rate (including expenses) — an average value per position is usually determined. If applicable, you can use the rates (shown in a price library) by The number of hours required at work.

And it is necessary to provide for:

• Any additional overtime costs,
• Meal or transport allowances,
• A margin for unforeseen events or absences.

Calculate travel expenses on a construction site

The travel expenses of journeymen can become considerable for sites that are remote or difficult to access. Here are reminders for calculating them.

The cost of transporting teams is estimated with the hourly transport cost, depending on the distance between the construction site and the base site of your teams. Include in your calculations:

• The cost of fuel,
• Depreciation of vehicles,
• Tolls,
• The parking lot,
• Workers' travel allowances.

There are two types of travel allowances: “short trips” (daily trips between home and construction site) and “The big trips” (when employees cannot return to their homes in the evening). Their calculation methods are different (read the details here).

Travel expenses are integrated into the details of the calculations for each work (via materials, materials and labour). A site monitoring software facilitates their transmission to the accounting department (Learn more).

Calculate material costs for your construction site

The calculation of the prices for materials is as follows: unit price Multiplied by the Quantity used, plus the loss coefficient.

This involves, where appropriate, including the cost of travel or delivery to the construction site.

Calculate hardware costs

The estimation of costs related to equipment is essential to quantify the cost of work. To do this, consider the following:

• Equipment rental: Consider the rental cost per day or per hour, multiplied by the expected length of use. Some software can help with construction site logistics (Learn more).
• Depreciation: If you own the equipment, spread the cost over its useful life.
• Transport: some equipment may require special logistics and involve additional costs.
• Maintenance and repairs: Plan maintenance and repair costs based on the condition of the equipment.
• Fuel and consumables: include expenses related to fuel and spare parts

The amounts calculated for each piece of equipment are used in the calculations of the dry disbursement structures.

Know your overheads

Overheads (or structural expenses) include costs that are not directly related to a construction site but are essential to the operation of the construction company. As indicated above, they include fixed expenses and variable expenses. For example:

Fixed expenses

• The rent for offices, workshops or commercial premises,
• The salaries of employees who do not work directly on construction sites,
• The insurances,
• Internet and telephone subscriptions,
• The software (Like Alobees)...

Variable loads

• Rental costs for construction vehicles,
• Water, gas and electricity bills,
• Payments for external services such as accountants or lawyers,
• Postal costs, bank charges,
• Work clothes and safety equipment,
• Office supplies, computer equipment and tools,
• Advertising and marketing activities...

The amount of overheads is communicated by the accounting department.

Choose your margin rate

The margin rate is fundamental. It is added to the cost of production (total outlay + overheads) To establish the selling price. Here are the things to consider:

• Complexity: the more complex a project is, the higher the margin rate can be. This compensates for the risks and the required expertise.
• Competition: analyzing competitors' prices helps to define your own margin. It is important to find the right balance between standing out and staying competitive.
• Perceived value: the quality of your services, your reputation and customer relationships are assets. They may justify a larger margin.

The idea is to balance these factors to set a margin that reflects the value of your work, while maintaining a competitive selling price.

Add VAT to your estimate

It is mandatory to include VAT in the costing. The percentage of tax depends on the type of work and their location. In mainland France, in the building sector, the following rates should be considered:

• Rate of 20%: for new buildings and renovations that are less than 2 years old. It also applies to major expansions.
• 10% rate: for renovations in homes older than 2 years. It covers labor and materials, if purchased by the professional. It concerns transformations, arrangements, improvements and maintenance.
• Rate of 5.5%: for energy improvement works (insulation, heating, ventilation, etc.) in homes older than 2 years. The craftsman must be RGE certified (“recognized guarantor of the environment”).

Rates vary by location. This is for example the case in Corsica or in the DOM-TOM (see here).

A work estimate must include the following information:

In construction, a quotation must contain certain information in order to be compliant. Once accepted by the customer, it becomes a contractual commitment.

• Information about the company,
• Quotation number, date and validity period,
• Customer contact details,
• Description of the work,
• Product/service information with unit price excluding VAT and quantity,
• Total price excluding VAT, VAT and total including VAT,
• Date of completion of the work,
• Conditions of execution or delivery,
• Information relating to waste management,
• Payment terms,
• Corporate stamp,
• Status and legal form of the company,
• Competent jurisdiction,
• SIREN number,
• RM number (trades register),
• Department number,
• intra-community VAT,
• “Quotation received before work was carried out”,
• “Good for work”,
• Place and date of signature,
• Signature.

For transactions with individuals, it is imperative to provide the general conditions of sale before the quotation is finalized, which may be located on the back of the quotation.

If you display your prices on a website, it is also mandatory to display your legal notices, the general conditions of sale (CGV) and the general conditions of use (CGU).

Why quantify a construction site effectively?

Accurately estimating a construction site is essential, both for the profitability of the company and for customer satisfaction. Here's why.

An under-priced project will not be profitable

An undervalued quote has negative consequences for the business. They affect profitability in the short and medium term.

• Financial losses: If the actual costs exceed the estimates, the company absorbs the difference. The profitability of the construction site is compromised.
• Poor quality: poorly estimated costs can lead the company to save money elsewhere, at the expense of quality.
• Reputation tarnished: exceeding the budget can cause problems on the construction site and damage the company's image in its region.
• Internal tensions: repeated costing errors create friction between teams. In particular between the quantity surveyor and the construction manager.

An overvalued construction site is harmful to competitiveness

An overstated cost of production also poses problems. Here are a few examples:

• Reduced competitiveness: prices that are significantly higher than those of competitors generally lead to the rejection of the quotation.
• Negative perception: a construction company offering overvalued quotes may be perceived as not very credible.

The price study is fundamental to ensure the profitability of its activity in the building sector. However, the work does not end there. It is also essential to make a construction site monitoring accurate and rigorous.