1. Building Economy ARE 431
Dr. Mohammad A. Hassanain 1
Estimate Setup
2
Format.
Overhead.
Profit.
Today’s Lecture

2. Building Economy ARE 431
Dr. Mohammad A. Hassanain 2
3
Estimate Setup
Most estimates are complied by a number of people
and organizations.
Putting the prices together into a coherent final report
requires consideration of many numbers from many
different sources.
To this point, the estimate has been prepared working
within specific divisions or trades.
The task now is to add overhead, profit, taxes, and
escalation if applicable.
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Estimate Setup - Format
To accomplish this, the first step is to bring the costs of
each specialty area “forward” to an estimate summary
page.
As in Figure 6-16, the estimate is broken down by the
CSI divisions.
The estimate can be summarized in whatever
breakdown form is used.
The important factor is to be able to separate
subcontractor from in-house work.
In-house work needs to be separated further into
material, labor, and equipment.

3. Building Economy ARE 431
Dr. Mohammad A. Hassanain 3
5
Estimate Setup - Format
The subcontractor price will include the overhead and
profit for the subcontractor.
In-house labor, equipment and material costs will need
to have overhead and profit added.
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Estimate Setup - Overhead
Project overhead includes both certain field activities
and home office costs.
In the illustrated example (Figure 6-16), overhead is
classified as General Requirements in the Division 1.
Examples of costs associated with the home office
would be office rent or real estate costs, vehicles,
engineering support, clerical staff, top management
salaries and marketing, legal and accounting fees.
In unit price estimate, home office, also called project
overhead, is factored into each of the four cost
categories on the estimate summary: material, labor,
equipment, and subcontractor.
The percentages that are used vary based on the
project type and the general contractor’s cost of doing
business.

4. Building Economy ARE 431
Dr. Mohammad A. Hassanain 4
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Estimate Setup - Overhead
Material and equipment costs are adjusted 10% to
account for the costs of managing the purchase or
rental, storage, and handling of the materials and
equipment at the job site.
The 10% overhead fee covers the costs associated
with the home office support of this process and the
profit associated with this work.
The overhead associated with labor is the greatest of
any of the cost categories.
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Estimate Setup - Profit
Profit is added at the point in the project when the
contractor has quantified the work involved in the
project and has priced the labor and equipment
involved.
The amount of profit that is added is a factor of the
type of project, its size, the amount of competition
anticipated, and the desire to get the job, and the
extent of risk associated with the project.
A good estimating process should identify the actual
direct costs for the project, the indirect costs
associated with the project and home office overhead,
and then allow top management the opportunity to
factor in a correct profit percentage.

5. Building Economy ARE 431
Dr. Mohammad A. Hassanain 5
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Estimate Setup - Profit
The profit added on can range from 0 to 25%.
If the company needs work, or is faced with a lot of
competition, then the profit charged may be small.
A project of high risk nature in a market in which a
company sees little competition would allow a higher
profit percentage.