Cost Estimation – How I Do It

Q: Do you include profit and taxes in the estimate?

Yes, always. After the base costs are done, I add overheads (admin, insurance, etc.), profit (based on project type), and taxes (like GST, PST, or income tax depending on location). This way, the final estimate is complete and realistic.

I’m Engr. Sadam, and I’ve been working as an estimator, mostly focusing on construction projects — especially in the MEP (Mechanical, Electrical, Plumbing) domain. On this page, I’m just sharing how I go about preparing cost estimates.

Cost Estimation Sheet

📊 Cost Estimation Sheet

Sheet tabs are available inside the frame; swipe on mobile or scroll to view all sheets.

What Does "Cost Estimation" Mean in Construction?

In simple words, cost estimation is figuring out how much a construction project will cost from start to finish. It covers everything — from manpower to materials, transport, taxes, and even profit margins. It’s like building the entire project on paper before it actually happens.

For MEP works, it gets a bit technical because you have to understand the systems and how they’re going to be installed, not just what’s written in the BOQ.

My Estimation Process (Step by Step)

1. Understand the Project First

Before touching the calculator, I study the drawings, scope of work, and client requirements. I try to fully understand what the project is about — whether it’s just electrical, or complete MEP, or something more specialized.

2. Break Down the Work

I divide the project into parts: electrical, plumbing, HVAC, fire systems, etc. Each one has its own material, labor, and timeline needs. Breaking it down makes it easier to stay organized and accurate.

3. Manhour Calculation

Next comes labor. I calculate how many manhours will be needed based on task difficulty and project duration. For this, I also estimate how many workers will be required on average during each phase of the job.

4. Material Take-Off

Material takeoff is not the part of cost estimation directly but sometime needed so for that from the drawings and specs, I extract quantities for all the materials — conduits, wires, ducts, valves, etc. I usually do this manually or semi-automatically using Excel sheets, depending on the project size.

5. Costing: Supply & Installation

I divide the estimate into two major parts:

Installation Costs – all labor-related costs like direct manpower, site transport, accommodation, etc.
Supply Costs – all materials, fittings, wastage, and logistics (if applicable).

Each cost component is calculated with up-to-date rates, and everything is broken down line by line.

6. Adding Overheads and Profit

After the basic cost is calculated, I apply overheads like admin expenses, insurance (if any), and finally, a profit margin. Taxation (like GST, PST, or Income Tax) is also applied as per the location and project type.

7. Final Review & Summary

At the end, I create a summary sheet — which gives an overview of total cost, cost per manhour, supply vs installation ratio, and final selling price. This summary helps me (and anyone reviewing) to quickly understand where the money is going.

What I Include in Every Estimate

Here’s what I always make sure to cover in my estimation:

Direct & Indirect Labor
Materials with Quantity and Unit Price
Transport, Food & Accommodation
Mobilization & Demobilization
Tools & Equipment (T&P)
Safety (HSE) Provisions
Overheads
Profit
Applicable Taxes

Every item has a purpose, and I try to keep the breakdowns clean and traceable.

The Format I Use

I work mainly in Excel, and my sheet usually has the following tabs:

BOQ
Dashboard
Executive Summary
Rate Analysis
Manpower (Direct / Indirect)
Material
Equipment
Tool & Plant
Food and Accomudation
Mobilization & Demoblization
Site Transportation
Safety (HSE)

This format helps me stay consistent, and also makes it easier to update the sheet for similar future projects.

Frequently Asked Questions (FAQ) About Cost Estimation

What is cost estimation in construction?

Cost estimation is the process of calculating how much a construction project will cost — from materials and labor to overheads and profit. It helps in planning the budget and making sure everything stays on track financially.

What is included in MEP cost estimation?

In MEP (Mechanical, Electrical, Plumbing) cost estimation, I include: Material quantities and rates Labor (manpower and manhours) Installation costs Transport, food, and accommodation Overheads and profit margins Taxes based on the project's region

How do you calculate manhours in construction?

I calculate manhours by assessing how much time each task will take and how many workers are needed. It’s based on experience, past data, and project-specific complexity. This helps me figure out labor cost accurately.

What tools or software do you use for estimation?

I mostly use Microsoft Excel, where I’ve built customized templates with different tabs — BOQ, Material, Labor, Equipment, etc. These help me stay organized and adjust values easily. For quantity takeoffs, I sometimes refer to drawings directly or use semi-automated tools.

Do you include profit and taxes in the estimate?

Yes, always. After the base costs are done, I add: Overheads (admin, insurance, etc.) Profit (based on project type) Taxes (like GST, PST, or income tax depending on location) This way, the final estimate is complete and realistic.

What’s the difference between supply cost and installation cost?

Supply cost includes the price of materials, fittings, and delivery. Installation cost covers labor, tools, food, accommodation, safety, and other on-site requirements. I keep both separate to better understand and manage each component.

Is material takeoff part of cost estimation?

Technically, material takeoff is a separate task, but it’s often required for estimation. I do it when needed — extracting quantities of wires, conduits, ducts, etc., from drawings. It helps ensure the cost estimate is based on real numbers.