How Inaccurate Labor Rates Can Hurt Your Bottom Line

Inaccurate Labor Rates and Why You Should Care

There are multiple factors that affect your estimate accuracy, but we’ll focus on labor for today. Construction estimating mistakes range from incomplete risk assessments to guessing costs based on inflation alone. But estimating labor in construction is one of the most commonly miscalculated areas of construction cost.

The reason is simple. Either the estimator or the cost estimating software labels a job suitable for fewer workers than what’s actually needed.

And the solution is relatively simple as well: better data and more reliable construction estimating tools.

Estimating Labor In Construction

The biggest factors when it comes to estimating labor in construction include:

  • Size of the Crew
  • Pay Rate for Each Crew Member
  • Number of Hours to Complete Project
  • Cost of Equipment and Materials

Among those labor estimation factors, the most common estimating mistake is the size of the crew and the hours it takes to complete a task. Whether it’s the lack of knowledge from the cost estimator or an error with the estimating software, two workers could show up for a five-person job.

Equipment could be the reason for this inaccuracy. For example, a two-worker crew with paint sprayers could do the job of a five-worker crew with paint rollers. That’s why all factors of labor costs must be considered for the most accurate estimate.

Example of a Labor Estimate Mistake

To emphasize the importance of estimating labor in construction, let’s look at a realistic scenario of a cost estimation mistake.

Let’s say your construction estimation tools calculate a two-worker crew for a 30-hour project at $20 per hour. That labor comes out to $1,200.

But then you realize that the project length and hourly rate are accurate, but it’s actually a five-person project. That $1,200 initial estimate is now $3,000.

It’s not hard to imagine how that modest example of a potential discrepancy can add up in huge ways. Just add an extra zero or two to those numbers to really make your eyes pop.

Pro-Tip 1: Double Check Subcontractor Quotes

Subcontractors are an extension of your own estimates, which makes it risky to blindly trust their cost estimates. 

Once you have a reliable cost estimating process, use it to double-check your subcontractor estimates. Check their estimated costs of labor, materials, and equipment. If you find discrepancies, dig deeper with the subcontractor to make sure you both lineup. 

Best case scenario, you and the subcontractor come to roughly the same estimate. The only worst-case scenario comes from skipping this step.

Pro-Tip 2: Pay Special Attention to Equipment Cost

Having the right equipment will make your job more efficient, and taking that into account will make the estimate more accurate. Here are some factors to consider:

  • Type and Size
  • Rented vs. Owned
  • Compatibility with Existing Equipment

You’ll also want to make sure you have the right person to use it. Some pieces of equipment require specialty and even specific permits and licenses, and hiring that person after the fact can notably affect your labor estimate.

How To Avoid Construction Labor Estimating Mistakes

Thankfully, construction estimation tools exist that streamline estimating labor in construction by taking all relevant factors into account. 

But for smaller or repetitive projects you may be able to keep things more stripped down in the following ways:

  • Build your own custom cost book based on research.
  • Use the personal experience of past bids of a similar nature.
  • Create a single, collaborative system (e.g., spreadsheet templates, DropBox, etc.) and manually research labor rates

However, for new or more complex projects, it’s best to use reliable, collaborative construction estimation tools built to take the latest labor practices into account. In tandem with constantly-updated, location-based cost data, you can avoid construction estimating mistakes altogether.

That’s exactly what you get with CostCenter. The industry’s most reliable vertical construction cost data can be found in CostBook, which works seamlessly with CostPro, an estimating software built by estimators, for estimators.

You can also use either CostBase or CostPro for quick and easy access to past work and work-in-progress estimates. That includes giving clients read-only access to certain aspects of the process.

Collaborate and organize using constantly-updated and transparent data with CostCenter today. Schedule a free demo to learn more.



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