Construction cost estimating is the starting point of practical work on any construction project after the design phase. Sometimes, multiple estimates are also required to create a perfect design. That’s why you have to collaborate with architects and estimators at the same time.

In that case, if you do not know the lingo or terminologies of estimating, then you’ll have a hard time understanding everything. Plus, you’ll never make an accurate decision on each step. That’s why this post is written. It’ll tell you all the basic terminologies of construction cost estimating. So, keep reading further. It’ll educate you as well as amuse you.

Let’s begin!


A contractor has to issue a performance bond in favor of the client. It acts as a guarantee of the delivery. If the contractor cannot fulfill all the requirements or does not meet deadlines with quality, then the client is allowed to get compensation.

A performance bond is necessary. If you work without a performance bond, then you cannot claim compensation in court. That’s why always ask for a performance bond from your contractor before starting your project. It’ll keep your contractor vigilant all the time during the project.

Capital costs

All expenses that come with establishing a structure are called capital costs. The detail is below.

  1. Cost of land
  2. Cost of feasibility studies and the pre-design phase

III.    Compensation for the architect, engineer, and members of the design team

  1. The total cost of construction (labour, materials, equipment, etc.)
  2. Cost of a commissioner
  3. Cost of temporary equipment and structures

VII.    Cost of inspection


Even if you have the most accurate estimate, you have to face all factors that are beyond your control during a project. That’s why you have to spare a budget for extra costs that could not be perceived at the start of the project. These costs are called contingencies.

Equipment cost

During the construction project, you have to arrange all the tools and equipment. It may include mixers, cranes, vehicles, and many more. You can either buy the equipment or rent it. The cost associated with them is called equipment cost.


Most construction projects run for a long time. During which the cost of everything can increase. This inflation needs to be adjusted in the budget, and you mention it as an escalation cost.

Indirect costs

Other than the main construction cost, you have to bear some other costs, such as administrative costs, transport, legal fees, permits, and other expenses depending on the type of the project. All these expenses are referred to as indirect costs.

Labor hour

It is the unit of work for individuals on the job. You calculate it on an hourly basis. It is also known as man-hour.

Labor rate

It is the amount that you pay to craftsmen per hour, and it covers hourly rates, benefits, and insurance.

Material prices

These are the prices of materials that you require on the job. Estimators calculate it on the basis of historical data. However, material costs fluctuate with the location and time.

Operation and maintenance costs

If you are the client, then it will be your headache. These costs include salaries, rents, and utility expenses during the project.


If you are a contractor, then you have to increase profits. It is the difference between the actual cost of the project and the amount you receive from the client.

Quantity takeoff

You have to do this before starting the construction. It includes material costs and labor costs.

Subcontractor quotes

Every contractor needs subcontractors to complete different phases of the project. Subcontractors’ quotes are the rates for these specific jobs.


The cost of your project can vary due to several factors such as:

  • Increase in the labour rate
  • Increase in the rent of equipment
  • Increase in the material cost
  • Increase in the indirect costs
  • Delay due to rain

Variance in costs can increase the project’s cost substantially. That’s why you have to allocate a budget to cover it for the best.


The above terminologies are enough to understand an estimate from your contractor. So, learn them and use them in the field. Have a great day.