Industries in the areas of manufacturing and construction feel the acute pressure of having to operate within budgets. Projects are often dependent on complex supply chains to provide the materials needed to execute production. Being able to predict the costs of raw materials, time and the skilled workforce needed to complete a project is essential, and cost estimators are critical to this process.
Various government agencies including the Department of Energy have implemented strategic policies in the areas of cost estimating and budgeting in the last several years. Funding for public sector projects have tightened along with tax revenues, and an improvement in the accuracy of cost estimation has become part of a strategic objective for cost controls. Civic projects, such as road work, utility work or construction on public buildings may be performed by public sector organizations or may be contracted to private companies. In all cases, cost estimators are involved in helping to determine budgets. Public revenues are finite, and tax-payers appreciate judicious spending of their tax-dollars.
The term cost estimator is differentiated from construction cost estimator through industry application. Any business that works with raw materials and a labor force, or provides development support to industries that do, needs the skilled services of a cost estimator. When the industry or project is specific to building, the term construction cost estimator is used.
Construction cost estimation includes:
- Large scale planning processes
- Infrastructure development
- Environmental impact analysis
Outside the construction industry, cost estimation is applied to:
- Environmental engineering
Accounting for Increases
Cost estimation is far more than educated guessing. In manufacturing and construction it requires a sophisticated understanding of the work force, process, supply chain and potential for fluctuating overhead costs so as to be able to confidently draft budget estimates that tell clients, project managers or financial controllers how a project needs to be financed.
A cost estimator needs to be able to understand how the costs of labor, materials, permits and transportation interact with inflation, market fluctuations and time in order to estimate accurately and report to the managers or comptrollers who implement budgets and approve projects and purchases.
Cost estimation requires an understanding of how costs can change through the various phases of a project so that estimators can accurately project what to budget. Since contractors are expected to operate within a project’s allocated budget, but given the fact that material, fuel and labor costs may change between the bid phase and the construction or manufacturing phase, this is a very important consideration. Cost estimators need to account for the possibility of material price fluctuation based on market trends, as well as changes in labor costs for the various union tradesmen, laborers and machine operators involved in a project.
Cost increases are perhaps most obvious when looking at the increasing cost of fuel. On big commercial or civic projects that can take years to complete and that require the use of tremendous amounts of diesel for operating machinery, this is of particular concern.
On a large-scale construction or manufacturing project that consists of many phases with different subcontractors completing different components, bids come from multiple sources. In these cases, project managers are dependent on their own cost estimators to assess the viability of the bids they receive from various subcontractors. Subcontractors may submit low bids in an effort to get the job, so these bids need to be verified to be sure they are reasonable. Operating within budget is largely based on selecting good subcontractors who have submitted realistic bids.
A Relevant Education
Employers are looking for cost estimators with the right education and experience. As the interaction between costs and commerce becomes more complex, specific education and training in the areas of cost estimation and analysis becomes more important.
Because there are no degree programs specific to cost estimation, professionals who pair construction or manufacturing experience with an education in accounting and finance are well positioned for careers in cost estimation. Degree programs in accounting give a professional experienced in construction or construction contracting the essential skills of budgeting, cost analysis and cost accounting. Experienced contractors can take accounting courses or pursue an accounting degree to give them both sides of the cost estimation equation – an understanding of both process and finance.
Credentials and Certifications
There are a number of professional organizations that offer certification to cost estimators. Certifications can be used to further demonstrate ability and skill, and can be a way to both develop professionally and meat the strategic needs of an employer. These organizations also offer an opportunity for professional networking, and most offer publications and courses to keep current in industry trends and technology.
AACE International is a professional organization for cost management professionals and offers certification for cost consultants, cost engineers as well as planning and scheduling professionals. They also offer conferences and publications. Certification in one of the AACEI areas requires professional experience and passing an examination.
The American Society of Professional Estimators is an organization specifically for those in the role of cost estimation in construction. ASPE’s process requires completing a sponsored workshop, submitting a professional paper for peer review and passing an examination to receive the designation Certified Professional Estimator.
The Society of Cost Estimating and Analysis offers two levels of certification for cost estimators in both the public and private sector. Both SCEA certifications require a bachelor’s degree, although experience may be substituted. Candidates must also pass an examination. The SCEA confers the credentials Professional Cost Estimator/Analyst and Certified Cost Estimator/Analyst.
Earnings and Salary Opportunity
About 59% of cost estimators work in the construction industry according to the US Bureau of Labor Statistics. The median salary for cost estimators in 2020 was $66,610 and $114,360 at the high end (90th percentile).
There are notable variations in what cost estimators can expect to earn based on the industry in which they work:
- Heavy and civil engineering construction – $77,480
- Construction of buildings – $70,610
- Specialty trade contractors – $67,510
- Manufacturing – $63,740
- Automotive repair and maintenance – $59,090
May 2020 U.S. Bureau of Labor Statistics salary and labor market information for Cost Estimators is based on national data, not school-specific information. Conditions in your area may vary. Data accessed April 2021.
The industry is more technical than ever and requires tech-savvy professionals familiar with the modeling and software tools the construction industry relies on. Professional advancement in the area of cost estimation generally goes to those with knowledge of BIM (building information modeling) and CAD (computer-aided design).