Companies are legal entities composed of a group of people who share a common purpose in achieving a specific objective. They exist across every type of industry, and most of the time, they are creating a product to sell, building something, or providing a kind of service. There are an incredible amount of details involved in each step, and a big one is figuring out how much everything is going to cost. Therefore, a cost estimator is an essential part of the business process. What exactly does a cost estimator do?
Throughout this Ultimate Guide to Becoming a Cost Estimator, you will discover what a cost estimator is, what they do, and why they are important. We will discuss the history of cost estimating, what it takes to start a career as a cost estimator, and what it looks like to experience this career. You will read about future trends for cost estimators and how Covid-19 has impacted this position.
What is a Cost Estimator?
Companies and businesses typically exist to create and produce products, build something, or provide a service. When a company embarks on a project, they have to budget for what it may cost. There are an incredible amount of details that play a part in determining what is needed and the project’s overall potential cost. These details involve material prices, labor hours and rates, equipment costs, contingency costs, subcontractor quotes, software, hardware, facilities, and indirect costs, including permits, land use, on-site utilities, and design fees. If it cannot stay on budget, the project may quickly come to an end, or the overall result could be negatively impacted. An accurate cost estimation benefits the company, executives, and stakeholders and can lead to the company’s success as a whole, which is why cost estimators are highly important.
Cost estimators have the high-pressure job of collecting and analyzing data to predict production costs for product manufacturing and construction projects, the cost of providing services, and product pricing. They will sometimes analyze what something already costs or why it costs more or less than initially estimated. Managers rely on accurate cost estimations to bid on contracts or appropriately determine pricing.
An exciting aspect of the job is that cost estimators are useful across all industries and specialize in a particular sector or product of interest. The list of options that cost estimators work with is endless, including all kinds of products from toothbrushes, utensils, and sports equipment to cars, electronics, and aircraft. They can also estimate costs for bridges, satellites, software systems, skyscrapers, manufacturing facilities, and hospitals.
Methods of Cost Estimating
- Analogous Estimating: Utilizes an analogy by comparing data and results from a similar past project to estimate the cost and time needed for a current project. This method is helpful for existing projects that do not provide much detailed information.
- Parametric Estimating: Defines the relationships between variables (statistical correlations) of similar past projects and the current project to determine duration and cost estimation. This method is a more accurate method matching raw data from current projects with historical data collected.
- Three-Point Estimation: Calculates the average of the optimistic (best-case scenario) estimate, pessimistic (worst-case scenario) estimate, and the most likely (most realistic) estimate. It takes into consideration quantifiable risks and is useful when parametric estimating is not available.
- Bottom-Up Estimation: Utilized when detailed data is available for a project. It breaks down the aspects of a project and estimates the cost and time to accomplish each component. It then adds up each estimation to total the overall cost and duration of the project. This method is the most accurate and considered the “gold standard for projects.”
Skillset
One must possess many skills to be a successful cost estimator. Properly analyzing data, performing accurate calculations, and presenting the findings takes strong analytical, mathematical, communication, and writing skills. Managing time, organization and a keen eye for detail is essential, as minor errors or changes can be detrimental to a project. Other necessary skills include critical thinking, active listening, decision-making, complex problem-solving, inductive and deductive reasoning, and systems analysis and evaluation skills.
It is helpful to have considerable technical skills in several types of analytical and scientific software like spreadsheets, Microsoft Excel, Computer-Aided Design, Building Information Modeling, Construction Management, Customer Relationship Management, and Database Reporting software. Acquiring a firm knowledge base in data analysis, product costing, engineering science and technology, computers and electronics, customer and personal service, building and construction, construction estimation, project management, economics and accounting, production and processing, and design features like blueprints, technical plans, and models is highly beneficial to cost estimators.
Duties
Many factors, variables, and steps are involved in preparing accurate and efficient cost estimations. As an individual works towards becoming a cost estimator, they educate and prepare themselves for extensive tasks. Let’s review the primary duties a cost estimator performs to determine the estimations for projects, products, and services.
- COLLECT relevant information and historical data.
- RECORD information like drainage, topography, access, and water and electrical services while visiting the actual production site.
- ANALYZE and RESEARCH financial data, current processes, blueprints, materials needed, labor required, production time, and other technical documents.
- IDENTIFY variables that could impact costs like weather conditions, shipping delays, and wasted material.
- ASSESS the cost-effectiveness of different estimation methods, products, projects, and whether a company produces or purchases materials.
- ESTIMATE and CALCULATE quantifiable characteristics, like personnel, time, equipment, and supplies, and costs of products and services.
- MONITOR financial indicators and resources.
- RECOMMEND ways to reduce costs,
- CONSULT databases and their records to compare prices of similar projects.
- MAINTAIN records.
- COMMUNICATE clearly with clients, team members, and supervisors.
- COLLABORATE with contractors, engineers, fellow employees in other departments, business owners, architects, clients, designers, and construction managers to figure out needed adjustments and fix problems.
- ADJUST estimates, track actual costs, make new cost estimates, and prepare cost and expenditure statements throughout the project’s development.
- DETERMINE compliance.
- NEGOTIATE agreements with others in conflict resolution.
- ESTABLISH systems and procedures that monitor costs and reporting.
- PRESENT comprehensive cost-estimate reports and other findings to managers and members of the production team.
- REMAIN technically relevant.
- UTILIZE software to evaluate costs.
Personality
Various personality traits coincide with the necessary skills and duties of a cost estimator. They tend to be dependable, persistent, cooperative, independent, adaptable, and have integrity, initiative, self-control, high achievement, and a strong tolerance for stress. People wired to follow procedures and routines and work with data and details tend to be labeled as conventional and organizer. Those who enjoy starting and completing projects, making lots of decisions, leading others, potentially taking risks, and handling business are known as enterprising and entrepreneurial. Both of these types of people could be successful cost estimators.
Types of Cost Estimators
Although they can work on various projects in all kinds of industries, there are two main cost estimators. Construction cost estimators prepare estimates for construction projects like buildings, roads, and bridges. They estimate costs for labor, materials, and project duration for the entire facility, like a hospital, or just parts of the project, like the building foundation. Many are employed by construction firms, contractors, or engineering firms. The second type is the manufacturing cost estimators. Their estimates lead managers in production decisions, as they calculate production, development, and redesign costs for goods and services.
History
Cost estimation has been happening in some form or fashion for thousands of years and can date back to constructing the ancient Egyptian pyramids. There have been various ways to estimate costs throughout the ages when it comes to construction or manufacturing. A defined practice of project cost management began in the 1950s. For decades, cost estimators created handwritten paper documents using pencils and architectural scales. Manually written columns and rows displaying pricing components and descriptions became known as spreadsheets. This form of documentation could take months to complete.
Evolution of Cost Estimation from the 1980s – 2000s
- Computers became more prevalent for business use, therefore introducing spreadsheet computer applications for estimations.
- Microsoft Excel was introduced in 1985 and became the most popular estimation tool.
- The first specialized software for manufacturing cost estimation was created.
- These electronic spreadsheets helped with calculations but were open to formula errors, especially as they became more complex, and did not necessarily improve accuracy or productivity.
- To battle these challenges, commercial cost estimating software applications were created. Benefits included data structures, reference cost databases, hard-coded formulas, speed, professional reports, and accuracy.
- Due to a study in 1994 by the National Institute of Standards and Technology that revealed billions of dollars in efficiency losses from inadequate management, estimating, and computer-aided design (CAD) processes, the industry focused on advancing systems and processes in development and technology.
- Over the years, cost estimating programs kept upgrading to fix errors and make the programs more efficient. Data began to be saved for later use, and programs became specialized, offering features specific to a particular trade.
- In the early 2000s, manufacturers were finding the need for a cost estimation system that could estimate costs early in the design sequence from a 3D CAD model and the need for an automated costing system that could evaluate hundreds of CAD models’ prices at the same time. Manufacturing cost estimation evolved to provide extensive amounts of data and modern database architecture.
- Eventually, cost estimating software allowed for collaborative access for estimators and managers to work on several projects, estimates, and contracts simultaneously. This Efficient Project Delivery and Cost Estimating software has revolutionized cost estimating in significantly reducing project duration, change orders, legal disputes, and procurement cycles, and significantly increased estimation time.
- Cost estimation systems, tools, software, and applications will continue to evolve alongside technological advances to appease the growing need for efficiency and accuracy in estimations.
How Do I Start a Career as a Cost Estimator?
There is no way to step into a career as a cost estimator without years of education and training. This high-pressure job requires in-depth knowledge in multiple areas and a full understanding of many aspects of the industry in which you choose to work. Let’s look at the types of degrees, professional development opportunities, and professional associations available to cost estimators as they begin and continue in their careers.
Education
A great way to obtain the necessary knowledge and skills to become a cost estimator is by earning a bachelor’s degree. A bachelor’s in business, accounting, engineering, finance, economics, or an industry-related field like construction management can benefit cost estimators. Popular majors include construction engineering, materials engineering, statistics, manufacturing engineering, building science, mechanical engineering, construction engineering technology, and physical science. Those who wish to expand their expertise, advance in their career, take on a management position, or earn better pay can pursue a master’s degree in construction management or a related degree.
The knowledge gained throughout different courses is even more important than the specific degree you get. In the pathway to becoming a cost estimator, you must acquire general knowledge in engineering, technology, economics, accounting, analytics, computers, design, and an extensive amount of knowledge in mathematics. It’s vital for those pursuing construction cost estimation to learn about construction and building and those going into manufacturing cost estimation to study product manufacturing. An understanding of Computer-aided Design (CAD) and Building Information Modeling (BIM) is also beneficial to cost estimators.
Professional Development
In this guide to becoming a cost estimator, you can see that it is good to seek out every opportunity to develop professionally. Gaining a considerable amount of professional experience in construction is impressive to employers and can even possibly get you a job as a cost estimator without earning a degree. It is fair to say that most employers will provide on-the-job training, including techniques and instruction in the use of industry-specific proprietary cost estimation software. Outside of on-the-job training, there are several ways to achieve professional development. Let’s take a look at some opportunities.
Internships
While you are pursuing a degree or even after you have graduated, completing an internship or cooperative education program gives you practical experience while working on exciting projects. Internships allow you to gain insight into which industry you may want to go into as a cost estimator. Some examples of current cost estimating internships listed on Indeed.com include:
- The Cost Estimating and Pricing Internship for Ball Aerospace is a 10-week program. Interns spend the summer in Colorado with a mentor estimating costs for a program wanting to build and launch rockets.
- The Purchasing Internship with Perry Homes, LLC, gives students experience with the negotiating process, establishing pricing and costs, rebate agreements, market evaluation, and bid review.
- The Cost Management Intern with Cumming Corporation provides opportunities to prepare design and change order estimates, task orders, and structure work breakdowns and participate in value engineering.
Certifications
Although certifications are not always required, more and more employers are beginning to require or highly encourage their cost estimators to become certified as they see great value in the process. It increases knowledge and ability, provides professional development, shows a high level of dedication and commitment, enhances resumes, and provides continuous learning opportunities through the required recertification every three to five years. The top certifications for cost estimators include the Professional Cost Estimator/Analyst (PCEA), Certified Estimating Professional (CEP), Certified Professional Estimator (CPE), and the Certified Cost Estimator/Analyst (CCEA) certifications. These certifications are offered by different associations and have varied standards and requirements.
Associations
It is vital in your professional development as a cost estimator to become a professional association member. Some associations offer limited free resources, but investing in a membership dramatically increases your opportunities and access to all the association has to offer. The slew of resources provided can vary, but you will typically find a combination of educational programs, professional and technical resources, blogs, webinars, workshops, seminars, and conferences. You will also find mentorships, networking opportunities, certification training and exams, events, continuing education, magazines and publications, career centers, professional communities, online courses, and scholarships. Associations for cost estimators promote the importance of the job and cultivate professional growth. Here are the top associations for cost estimators.
- American Society of Professional Estimators (ASPE)
- AACE International
- International Cost Estimating and Analysis Association (ICEAA)
- Construction Management Association of America (CMAA)
What Does a Career as a Cost Estimator Look Like?
A career as a cost estimator can look quite different from day to day and varies greatly from other cost estimators. Similarities across the board consist of a full-time, competitive workload mostly amidst an office environment, possibly more than 40 hours of work depending on projects, the use of computers and computer systems, phone conversations, teamwork, and the pressure of deadlines.
A career as a cost estimator looks different through the vast array of industries that utilize their skills. The enormous range of projects and assignments keeps the job interesting and ever-changing. Depending on the project, cost estimators get opportunities to visit construction sites, manufacturing plants, assembly lines, and the location of whatever project they are working on to see and touch on what they are estimating and gain a first-hand perspective.
Types of Employers
The variety of jobs for cost estimators correlates to the different types of businesses that employ them. Many will find jobs with building construction or equipment contractors. The Bureau of Labor & Statistics shows the types of employers for cost estimators are specialty trade contractors (36%), construction of buildings (17%), manufacturing (13%), automotive repair and maintenance (7%), and heavy and civil engineering construction (6%). Payscale shows some of the top employers of cost estimators to be the Ford Motor Company, Fluor Corporation, The Boeing Company, Booz, Allen & Hamilton, Malnove Incorporated, and Texas Hydraulics, Inc.
Pay
Depending upon the company, type of industry, level of expertise, and the work location, the salary for cost estimators can vary greatly. With the lowest pay being under $40,000 and the highest income reaching more than $111,000, the average pay for cost estimators was $65,250 in 2019, according to the Bureau of Labor & Statistics. The highest average salary is found with heavy and civil engineering construction companies at $75,890. Then we have the construction of buildings at $69,240, specialty trade contractors at $65,650, manufacturing at $62,630, and automotive repair and maintenance at $57,780. High cost estimator salaries are found at the Ford Motor Company at $110,000, Fluor Corporation at $88,000, and The Boeing Company at $79,000.
Many factors play a part in the salary from city to city and state to state for cost estimators, especially the cost of living, product demand, the need for construction, and each project’s scope. The best-paying cities for cost estimators from highest ($110,380) to lowest ($84,110) are Peabody, MA, Vallejo, CA, San Rafael, CA, San Francisco, CA, San Jose, CA, Carbondale, IL, Honolulu, HI, Cheyenne, WY, and California, MD. A higher than average salary can also be found in San Diego, Detroit, and New York City. States that pay the best from highest ($93,880) to lowest ($77,390) are DC, Alaska, Hawaii, California, Massachusetts, and Washington.
What are the Future Trends of Cost Estimators?
The future trends of cost estimators have some positive and negative implications. With the improvements and advancements made in technology, especially in cost estimation software, cost estimators’ work can be done more efficiently. Although this is a positive aspect, it does decrease the number of cost estimators needed for projects. From 2019-2029, the Bureau of Labor & Statistics projects a 1% job decline for cost estimators. Despite this projected decline, the demand for cost estimators is still genuine; it just creates a more competitive environment and motivates cost estimators to gain expertise.
Cost Estimators and COVID-19
Most industries were not prepared to face the impact of an infectious disease like the COVID-19 pandemic. The two main areas cost estimators work in, manufacturing and construction, happen to be two of the hardest-hit industries. Cost estimators have been deeply impacted. Everything just seemed to stop. There was a massive disruption in the supply chain, a delay and even cancellation of construction projects, an increased concern for employees’ health and safety, and a significant decrease in the number of jobs available. These industries also faced supply shortages, legal issues with contractual obligations, companies have laid off employees, some companies have not survived, and the global uncertainty is immense. On the bright side, one of the first non-essential sectors that opened up throughout the states was construction, especially outdoor projects. This was good for cost estimators.
Although we have yet to see the far-reaching impact of this pandemic, adaptation is occurring. Projects in manufacturing and construction are beginning to grow again. Industries are being forced to improve crisis plans and mitigation strategies, create a structure that will lessen the impact of future pandemics, and provide a more coordinated and confident response. Cost estimators are a part of this adaptation. There is an aspect of their job that will need to incorporate potential risk factors for future pandemics when determining cost estimates for projects.
Next Steps
As you have read through all the Guide to Becoming a Cost Estimator has to offer, is it interesting to you? Do you get excited about the importance of the job, its steps to becoming a cost estimator, and what the career would look like?
Check out these videos from real-life cost estimators about their experiences:
Do you feel you have the skills, potential, and personality to be successful as a cost estimator? Take this interest profiler quiz and this career quiz to see if cost estimator is the path for you to pursue in your journey of finding your dream career.
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