Every trade has its own language. Construction estimating has more than most. When a general contractor sends you bid documents and references alternates, allowances, addenda, and a CSI-formatted scope of work, you need to know exactly what each term means before you pick up a calculator.
This glossary covers 80 of the most important construction estimating terms used in commercial and residential construction. Each definition is written the way an experienced estimator would explain it to someone joining their team clear, direct, and focused on how the term actually applies in practice.
Bookmark this page. Come back when a term shows up in bid documents that you have not seen before.
A
Addendum
A written change to the bid documents issued by the owner or architect before the bid date. Every addendum is numbered and must be acknowledged in your bid. Missing an addendum and submitting a bid based on outdated documents is a serious problem that can disqualify your bid or leave you building work that was not in your price.
Allowance
A fixed dollar amount included in the estimate for work that cannot be fully defined at bid time. The owner or architect sets the allowance value. You include it in your total without markup unless the contract specifies otherwise. Common allowances cover finish hardware, specialty lighting fixtures, and landscaping plant material. When the actual cost differs from the allowance, the contract is adjusted through a change order.
Alternate
A separate bid item that the owner can accept or reject independent of the base bid. Alternates are either additive (they add scope and cost to the base bid) or deductive (they remove scope and reduce cost). Always price alternates separately and clearly label them. Do not fold alternate scope into the base bid.
As-Built Drawings
Construction drawings updated after the project is complete to reflect how the work was actually built. As-builts capture field changes, RFI resolutions, and design modifications made during construction. They matter for estimating because they are the starting point for any renovation or addition estimate on an existing building.
Average End Area Method
A calculation technique for earthwork volume. The estimator measures the cross-sectional area of cut or fill at two stations along an alignment, averages the two areas, and multiplies by the distance between them. The result is the volume of material between those two stations in cubic yards.
B
Backcharge
A cost charged by one party to another for correcting defective work or completing work the responsible party failed to perform. If a subcontractor damages finished flooring and the general contractor has it repaired, the repair cost is backcharged to the subcontractor. Backcharges must be documented and are a frequent source of disputes.
Bank Cubic Yard (BCY)
A cubic yard of soil measured in its natural undisturbed state in the ground. Bank cubic yards are the starting unit for all earthwork calculations. Once excavated, the same material occupies more volume as loose cubic yards because the soil structure is broken. See also Loose Cubic Yard and Compacted Cubic Yard.
Base Bid
The total bid price for the complete scope of work as described in the base bid documents, not including any alternates. The base bid is what the owner evaluates for award before deciding whether to accept any of the alternates.
Bid Bond
A financial guarantee provided by the bidder to the owner at bid submission. If the low bidder fails to enter into the contract, the bid bond compensates the owner for the cost difference of awarding to the next bidder. Bid bonds are typically 5 to 10 percent of the bid amount. They are required on most public projects and many large private projects.
Bid Date
The deadline for submitting bids. No bids are accepted after the bid date and time. Work backward from the bid date when planning your estimating schedule to ensure adequate time for takeoff, pricing, subcontractor quotes, and review.
Bid Leveling
The process a general contractor uses to compare subcontractor bids for the same scope. The GC creates a bid tab listing every scope item and checks each sub's bid for inclusions and exclusions. The goal is to compare apples to apples before selecting the lowest qualified bidder.
Bid Tab
A spreadsheet the GC creates to compare multiple subcontractor bids side by side. Each column is one subcontractor. Each row is a scope item. Totals at the bottom show the apparent low bidder, but the detail rows reveal scope gaps that change the ranking.
Bonds
Financial guarantees that protect project owners from contractor default. The three most common are bid bonds, performance bonds, and payment bonds. Bond premiums typically run 0.5 to 3 percent of the contract value depending on the project size, the contractor's financial strength, and the bond type.
Budget Estimate
A preliminary cost estimate prepared early in the design process before construction documents are complete. Budget estimates use historical cost data per square foot, per unit, or per system. Accuracy ranges from plus or minus 15 to 30 percent. Budget estimates are used for feasibility studies and project financing, not for bid submissions.
Buy-Out
The process after contract award where the general contractor finalizes subcontractor and supplier agreements for all portions of the work. A successful buy-out means the GC secures all subcontracts at or below the prices included in the original estimate.
C
Change Order
A written agreement between the owner and contractor that modifies the original contract scope, price, or schedule. Change orders must be signed by both parties before the additional work begins. Verbal authorizations to proceed without a signed change order create collection problems at project closeout.
Clarification
A written response to a bidder's question about the bid documents. The architect or owner issues clarifications to all bidders simultaneously so no single bidder has an advantage. Clarifications that change scope become addenda.
Closeout
The final phase of a construction project covering punch list completion, as-built drawing submission, warranty documentation, operations and maintenance manual submission, and final payment application. Estimators should include time and cost for closeout activities in every commercial project estimate.
Compacted Cubic Yard (CCY)
A cubic yard of material after it has been placed and compacted as fill. Compacted volume is less than bank volume because compaction forces soil particles closer together. To achieve one compacted cubic yard, you typically need more than one bank cubic yard of material. The difference is the shrinkage factor.
Competitive Bid
A procurement method where multiple contractors submit sealed bids and the contract is typically awarded to the lowest qualified bidder. Most public projects and many large private projects use competitive bidding. Knowing your competitors' tendencies helps you calibrate how tight to bid on competitive projects.
Contingency
A budget reserve added to an estimate to cover unforeseen costs. Design contingency covers incomplete design scope. Construction contingency covers unknown field conditions and minor scope changes during construction. Typical design contingency is 10 to 20 percent of construction cost at schematic design, reducing to 5 to 10 percent at construction documents. Construction contingency is typically 3 to 10 percent depending on project complexity.
Cost Code
A numbering system used to organize estimate and project cost data by work category. Cost codes let you compare estimated cost to actual cost by trade or activity throughout the project. Most contractors use either the CSI division system or a proprietary cost code structure.
CSI MasterFormat
The Construction Specifications Institute's standard numbering system for organizing construction specifications and estimates. MasterFormat uses numbered divisions from 00 through 49. Division 03 is concrete. Division 09 is finishes. Division 23 is HVAC. Division 26 is electrical. Estimates organized by CSI MasterFormat are readable by any GC or owner without translation.
Cubic Yard
The standard unit for measuring volume in US construction. One cubic yard equals 27 cubic feet or approximately 3 feet by 3 feet by 3 feet. Concrete, soil, aggregate, and many other materials are purchased and estimated by the cubic yard.
D
Davis-Bacon Act
Federal legislation requiring contractors on federally funded construction projects to pay the locally prevailing wage rates for each trade as determined by the Department of Labor. Prevailing wage rates vary by county and trade. Estimating a Davis-Bacon project with open shop rates instead of prevailing wage rates creates a significant labor cost underestimate.
Dead Load
The permanent static weight of the building structure and fixed components including concrete, steel, roofing, and mechanical equipment. Dead loads are a primary input for structural engineering design and affect the sizes of structural members that the structural estimator must price.
Deductive Alternate
A bid alternate that reduces the base bid price by removing specified scope. If accepted, the contract amount decreases by the deductive alternate amount. See also Alternate.
Deliverable
A specific output required under a contract. In estimating services, deliverables typically include the quantity takeoff spreadsheet, the cost estimate, and any supporting documentation.
Design-Build
A project delivery method where a single entity provides both design and construction services under one contract. Design-build projects require estimators to price work from incomplete documents and to track design development costs as the design evolves.
Direct Cost
The cost directly attributable to constructing the work including labor, material, equipment, and subcontractors. Direct costs are distinguished from indirect costs such as general conditions, overhead, and profit.
E
Elevation
A drawing showing a vertical face of a building or element viewed straight on from the exterior or interior. Elevations are essential for glazing estimating, exterior cladding estimating, and millwork estimating because they show heights, proportions, and surface areas that floor plans do not reveal.
Escalation
The increase in material and labor costs over time due to inflation, supply chain changes, and market conditions. On projects with long construction durations, the estimator adds an escalation factor to future-year costs to account for price increases between bid date and the time materials are actually purchased.
Exclusion
A scope item explicitly stated as not included in the bid or estimate. Listing exclusions clearly in your bid protects you from scope disputes after award. Common exclusions include permits, dewatering, hazmat abatement, and items furnished by the owner.
F
Field Order
A written directive from the owner or architect authorizing a minor change in the work that does not affect contract price or schedule. Field orders are documented but do not require formal change order processing. If you believe a field order has cost or schedule implications, respond in writing before proceeding.
Float
The amount of time a non-critical activity can be delayed without affecting the project completion date. Float belongs to the project, not to any single contractor, in most contract forms. Subcontractors who use float for their own benefit by delaying work can create schedule problems for following trades.
Free Issue Material
Material furnished by the owner for contractor installation. Estimators include the labor to receive, store, handle, and install free issue material but not the material cost itself.
G
General Conditions
The on-site overhead costs required to support the work without directly constructing it. General conditions include the superintendent, the project manager, temporary facilities, safety equipment, small tools, site security, and permits. General conditions typically run 8 to 15 percent of total direct construction cost on commercial projects.
General Requirements
CSI Division 01 of the MasterFormat system covering the administrative, procedural, and temporary facility requirements for the project. General requirements include submittals, substitutions, temporary utilities, project meetings, and quality control procedures.
Gross Area
The total floor area of a building measured to the outside face of the exterior walls. Gross area is used for budget estimating, square foot cost comparisons, and some lease calculations. Gross area is always larger than net area by the thickness of exterior walls and the area occupied by structural elements.
H
Hard Bid
A competitive lump sum bid submitted on complete construction documents where the contractor takes the risk of any quantity or scope errors in the estimate. Contrasted with cost-plus contracts where the owner bears the cost risk.
Hazmat Abatement
The removal and disposal of hazardous materials including asbestos, lead paint, PCBs, and contaminated soil. Hazmat abatement requires licensed contractors and specific disposal procedures. Always confirm the presence or absence of hazmat before estimating a renovation project.
I
Indirect Cost
Project costs not directly attributable to constructing specific work items. Indirect costs include general conditions, insurance, bonds, and home office overhead. Some estimators use the term to refer to items that support multiple work activities without belonging to any single one.
Invitation to Bid (ITB)
A formal document issued by an owner or GC inviting qualified contractors to submit bids for a specific project. The ITB defines the scope, the bid date, the bid requirements, and the selection criteria.
L
Labor Burden
The total cost of employing a worker beyond their base wage rate. Labor burden includes payroll taxes, workers compensation insurance, health insurance, retirement contributions, and paid time off. Labor burden typically adds 30 to 45 percent to the base wage rate. An electrician earning $45 per hour actually costs the contractor $58 to $65 per hour all-in.
Line Item
A single scope entry in an estimate with its own quantity, unit, unit cost, and extended cost. A well-organized estimate has a separate line item for every distinct material or labor activity. Combining multiple activities into a single line item reduces the usefulness of the estimate for cost tracking during construction.
Lump Sum
A single fixed price for the complete scope of work. The contractor takes the quantity and scope risk. Changes to the scope require a change order to adjust the lump sum price.
Loose Cubic Yard (LCY)
A cubic yard of material measured after it has been excavated and is in a broken, loose state in a truck or pile. Loose volume is always greater than bank volume due to swell. Truck capacity is measured in loose cubic yards. See also Bank Cubic Yard.
M
Markup
The percentage added to direct costs to cover overhead and profit. Markups vary by contractor, project type, and market conditions. A contractor with 12 percent overhead and a 5 percent profit target applies a 17 percent markup to direct costs. Markup is applied differently than margin, which is calculated as profit divided by selling price.
Material List
A complete list of all materials required to complete a specific scope of work with quantities and specifications. Material lists feed purchasing, help identify long lead items, and are the basis for supplier quotes.
MEP
Mechanical, electrical, and plumbing the three primary building system trades. MEP systems represent 40 to 60 percent of total commercial construction cost on complex building types. Our MEP estimating cost guide covers the cost breakdown for each system in detail.
N
Net Area
The usable floor area of a building measured inside the finished walls, excluding structural elements, mechanical shafts, and common areas. Net area is used for space planning, tenant lease calculations, and some finish quantity calculations.
Notice to Proceed (NTP)
A written authorization from the owner directing the contractor to begin construction. The NTP typically starts the contract time clock. Do not mobilize or order long-lead materials before receiving the NTP unless the contract specifically permits it.
O
Open Book
A contract arrangement where the contractor shares all project costs with the owner for review and verification. Open book contracts are common on cost-plus projects and design-build projects where the owner wants transparency into actual project costs.
Overhead
Business costs not directly attributable to any single project including office rent, administrative salaries, insurance premiums, vehicles, and technology. Home office overhead is recovered through the markup applied to every project. Site overhead is captured in the general conditions estimate for each specific project.
Owner Furnished, Contractor Installed (OFCI)
Equipment or material purchased by the owner and delivered to the site for the contractor to install. The contractor prices receiving, storage, handling, and installation labor but not the material cost.
P
Payment Bond
A financial guarantee that the contractor will pay all subcontractors, suppliers, and laborers on the project. Payment bonds protect lower-tier parties from non-payment by the GC. Required on all public projects over the federal threshold and on many large private projects.
Performance Bond
A financial guarantee that the contractor will complete the project according to the contract terms. If the contractor defaults, the surety either completes the work, hires another contractor, or compensates the owner up to the bond amount.
Prevailing Wage
The wage rate established by federal or state law for each trade on public construction projects. Prevailing wages are set by geographic area and must be paid to all workers on covered projects. See also Davis-Bacon Act.
Profit
The amount remaining after all project costs including overhead are subtracted from the contract revenue. Target profit margins in construction vary from 3 to 8 percent on competitive commercial work to 10 to 20 percent on specialty or design-build work.
Punch List
A list of incomplete or deficient work items identified during the substantial completion inspection. The contractor must complete all punch list items before final payment is released. Estimators should budget punch list correction time in the project schedule.
Q
Quantity Takeoff
The process of measuring construction drawings and calculating the quantity of every material and labor item required for a specific scope of work. Quantity takeoff is the foundation of every accurate estimate. Our guide on quantity takeoffs explains when to do takeoffs in-house versus outsourcing to a professional service.
R
RFI (Request for Information)
A formal written request from the contractor to the architect or engineer asking for clarification on a drawing, specification, or site condition. Every RFI should be submitted in writing and tracked. Unresolved RFIs that affect cost or schedule should be flagged immediately.
RFP (Request for Proposal)
A procurement document requesting detailed proposals from contractors or service providers. RFPs typically require more information than a simple bid, including qualifications, schedule, methodology, and pricing.
RSMeans
A widely used construction cost database published by Gordian that provides national average unit costs for labor, material, and equipment by trade and work category. RSMeans data is adjusted by location factors for different markets. The Virtual Estimation uses RSMeans regional data updated monthly to ensure our estimates reflect current market pricing in your specific area.
S
Schedule of Values
A breakdown of the contract price by work category that forms the basis for monthly payment applications. Each line item in the schedule of values has a value, and the contractor bills a percentage completion of each line item each month.
Scope of Work
A written description of all work included in a contract or bid. A clear scope of work defines what is included, what is excluded, and any assumptions or clarifications. Scope gaps between the GC and subcontractors are the leading cause of disputes on commercial projects.
Shrinkage Factor
The reduction in volume that occurs when soil is compacted as fill compared to its natural bank state. Clay soil with a 20 percent shrinkage factor requires 1.25 bank cubic yards to achieve one compacted cubic yard of fill.
Site Overhead
The direct project costs required to support field operations without constructing specific work items. Site overhead includes the project superintendent, field office, temporary fencing, dumpsters, temporary utilities, and safety equipment. Site overhead is also called general conditions.
Specification
Written technical requirements describing the quality, performance, and installation requirements for materials and systems used in the project. Specifications are organized by CSI MasterFormat divisions. Reading the specifications before starting a takeoff prevents costly errors caused by assuming standard product where a premium specification is required.
Substantial Completion
The point at which the work is sufficiently complete that the owner can use it for its intended purpose. Substantial completion triggers the start of the warranty period, the release of retainage in some contracts, and the beginning of the punch list process.
Subcontractor
A contractor hired by the GC to perform a specific portion of the work. Specialty trades including electrical, plumbing, HVAC, fire suppression, and roofing are typically performed by subcontractors. The GC is responsible for the subcontractors' work as if the GC performed it directly.
Submittal
Documentation submitted by the contractor to the architect for review and approval before materials are ordered or work begins. Submittals include shop drawings, product data, and samples. The submittal review process can take weeks on complex systems, making early submittal submission critical on tight schedules.
Swell Factor
The increase in volume that occurs when soil is excavated from its natural bank state. Clay soil with a 30 percent swell factor occupies 1.30 loose cubic yards for every bank cubic yard excavated. Swell factors determine the number of truck loads required to haul excavated material.
T
Takeoff
See Quantity Takeoff. The Virtual Estimation provides professional construction takeoffs for all trades with 24 to 48 hour delivery across all 50 states. Contact us at info@thevirtualestimation.com or visit our construction estimating services page.
Time and Materials (T&M)
A contract type where the owner pays the contractor for actual labor hours at agreed rates plus actual material costs plus a markup. T&M contracts shift the quantity and scope risk to the owner. They are common for undefined scope work, emergency repairs, and exploratory work.
Ton
The standard unit for pricing rebar, structural steel, and many bulk materials. One ton equals 2,000 pounds. Structural steel is fabricated and erected by the ton. Rebar is purchased and installed by the ton.
U
Unit Price
A per-unit cost for a specific work item. Unit price contracts allow the owner to adjust quantities during construction without a formal change order for each adjustment. Unit prices for sitework items like earthwork, pipe installation, and paving are common on civil projects where exact quantities are uncertain at bid time.
Unilateral Change
A contract modification initiated by the owner without the contractor's agreement on price or scope. Unilateral changes are allowed under most contract forms when the parties cannot agree, but they create disputes and should be documented carefully.
V
Value Engineering (VE)
The process of analyzing project scope to identify cost savings without reducing required function or performance. VE proposals substitute less expensive materials, simplify construction methods, or eliminate unnecessary scope. Successful VE proposals reduce project cost while maintaining the design intent.
Variance
The difference between the estimated cost and the actual cost of a work item. Positive variance means actual cost exceeded the estimate. Negative variance means the work came in under budget. Tracking variance on every completed project improves future estimate accuracy.
W
Wage Rate
The hourly pay rate for a specific trade and classification. Wage rates vary by trade, experience level, geographic location, and whether the project is union or open shop. Prevailing wage projects require specific published rates for each trade and county.
Waste Factor
A percentage added to theoretical material quantities to account for cutting waste, breakage, over-ordering, and installation variation. Waste factors vary by material type and project complexity. Applying the wrong waste factor is one of the most common sources of material quantity errors in construction estimating.
Work Breakdown Structure (WBS)
A hierarchical decomposition of the total project scope into manageable components. The WBS organizes work by phase, trade, or cost category and forms the framework for both the estimate and the project schedule.
Related Estimating Guides
These guides go deeper on specific estimating topics mentioned throughout this glossary:
The concrete estimating guide covers concrete volume calculations, waste factors, and formwork estimating.
The earthwork estimating guide covers bank cubic yards, swell and shrinkage factors, and mass haul calculations in detail.
Visit our service areas page for regional construction estimating coverage across all 50 US states.
