Turning the estimate into a working budget
The contract for a two-storey childcare centre was signed on Friday. On Monday, accounting asks for the budget so it can open the job, and the rebar supplier's first invoice will arrive within days. All you have is the estimator's 12-page summary by trade, with overhead and profit on the last line.
Rebuild the estimate as a budget by cost code before the first invoice arrives: every line the job will charge, your own labour in hours as well as dollars, each subcontract marked bought or not bought, allowances on their own lines, and a total that ties to the contract price. An estimate is organized to price the work; a budget is organized to control it. Cost engineers define a budget as a planned allocation of resources, with materials usually split into quantity and unit cost and labour into workhours and wage rate. Invoices that arrive before the budget are coded wherever someone guesses.
From estimate to budget
- Start from the final numbers: the estimate as bid, with addenda and bid-day changes, and the differences list from the handover.
- Map every estimate line to exactly one cost code. A code may collect several lines.
- Budget your own work in units: labour as hours and rate, materials as quantity and unit price.
- Carry each subcontract and major purchase at its estimated value, marked "not bought", until the buyout log records the award.
- Give allowances their own lines: the contract's cash allowances, which you reconcile with the owner, and the estimator's allowances for known but undefined items. Keep contingency and fee apart too.
- Tie it out: every code, plus the fee, must add up to the contract price.
- Issue one version and lock it. It then changes only by approved change order or a recorded transfer.
Common mistakes
- Loading the estimate summary into accounting as the budget, so labour has dollars but no hours.
- Spreading the fee across the codes, where overruns quietly use it up.
- Leaving cash allowances inside trade codes, where they are spent without being reconciled.
- Carrying an unbought package at the lowest quote received before anyone has levelled it.
- Moving money between codes to hide an overrun, with no record.
Checklist
Before you issue the budget
- Every estimate line in one code
- Own labour in hours and rate
- Unbought packages marked "not bought"
- Allowances, contingency and fee on their own lines
- A total that ties to the contract price
- One version for site, office and accounting
Check your understanding
Your budget detail comes to $27,000 more than the contract price. Why not add a line of minus $27,000 at the bottom?
