What are the two basic laws of construction estimating?

What are the two basic laws of construction estimating?

• A. Low estimates decrease profits and high estimates decrease volume.
• B. Low estimates increase profits and high estimates increase volume.
• C. Estimates do not affect profits.
• D. High estimates maximize market share.

Answer: (A)

Pricing decisions in construction estimating drive a trade-off between profit and volume. If you submit a very low estimate, you’ll likely win more work, but the margin on each job is thin, so overall profits drop. If you submit a very high estimate, you protect margins but become less competitive, so you win fewer projects and the volume decreases. These effects explain why low estimates tend to decrease profits and high estimates tend to decrease volume. The practical takeaway is to price to maintain healthy margins while staying competitive enough to keep a steady flow of work.