Top 25 Construction Terms You Need to Know in 2022

August 3, 2022

From "construction estimate" to "takeoff," and everything in between.

The world of construction is ever-evolving, especially for those who are just starting a new project. Whether it’s a real estate investment project with luxury condos or a small addition to a home, knowing the right construction terms will help you make the best decision for your budget and timeframe.

As the vocab of the construction industry changes, so does the construction bidding process. These 25 construction terms will help you understand what’s going on in your project and how you can improve your bottom line.

  1. Construction Estimate. This is how much the labor and material costs of a construction project are forecasted to be, written up in a document. The estimate helps gauge whether a project is feasible.
  2. Cost Data. The detailed pricing information for materials and labor in a construction estimate. Cost data can be sourced from a historical cost book or digital database with regional search features.
  3. Bill of Quantities (BOQ). This is an itemized list featured in a contract estimate. A BOQ details all the materials and workmanship used to help price a project.Bid. This is a price proposal for a construction job. There are several construction terms that involve this cornerstone term.
  4. Bid Package. A bid package is one of the most important parts of the construction bidding process. This is a full contract that features a detailed bill of quantities, a description of the project, and everything else required for the buyer to make an educated decision.
  5. Bid Selection. This is the part of the construction bidding process that involves the buyers accepting one bid and rejecting the rest of them. Once a bid has been formally accepted, the project is officially started.
  6. Construction Management at Risk (CMAR). CMAR is a method of estimation that involves the construction manager dedicating themselves to keeping the project under a guaranteed maximum.
  7. Cost Codes. These are special codes that track labor expenses and budgets.
  8. Guaranteed Maximum Price/GMP. This is a pricing method that involves charging the price of the cost, plus a fixed fee. The total has a price cap that cannot be exceeded.
  9. Job Costing. This is an accounting method that measures whether the actual expenses for a project match the construction estimates given.
  10. Low Bid Procurement. This is a bid selection method that involves choosing the bid with the lowest overall price.
  11. Negotiated Procurement. This is a bid selection that involves no actual bid package submitted. Rather, the contractor is chosen without any formal bidding process, price package, or open call for bids.
  12. Pay Applications. This is a document that explains how the contractors will be paid.
  13. Performance Gap. If the progress of construction doesn’t match how much should have been accomplished, this is known as a performance gap. Performance gaps can lead to higher-than-estimated costs. In serious cases, it can also lead to lawsuits.
  14. Punch List. Once a project has ended, a punch list will be made. This details portions of the project that were not made to customer expectations.
  15. Purchase Order (PO). A PO is a document that shows they plan to buy goods or services from a seller. In construction, an example would be a note that shows that a contractor will buy lumber from a local shop.
  16. Request for Information (RFI). This is a preliminary part of the cost estimate process which involves offering general information on what vendors are capable of doing for the project.
  17. Request for Quote (RFQ). This is a price request from a buyer to a vendor for a particular common item or service. RFQs are used to gauge the total amount of money required to finish a project.
  18. Request for Tender (RFT). Though this may be a bit of a misnomer for some, a request for tender is a formal invitation for vendors to offer bids to supply services and/or products to a project.
  19. Scope/Scope of Work (SOW). This is one of the more important construction terms on this list. The Scope of Work is the contractual agreement outlining what all the work for a project will entail.
  20. Scope Creep. Scope creep occurs when a client continues to add on new features and tasks that were not in the initial scope of work. This is often a source of problems for both the buyer and the construction crew.
  21. Sole Source Procurement. This is the act of purchasing a contractor’s services without any competition in the construction estimate process.
  22. Takeoff. This is a full list of all the materials (and quantities) that will be required in order to finish a project successfully.
  23. Tender. After an invitation for a bid has been made, suppliers and contractors will send a tender. This is an official response to the invitation regarding the supplies or labor they can contribute.
  24. Unit Price Contracts (UPC). This is a contract where the supplier or contractor is paid based on the price of the items used in the project.

Need help building better construction estimates?

Understanding construction terms for the estimation process is helpful, but not as important as accurately estimating any project. That’s why keeping an eye on the latest material and labor prices is crucial to bid success.

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