In-House Cost Estimators Vs. Outsourced Estimating Companies: Which Is The Better Option?

Accurate cost estimation is a critical aspect of project planning for construction firms, developers, and businesses in various industries.

The accuracy of these estimates can impact everything from budgeting to resource allocation, client satisfaction, and profitability. When estimating, companies face a major decision: Should they hire in-house cost estimators or outsource to estimating companies?

In this article, we’ll delve into the pros and cons of both approaches, helping you make an informed decision that best suits your company’s needs. We will evaluate cost-efficiency, expertise, control, scalability, and long-term benefits to determine the most effective solution.

What is Cost Estimation in Construction and Business Projects?

Cost estimation is forecasting the financial resources required to complete a project. It involves assessing material costs, labour, equipment, overhead, and other miscellaneous expenses. This estimation helps ensure the project stays within the agreed budget, meeting the client’s expectations without compromising quality. Whether for construction, manufacturing, or IT projects, cost estimation is indispensable for resource management and profitability.

The Role of In-House Cost Estimators

An in-house cost estimator is a professional employed directly by a company to handle the task of estimating project costs. Typically, these estimators work closely with project managers, engineers, and procurement teams to create accurate and detailed cost breakdowns.

Advantages of Hiring In-House Cost Estimators

1. Direct Control and Oversight: Having cost estimators within your organization allows immediate collaboration and communication. This promotes seamless integration with other departments, such as project management, design, and procurement. In-house estimators can quickly adjust estimates based on changes or updates in project scope without the delay that might occur when outsourcing.
2. Deep Familiarity with Company Standards In-house estimators often better understand a company’s specific processes, standards, and previous project data. This allows them to apply internal knowledge to create more accurate estimates. Since they are part of the same corporate culture, they are aligned with the company’s strategic goals.
3. Custom Solutions and Flexibility An internal team member has the flexibility to adapt cost estimates to the specific requirements of your business model. Whether the project requires a highly detailed line-item estimate or a more streamlined approach, an in-house cost estimator can tailor the process accordingly.
4. Long-Term Investment Over time, an in-house cost estimator can build expertise specific to your company, resulting in greater efficiencies and accuracy in estimates as they become more familiar with the company’s unique challenges and preferences. This could also lead to cost savings in the long run, as they gain institutional knowledge that external estimators wouldn’t have.

Disadvantages of Hiring In-House Cost Estimators

1. High-Fixed Costs One of the main drawbacks of hiring in-house is the fixed salary and benefits you need to pay. Whether or not your company has projects requiring estimates, you still have to pay a full-time estimator. This makes it costly during downtime or off-peak periods.
2. Limited Exposure to Market Trends In-house estimators might be limited in their exposure to industry trends and pricing fluctuations, especially if they only work on a few projects annually. They may not have the opportunity to frequently work on diverse projects and industries, reducing their ability to stay up-to-date on current market pricing.
3. Training and Development Costs You will need to invest in their ongoing professional development to keep them informed about the latest software, methodologies, and industry standards, which will add to your company’s expenses.

The Benefits of Outsourcing to Estimating Companies

Outsourcing cost estimation to the construction estimating company involves hiring external specialists or companies focusing solely on project estimation. These services often serve multiple clients across different industries and project types.

Advantages of Outsourcing Estimation to a Specialized Company

1. Access to Specialized Expertise Finds the best estimating companies that are highly specialized. Their estimators often have extensive experience in various project types and industries, giving them unique insight into current market conditions, material pricing, and labour costs. Their industry knowledge can provide more accurate and competitive estimates.
2. Cost Efficiency Outsourcing eliminates the need to maintain a full-time in-house estimator, reducing overhead costs. You only pay for the services you need when you need them. This is particularly valuable for companies with fluctuating project volumes. Estimating companies often work on a project-by-project basis, which is more cost-effective during slow periods.
3. Scalability Outsourcing allows you to scale your estimation efforts based on project demands. If you’re working on multiple projects, you can quickly ramp up by outsourcing to multiple estimation experts rather than overwhelming an in-house team. This flexibility is a key advantage during peak periods of activity.
4. Up-to-date tools and technology estimation companies invest heavily in the latest software and technologies to stay competitive. These tools allow for faster, more accurate estimates and often provide more detailed reports than what an in-house estimator using basic tools might produce.
5. No Training Required When you outsource, the estimation company hires, trains, and updates its workforce with the latest industry knowledge. This saves your company both time and money on continuous professional development.

Disadvantages of Outsourcing Cost Estimation

1. Less Direct Control Outsourcing inherently means giving up a degree of control. You may have less influence over the estimation process and encounter delays due to communication gaps between your team and the external estimator. Aligning the external company’s standards and methods with your own can also present challenges.
2. Confidentiality Concerns Outsourcing to third-party companies raises concerns about data security and confidentiality. Your project data and costs could be shared or leaked. It is essential to work with reputable estimating companies and ensure proper non-disclosure agreements (NDAs) are in place.
3. Inflexibility During Project Changes If significant changes to the project occur during the estimation process, outsourcing can be cumbersome. The time and effort required to update estimates could be greater than what an in-house estimator would require, leading to delays in project timelines.
4. Lack of Company-Specific Knowledge External estimators may not fully understand your business model, goals, or internal processes. This can sometimes lead to overly conservative or overly optimistic estimates, affecting profitability or client satisfaction.

Making the Right Choice for Your Business

To make the best decision, assess your company’s specific requirements:

• Frequency of Projects: If your company has a steady stream of projects, hiring an in-house estimator may be more cost-effective. However, outsourcing may be more practical for companies with irregular project schedules.
• Specialization Needs: Outsourcing to Blaze Estimating provides access to specialists with experience in specific industries or project types. If your projects require niche expertise, outsourcing may offer more value.
• Budget Constraints: If you need to keep overhead costs low, outsourcing is the better option, especially if you’re a smaller firm or in a start-up phase.
• Long-term Strategy: Consider whether investing in an in-house team offers your company more control and long-term growth.