Accurate construction cost estimates are essential for any project. One often overlooked factor is the cost of permits. Permits are required for most construction jobs, whether commercial or residential. Failing to include permit costs can disrupt budgets and delay projects.
This article explains how to effectively account for permits in your construction cost estimates.
We’ll keep it simple and cover why permits matter, how to estimate their costs, and tips for including them in your budget.
Why Are Permits Important in Construction?
Permits ensure safety, compliance, and proper construction standards. They are issued by
local authorities and cover various aspects of construction. These include electrical work, plumbing, structural changes, and zoning laws. Without permits, you risk:
1. Legal fines
2. Project shutdowns
3. Higher costs to fix non-compliance issues
Including permit costs in your estimates helps you avoid unexpected expenses and stay within budget.
Types of Permits You May Need
Construction projects require different permits depending on the type of work. Some common types include:
Building Permits: Required for new construction or major renovations.
Electrical Permits: Needed for wiring or other electrical work.
Plumbing Permits: Issued for pipe installations, repairs, or replacements.
HVAC Permits: For installing heating, ventilation, or air conditioning systems.
Zoning Permits: Ensure the project complies with local zoning rules.
Demolition Permits: Required if part of the structure needs to be torn down.
The specific permits depend on the location, project size, and scope of work.
Steps to Account for Permit Costs in Your Estimates
1. Research Local Permit Requirements
Every city or region has its own regulations. Start by contacting local authorities or visiting their websites. You can usually find a list of required permits and their fees.
If you’re working on commercial construction estimation, the permit requirements may be more complex than residential projects.
2. Calculate Permit Fees
Permit fees vary depending on several factors, such as:
1. Project value (cost of the entire project)
2. Square footage of the construction area
3. Type of work (new build, renovation, or repair)
For example, building permits for new construction may be a percentage of the total project cost. Smaller permits, like plumbing or electrical, might have fixed fees.
To avoid errors, gather fee schedules from local authorities. Be thorough, as missing even a small permit can impact your total costs.
3. Include Permit Costs in Your Budget
Once you calculate the permit fees, add them to your construction cost estimate. Include them under a separate line item called “Permit Fees” to ensure clarity.
If you use estimating software for construction cost estimating, you can add permit costs as an additional category.
4. Factor in Inspection Costs
Permit fees often include the cost of inspections. However, some projects require multiple inspections during different phases of work. These can add extra costs, so it’s essential to include them in your estimate.
For example, drywall work often needs inspection after installation. Including inspection fees is crucial in drywall estimating to ensure your estimate is accurate.
5. Plan for Permit Delays
Sometimes, permit approvals take longer than expected. This can delay the project timeline and increase labor costs. To account for this, add contingency funds in your estimate. A 5-10% contingency is a good rule of thumb for most projects.
Tips for Accurate Permit Cost Estimates
1. Work With Local Experts
If you’re unsure about permit costs, consult local contractors or building inspectors. They have experience with similar projects and can provide valuable insights.
2. Use Historical Data
If you have worked on similar projects before, check past permit costs. Historical data is a reliable way to estimate fees for new projects.
3. Communicate With the Client
Always inform your client about permit costs. Include detailed breakdowns so they understand where their money is going. Transparency builds trust and avoids disputes.
4. Consider Regional Differences
Permit costs vary significantly across regions. Urban areas often have higher fees compared to rural locations. Be sure to adjust your estimates accordingly.
For example, if your project involves residential construction estimating, costs in a city will likely be higher than in a small town.
5. Account for Permit Renewals
Some permits have expiration dates. If the project takes longer than expected, you may need to renew permits. Renewal fees should be included in your estimate.
Common Mistakes to Avoid
Ignoring Small Permits: Even minor work, like installing a new HVAC system, requires permits. Overlooking these can cause unexpected costs.
Underestimating Fees: Estimate permit fees accurately. Underestimating them can create budget shortfalls later.
Skipping Inspections: Missing required inspections can lead to fines and additional work. Always include inspection costs in your estimate.
Not Planning for Contingencies: Delays are common in construction. Always include contingency funds to cover unexpected permit-related costs.
Real-Life Example
Suppose you’re managing a residential project with drywall installation. You need a building permit, drywall inspection, and plumbing permit for this job. By researching local fees, you find that:
1. Building permit costs $1,000
2. Plumbing permit costs $300
3. Drywall inspection costs $150
You add a 5% contingency for possible delays, bringing the total permit cost to around $1,575. By including this in your estimate, you ensure accurate budgeting and no surprises.
Final Thoughts
Accounting for permits in construction cost estimates is critical for accurate budgeting. Ignoring permit fees can cause costly delays and legal issues. By researching local requirements, calculating fees, and planning for contingencies, you can keep your project on track.
Whether you’re working on lumber estimating, drywall estimating, or full commercial construction estimation, including permit costs will improve the accuracy of your estimates. Remember, a well-planned budget sets the foundation for project success.