How to estimate your construction project with inflation going crazy?

TLDR

Inflation increases material, labor, and transport costs while stretching the time between quoting and building, making accurate construction estimating harder. Contractors can protect profits by tightening pricing controls, shortening quote validity, adjusting margins, improving project management, and using modern estimating software that keeps pricing accurate in real time.

Estimating accurately during extreme inflation

Estimating is hard enough at the best of times. There are site visits to complete, measurements to double check, drawings to analyze, and dozens of questions to answer before you even begin pricing the work. Once the takeoffs start, you still need current supplier pricing, labor costs, and a clear plan to pull everything together into a quote that makes sense.

Even with construction estimating software, this process takes time. With inflation driving prices up across the globe, it has become significantly more difficult to protect margins while remaining competitive.

Why inflation hits construction harder than most industries

Construction businesses tend to feel inflation faster and more aggressively than many other industries. One of the biggest drivers is transportation. As fuel costs increase, the price of nearly every material rises alongside it. Even small increases quickly compound across an entire project.

Another major issue is the long gap between quoting a job and starting work. In construction, it is not unusual for months to pass between issuing a quote and stepping onto the site. During that time, material prices can rise multiple times and labor rates often follow. Without proper safeguards, these increases come straight out of your profit.

The good news is that there are practical steps contractors can take to stay ahead of inflation rather than reacting to it after the damage is done.

Keep your price lists constantly updated

Whether you rely on printed price lists or digital systems, outdated pricing is one of the fastest ways to lose money. Many suppliers now adjust pricing weekly or even more frequently, which makes manual updates difficult to manage consistently.

Some companies dedicate staff specifically to managing pricing databases. Others use construction estimating software like Bolster, which automatically pulls updated pricing so every new quote reflects the most current costs available.

Increase margins to create a buffer

Even when you use up to date pricing, inflation can still push costs higher between contract signing and material ordering. Increasing margins slightly can create breathing room to absorb those increases.

An additional five to ten percent markup can be enough to turn a potential loss into a profitable project without dramatically affecting competitiveness.

Shorten your quote validity period

Thirty day quote validity periods no longer make sense when prices change every week. Shortening your validity window to seven or fourteen days allows you to reassess costs before committing to a fixed price.

This approach gives you the option to revise pricing if material costs spike unexpectedly, protecting your business from taking unnecessary hits.

Focus on higher value work

If tight margins on small jobs are becoming harder to sustain, it may be time to reassess your positioning. Contractors who weather inflation best often focus on higher end or specialized projects where pricing pressure is lower and margins are healthier.

Finding a niche with less competition allows you to move away from race to the bottom pricing and toward long term stability.

Use escalation clauses when appropriate

Escalation clauses are common in commercial construction and can be valuable tools during periods of high inflation. These clauses allow prices to adjust based on changes in material or labor costs using predefined formulas.

While less common in residential work, they can be worth exploring for larger or longer term projects where cost volatility poses a real risk.

Consider cost plus pricing

Cost plus pricing shifts inflation risk away from the contractor by billing actual material and labor costs with an agreed markup. Clients receive invoices and timesheets alongside progress billing, ensuring transparency.

Although not widely used in residential construction, this model can provide strong protection during uncertain economic conditions.

Strengthen project management practices

Strong project management becomes even more important when margins are under pressure. Efficient scheduling, clear communication, and proactive change order management can help recover costs that might otherwise be lost.

If your team lacks formal project management training, investing in skills development now can deliver long term returns.

Invest in better technology and accuracy

When inflation is low, small estimating errors may go unnoticed. When costs are rising rapidly, even minor mistakes can erase profits.

Using modern estimating, communication, and time tracking tools helps ensure every dollar is accounted for. While investing in technology may feel risky during uncertain times, these tools often pay for themselves quickly through improved accuracy and efficiency.

Buy and store common materials strategically

For frequently used materials, bulk purchasing can lock in lower prices and reduce exposure to future increases. This approach only works if storage costs and shelf life are carefully considered.

Building strong relationships with suppliers can also lead to better bulk pricing and more predictable supply.

Remember that the economy moves in cycles

Inflation feels overwhelming, but economic cycles always shift. Construction companies that focus on tightening operations, improving systems, and protecting margins are better positioned when conditions stabilize.

Instead of waiting for prices to return to normal, use this period to refine how your business operates. When the market settles, a lean and disciplined company will be stronger than ever.

If improving your estimating process is part of that plan, Bolster can help. Bolster construction estimating software gives contractors the tools they need to price accurately, adapt quickly, and stay profitable even when costs are unpredictable. Contact the team to schedule a demo and see how Bolster supports smarter estimating.