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Construction Estimating Glossary: 40 Terms Every Contractor Should Know

Vega Estimating Team·May 26, 2026

Why Terminology Matters

Misunderstanding one term — like "allowance" vs. "contingency" — can lead to disputes, underbilling, or lost margin. Here are 40 essential terms every construction estimator should know.

A–C

  • Allowance: A budget placeholder for items not fully defined at bid time (e.g., "$5,000 fixture allowance").
  • AIA Billing: A standardized billing format using G702/G703 forms showing work completed and stored materials.
  • Bid Bond: A financial guarantee that the contractor will honor their bid if selected.
  • Buyout: The process of pricing out subcontractor and supplier contracts after a GC wins a bid.
  • Change Order (CO): A formal modification to the original contract scope and price.
  • Contingency: A budget reserve (typically 5–15%) for unforeseen conditions.
  • CSI Divisions: A standard numbering system for organizing construction specifications (e.g., Division 09 = Finishes).

    • D–L

  • Direct Cost: Labor and material costs directly tied to construction work.
  • Estimate: A calculated projection of project cost based on quantities and pricing.
  • General Conditions: Overhead costs of running the job site (trailer, supervision, insurance, temp utilities).
  • Guaranteed Maximum Price (GMP): A contract where the contractor absorbs overruns above the agreed maximum.
  • Lien Waiver: A document releasing a contractor's right to file a mechanic's lien upon payment.
  • Line Item: A single cost entry in an estimate (e.g., "Drywall Hanging — 4,200 sqft @ $0.45 = $1,890").

    • M–R

  • Markup: Profit and overhead added to direct costs, typically 10–25%.
  • Mobilization: The cost of moving equipment and crew to the job site.
  • Overhead: Indirect business costs not tied to a specific project (office rent, admin, insurance).
  • Preliminary Estimate: An early-stage estimate based on incomplete drawings, often used for budgeting.
  • Profit Margin: Net profit as a percentage of revenue.
  • Quantity Takeoff: The process of measuring drawings to determine material quantities.
  • Retainage: A percentage (typically 5–10%) withheld from payments until project completion.
  • RFI (Request for Information): A formal question to the architect or owner about plan ambiguities.

    • S–W

  • Schedule of Values (SOV): A breakdown of the contract price into line items used for progress billing.
  • Scope of Work: The defined boundaries of what a contractor is responsible for.
  • Subcontractor (Sub): A specialty contractor hired by the GC for specific trades.
  • Submittal: Product data, shop drawings, or samples submitted for approval before installation.
  • Takeoff: See Quantity Takeoff.
  • Unit Price: Cost per defined unit of work (e.g., $4.50 per sqft of tile installed).
  • Value Engineering (VE): Finding less expensive alternatives that meet the same functional requirements.
  • Waste Factor: A percentage added to material quantities to account for cuts, breakage, and errors.

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