Estimating Training – Candels Estimating & Training

Bidding and Relationships – Why are they so Important?

Bidding and relationships have a lot in common. Sometimes, in the midst of completing an electrical estimate or take-off, you are suddenly faced with a decision of whether or not to bid the job. It happens all the time! You have every intention of bidding the job but then you have doubts based on quality of drawings, relationships with the GC, or even the schedule. Although we have the ability to “say when” we do not always do it…maybe it is because we have too much time or money invested in the project or our egos get in the way.

The following guidelines may help you to analyze bidding and relationships as well as the projects that are worth bidding–and those from which you might want to walk away.

Bidding and Relationships

Perhaps the biggest question you may want to ask yourself is “Do I have a relationship with the general contractor or the customer?”

If you do not have a relationship with the GC, have you checked into the kind of company with which you may be dealing?
Have you run a Dun & Bradstreet report on them or have you checked with others who may have done business with them already?
Or do you think they are using you for a check price?

In terms of having a relationship with the customer and not the GC, this relationship may or may not help you. You must determine if they will work with you and if they will give you feedback. Sometimes the end customer relies on the general contractor or construction manager to ultimately choose the subs, so even a relationship with customer may not be your golden ticket.

Beyond having a relationship with the GC or the end customer, do you truly understand the scope of the work? If you do not fully understand the scope, any other decision you make regarding the project may be immaterial. You must review all bidding documents prior to determining whether to bid a job. In reviewing the bid documents, you must also consider if you have experience in the type of project you are considering bidding. There is no substitute for experience. Having experience on a particular type of project will clue you into the potential pitfalls that could cost you escalated labor time or inflated material costs or both.

Is this for real?

A seasoned estimator will notice the signs that a project may not be “real.” Maybe some of you are asking the question “How can the job not be real if it is out to bid?” Often an electrical contractor will work like crazy to complete an estimate because the GC’s time schedule is tight and he needs a price “right away,” only to find out later that they were simply looking for a check price or just a budget. Other times, an electrical contractor will design-build the job only to later determine that because the bidding documents were so incomplete, the job will be rebid in the future. Similarly, an electrical contractor will design the job assuming that the general contractor will give them the job simply because they completed the electrical design/layout work, only to later find out that the job will be rebid with the new information provided by you. (Again, know who you are dealing with and what the actual scope of work is.)

The size, visibility, location, schedule and number of general contractors bidding the job will dictate how many electrical contractors ultimately bid the job. And, the number of ECs bidding the job should factor into your decision on whether to bid the job. Obviously, more bidders on the project lessens your probability of actually getting awarded the job. A large bidding pool often leads to “an auction” whereby contractors offer to meet and beat the lowest bidder’s price. So even if you are the low bidder on bid day, it doesn’t necessarily mean that you will be awarded the job.

Type and Tools

Other issues to consider are the job schedule, your experience with the type of project, and the tools and resources you would need to complete the project. Often job schedules are extremely tight.

Do you have the necessary resources to finish the job on schedule?
Do you have the manpower to complete the project on schedule or will you have to coordinate “borrowing labor” from a fellow electrical contractor?
If so, do you have relationships with other contractors to share labor?
Can you complete the job with your “B” team and still keep the customer happy?
Finally, do you have the tools and resources to complete the project? If you must invest in tools to complete the project, it will increase your job costs and ultimately hamper your profitability. Having the necessary tools up front will obviously add to your bottom line.

Sometimes drawings that are issued for a project are not completely engineered. Perhaps the circuiting has not been completed; there are incomplete panel, lighting, or mechanical schedules; or there are too many “holes” in the drawings. We find daily that design teams are putting incomplete jobs out to bid and try to get you buy into a guaranteed maximum price for a partially engineered project. This may be a signal that the job is still in the design phase. If this is the case, it is entirely possible that the job will come out to bid again, meaning you, your estimator, or your outsourced estimating team will need to redo the job, adding time and cost to the price of bidding the job. If the drawings are incomplete and you do not have a relationship with the GC, you may want to walk away. If not, then there are still other issues to consider before you decide to submit a price for the job.

Is the job you are bidding in “your territory?” If you are not from the area, are you familiar with the licensing and permit requirements in the area? Is it a heavy union area?

Quotes

Now, let’s get to quotes. If there are a considerable number of ECs bidding the job, it is possible that one or two of them will receive the “whisper number” from the supply house, giving them considerable advantages on bid day. So the question to ask yourself is “do I have a good relationship with at least one supply house, ensuring that I will get a good number on bid day?” Once you get the right numbers from your supply house, then you must analyze your direct job expenses versus your competitors. Have you checked to ensure that the numbers you are carrying are correct and competitive? Again, is your labor force competitive?

Once you have analyzed that, it is time to apply overhead and profit to the job. Every electrical contractor has a differing view on how to apply overhead to a job. Some apply it by raising the hourly rate to a “fully loaded rate.” Others apply the overhead to a certain percentage of the job cost. Neither is right; you simply just need to fully understand it and be consistent with all projects. If you do not understand the principle of overhead, it is time to sit down with your accountant or an estimating consultant and review the components of overhead, their value, and the most appropriate way to apply this cost to your estimate.

Finally, we cannot forget PROFIT. Electrical contractors typically anticipate between 7 to 15% profit and almost always that number can be achieved. If by chance, you get the job and you do not achieve your anticipated profit levels, an analysis of why the job went sour may help to avoid those particular pitfalls again.

Bidding jobs may be one of the most nerve-wracking tasks that an electrical contractor undertakes on a regular basis. By paying attention to the signs and asking yourself some of the questions above, you may have a better handle on “knowing when to say when” meaning you will be better equipped to bid a job, or be confident enough to walk away when the signs and signals are there that this is not the job for you. Knowing your strengths, asking the hard questions, and not being afraid to stand up to those with unreasonable demands will ultimately lead to a more profitable electrical contracting business. And, isn’t that really what it is all about?

It’s The Day After Bid Day…

Your bid has been submitted. So, what comes next? You might be surprised to find out that many contractors do nothing once their bid has been submitted and then they wonder why they do not win more jobs. The good news is that a few simple steps can change your success rate.

There is so much more to be considered besides your price. First, let’s start with your product. Consider the service you provide as a brand. Does the general contractor know anything about your brand? If he does, that’s great! If he does not, he might consider you a “no name generic” and consider the bid of another “brand name” electrical contractor. The point is to know the clients to whom you are bidding! If you do not know them now, get to know them. We can site many cases where an EC had been so persistent in trying to win a project with the GC, that he finally relented and gave him a small piece of the job, opening the door to relationship development. The point is to follow up, follow up, follow up! The simplest thing you can do is ask for the order. If you don’t ask straight out, then you may never get the opportunity to do the work.

There are many ways for the industry to get to know your brand. Start bidding more work. You may not get the work right away, but your name will become more familiar with general contractors. Name recognition cannot be underestimated! Join a trade or civic organization to allow you to network with the right people.

Lastly, invite the project manager for the potential job to one of your current job sites and show them what you can do and what you know. Make sure that the general contractor knows about your capabilities. Do you have the manpower, tools, and equipment to get the job done on schedule? This is particularly important when schedules are condensed. Do you have history in the type of work that you are bidding? Give the general contractor a resume of the jobs you have completed to ensure them that you can get the job done. Project managers buy jobs; very rarely does the general contractor’s estimator.

Some contractors try to win more jobs by cutting their price. However, if you sell on price, you may get the job but what have you sold exactly other than your price? Sell your company’s capabilities and benefits to justify your price! Generally, chasing someone else’s number is not a profitable venture. Do you really know if the number you are chasing is real or is the GC just trying to get you to lower your price? Is the number based on an actual take-off, not on a square foot or hunch number? Again, we have seen so many instances of contractors chasing someone else’s number just to get the job, thinking that he is going to make it up in change orders. That may never happen.

If you know you can’t do the job for someone else’s price, walk away! If you have identified your true costs by doing a quantitative take-off, you will know at what price you can realistically complete the job.

By building your “brand,” selling your company’s reputation and capabilities, and following up once you submit your price, you will undoubtedly see better results. Don’t wait for the phone to ring. Be proactive and sell your price!

Specification Review Checklist

Reviewing the specs is important to the estimating process.

When completing a construction specification review, an estimator should follow a systematic approach. The specifications, include information for each CSI division, however, none should be reviewed in isolation. Even though our focus is electrical, also known as CSI Division 26 (and previously Division 16), information related to the electrical specs will be shown in other sections and must be reviewed.

Why do we look at other specs sections other than electrical?

An untrained estimator may think that reviewing the electrical specs is enough. It’s not. A thorough construction specification review must include the “front end” of the specs (CSI Division 0 and CSI Division 1). This information includes the drawing list, Invitation to Bid, bid scopes, and summary of work. It may also include the project schedule, (Can you get it done it time with your team and tools?), walk through information (Often this in mandatory!), existing conditions, alternates, and allowances. This section also includes bonding information.

Never bid a job you cannot bond! Knowing your bonding capacity is important. Believe it or not, some contractors don’t know that there is an individual project amount bonding capacity, and an aggregate amount. The aggregate amount is the total dollar amount of all projects. If you have never bid a job with a bonding requirement, know that it takes time to get a bond. If you would like to work on projects requiring a bond, find a local agent and work on your bonding before you bid your project!

Before we move to reviewing the electrical specs, let’s talk about some other spec sections that are worthy of review.

In a previous blog post, I mentioned construction specification Divisions 10, 11, and 12 which detail specialty equipment and furnishings. The reason to review these specs is to determine if there is an electrical component with any of the equipment, and the requirements for the electrical contractor. You don’t need to spend hours reviewing these specs; it’s more like a quick review so you can watch out for these systems in the electrical specs and on the drawings.

Existing Conditions

It goes without saying that you want to know existing conditions. Will there be demo involved? Will the demo involve the removal of hazardous materials, such as ballasts containing PCB’s? If so, as an estimator, you want to be sure to cover the removal cost if it is part of your scope. Sometimes salvaged materials will be required to be returned to the owner so it is best to have this information before you bid the job.

Concrete

Concrete is a related spec section to electrical because some electrical equipment will require the use of a concrete foundation, such as a transformer or generator pad. Pole lighting may require bases made of concrete. Know your scope. Sometimes another contractor is responsible for concrete work, all or in part.

Fire and Smoke Protection

Fire stopping is required on projects. Generally this is a boilerplate spec section, however, be aware of specialty devices that cost more than the norm. Some pathways cost hundreds of dollars, so it is best to give this area of the specs a quick review to be sure to cover the cost of potentially expensive items.

Building Modules

We have seen more modular building. As a matter of fact, yesterday I reviewed a job for a KFC. I did not realize that the building was going to be built in four sections at an offsite warehouse. The customer wanted a price for a “stick built” electrical estimate as well as an idea of what it might cost for the electrical including modular construction. We have also seen projects where a portion of the building is built offside. One such project was a hotel where only the bathrooms in certain areas of the building were modular. It’s good to know this up front because you may unknowingly cover the costs for lighting fixtures, receptacles and other devices that are part of the modular construction and therefore not in your scope! With the rising cost of labor, I would suspect that modular building will become more prevalent.

Heat Tracing

Heat tracing is one of those gray areas where it’s not always clear “who owns what.” It’s good to review the specs in this area to see if the electrical contractor will be providing the circuit for the heat trace only, or the cable as well. The same would apply to electric heating mats, snow melt, and the like. If you have a question about your scope of work and cannot find it in the project documentation or specs, always consult with the general contactor and/or issue a Request for Information (RFI).

Next time, we’ll discuss all the hidden gems in the electrical specifications!

Project Specification Manual

The project specification manual is also known as the specifications.

Always review the entire project specification manual!

You’ve heard me say this many times before. “The devil is in the details.” The project specification manual, also known simply as “the specs,” contains a lot of details! You will notice as you review Division 26, or the electrical specs, to refer to other construction specification sections. Always review those sections for related work and how that pertains to the electrical scope of work.

Division 00 is where it all begins!

An estimator should review Division 00, or the “front end docs” first. Review all project information here, such as alternates, allowances and special job conditions. Always refer to the construction specification index for all specification sections, so that you can easily review information that is pertinent.

Always review Division 10, 11, and 12, Specialties, Equipment and Furnishings!

Divisions 10 through 12 of the construction specification detail information about special equipment and furnishings. While the electrical contractor might not have to furnish these items, every project is different. Always review and never assume what you own and don’t own! In class today, we reviewed a rather extensive project’s construction specification. It included photoluminescent egress markings, exterior sun control devices, dock levelers, projection screens and motorized project lifts, and roller shades.

What are photoluminescent lights?

Photoluminescent egress markings have become much more prevalent because they mark the egress path when both normal and emergency power fails. They are not electrical and recharge with regular light. We have seen some projects where the electrical contractor provides and installs this lighting. However, on the project we reviewed, the specifications clearly stated that the items must be installed by a contractor having 10 years experience. That still doesn’t solve the mystery of whether the electrical contractor on this project had to furnish the lighting with installation being subbed out to a qualified contractor. Honestly, we discussed that the construction specification does not stand alone. Sometimes you have to get additional information from the drawings, and other contract documents. You never know where you will find that missing piece of the puzzle to answer your question.

Sometimes sun control devices are just awnings!

We determined that the exterior sun control devices were not motorized, so we moved on.

Dock levelers may or may not require additional devices to be provided by the electrical contractor.

The dock leveler was provided with a disconnect and the control switch, so we will look for the electrical requirements of this item when we start the take-off. I just finished a project on Friday that had a dock leveler and control switch, but the electrical contractor was responding for providing the “traffic” (red/green) light at the dock. Look for notes on the drawings for additional items that you have to provide! In this case, there was a lighting symbol shown and a part number, so we added this to our list of items that need a quote.

Projector screens and lifts often require control wiring provided by the electrical contractor.

Rarely, if ever, does the electrical contractor have to provide the projection screen or projector lifts, and that was the case here. We were more interested in determining the control conduits and wiring that would be provided by the electrical contractor. Again, more information regarding this was shown on the actual construction drawings.

Roller shades can be motorized and they might be hidden on the drawings!

Finally, roller shades are often a stealthy item! We did determine that the roller shades were motorized, so that we could look for the circuits on the electrical drawings. I cited an example in class of a recent project we completed in Massachusetts. The roller shades were not clearly marked but were shown as a dotted line around the perimeter of a large room. All that the drawings mentioned was a simple note. Upon further review and a subsequent RFI document that was issued, we determined that there were 51 shades! You never want to not cover the circuits and small equipment connections for 51 items!

The project specification manual review can be a daunting task! It does get easier with practice!

We warned our students that it would take us about 16 hours to review everything that you should know about the construction specification. So far, we have reviewed related sections to electrical, as referenced in the specs. Always review the entire spec, paying close attention to related construction specification sections!

Electrical Estimating Apprenticeship – B.A.D.A.S.S. (Day 3)

The electrical estimating apprenticeship Day 3 started with a review of take-off components which we call B.A.D.A.S.S.

Be a B.A.D.A.S.S.

Years ago, we developed this acronym for our new estimators to remember all the components of bidding documents.

B – Invitation to Bid and Bid Forms

A – Allowances and Alternates

D – Drawings

A – Addenda

S – Scope of Work

S – Specs

B stands for Invitation to Bid and Bid Forms

Just because you receive an Invitation to Bid doesn’t mean that you should bid the project. We discussed having the time, tools, and resources to be able to complete the job per the requirements. Needless to say, if you are deficient in any area, you may have to reconsider bidding that project.

The Invitation to Bid is your first introduction to the project. It will include project name, location, and bid date, as well as what trades will be required on the project. It will also include information on pre-bid meetings and walk-throughs. Pay attention if attending the walk through is mandatory in order to submit a bid! Also, look around and see who is there. It will give you a good idea of which competitors are considering bidding the project.

Minority participation may be also be required. If you are bidding as a prime, you will have to be sure to satisfy the minority requirements. If you are a minority contractor, pay attention to the bid forms and what your advantage will be. Often you will receive a 10% consideration for the work.

The Invitation to Bid will also include information about whether bonding will be required. We discussed bid, payment and performance bonds. Simply, a bid bond ensures that “you will complete the job for the quoted price.” A payment bond ensures “a contractor will pay your subs and suppliers.” A performance bond ensures “a contractor will complete the job as stated.”

Jobs can either be public or private. Public jobs are bid strictly by “plans and specs” and no exceptions are made. Private jobs, on the other hand, have a lot more latitude.

A stands for Allowances and Alternates

Always review the bid documents, including the bid form and front end specifications for allowances and alternates. Allowances could be required for just about anything. Sometimes it will be a fixed dollar amount to be “used at the discretion of the GC” sort of like a pre-paid change order. Other times, the specs will state to carry a dollar amount for a system that is not designed.

Look at the alternates before you start your take-off so that you can identity the areas of the alternates before you start your take-off. Believe me; this is a time saver!

D is for Drawings

If I have said it before, I will say it again. Always ask for a full set of drawings because you will be responsible for anything electrical regardless of what drawing it is on. Look at the drawing index and make sure you have all the drawings. Review the RCP’s for ceiling type and height and the architecturals for wall construction.

If you follow a systematic approach to your electrical estimating process, you will undoubtedly identify the true cost of the project, which is the estimator’s role.

Day 4 follows with more BADASS tips! Stay tuned!

Bonding with the Specs

Specifications, scope of work, the walk-through and bonding are important pieces of any project, large or small.

Before you uncap a highlighter or open up your counting and take-off software, a thorough review of the specifications is critical to your estimate. Also, the scope of work, invitation to bid, and any other information provided should also be reviewed to totally understand the project.

Specs and Scope

The project’s specifications provide the road map to complete your take-off, estimate, and ultimately get to your bid price.

The front end specifications (Division 1) provide general project information that applies to all trades. The responsibility schedule or a scope of work document will detail “who owns what.” Never assume that everything you normally bid is part of the bid package on every project! Make sure to thoroughly understand the scope of work for your trade!

The specifications should also detail the project schedule. Be sure you can meet the deadline. Do you have the labor and equipment to complete the work on time? All over the U.S., contractors are experiencing labor shortages in the trades. Unless you know you can staff the project, you should only bid what you know you can complete.

The project schedule and liquidated damage clause should be reviewed in advance of bidding a project. Liquidated damages could cost thousands of dollars per day! Even when failure to meet the schedule is no fault of your own, you can be held responsible, particularly when you are one of the last trades off the job. When you experience delays due to other trades, always document the situation and put the owner/GC on notice, so as not to be hit with liquidated damages charges.

How important is the walk-through?

Another piece of information included in the front end of the specifications will be regarding the project walk-through. Often the walk-through is mandatory. Regardless, you or a designee should always attend this meeting. Valuable project insight can be gained about job site conditions and restrictions, working access, working hours, parking or materials storage space availability, and even the presence of asbestos.

If the walk-through is mandatory and someone from your company does not attend, your company will not be able to submit a bid. A walk-through also allows you to “see” what may not be shown on the drawings, such as existing equipment, access to the equipment, and general site conditions that may be hard to depict on the drawings. If the walk-through is not mandatory and you cannot attend, consider using a tool like Google Earth to get familiar with the job site. Do you ever wonder what we did before we had the internet and Google?

Let’s Bond

The front-end specs also include bonding requirements — be it bid, performance, or payment bonds. There is a lead time in getting a bond, so the earlier you request one, the better. A bid bond, usually no more than 10% of the project value, is subject to full or partial forfeiture if the winning contractor fails to either execute the contract or provide the performance or payment bonds. A performance bond, also known as a contract bond, guarantees satisfactory completion of a project by a contractor. Finally, a payment bond is a surety bond posted by a contractor to guarantee that its subcontractors and material suppliers on the project will be paid. Any of these bonds can take 3 to 4 working days to acquire. A good working relationship with your bonding company can reduce the lead time tremendously. And, if your relationship is really good, you may be able to arrange to write your own bonds through power of attorney.

Finally, the general contractor or construction manager may require you to carry “extra hours” to be used at their discretion and they may require you to carry allowances for contingent items. Often these are high-ticket items, so you want to make sure to include them in your proposal. More and more often, general contractors, especially larger ones, are including “500 extra hours to be used at their discretion,” feeling that they are pre-buying hours that can be used for change orders at a discounted rate.

Trade Specifications

After review of the Division 1 specs, you should read your trade’s specification section very carefully. Often your trade’s specifications will also refer you to other related specification sections and it goes without saying that you should read those as well. The bottom line is to understand the requirements of the project, and what your trade “owns” relative to the work on the project. As the old saying goes, “the devil is in the details.” If there is a conflict between the specifications and what is shown on the drawings, try to pinpoint a reference within the text that defines what information supersedes other information. You cannot rely on old wisdom that “the specs supersede the drawings.”

For example, the specs may state that outside duct banks shall be run in Schedule 40 PVC. However, a drawing note may state that all duck banks shall be run in galvanized rigid conduit (which costs a lot more than PVC!) If you can’t find a specific reference about what information supersedes, submit a Request for Information (RFI) for clarification. At all times, you want to be sure to cover your costs, yet at the same time, you do not want to cover any unnecessary costs that could unnecessarily inflate your bid price. Whatever you do, always qualify your bid! For example, it could be as simple as “Carried Schedule 40 PVC for all duct banks per specifications. Did not carry GRC per drawings.”

Specs are often considered “boiler plate,” meaning they do not always contain project specific information. And to be truthful, it can get tedious reviewing hundreds of pages of what may seem to be worthless information. For example, for electrical, the contractor will look for wiring methods, fittings required, testing and coordination studies, and the responsibility of providing starters and disconnects. As a general rule, if the project is funded privately, a contractor can deviate from the specifications. However, if the project is publicly funded, each trade will be bidding on “plans and specs,” meaning no deviations from the plans and specifications.

Be aware that specs may include information on systems that are not shown or referenced on the drawings. That doesn’t mean that you shouldn’t cover the cost for these items if they are in your bid package.

A thorough review of the specifications helps you map out the entire bid process and set the stage for the next part of the estimating process — the take-off.

Construction Estimating Process Starts Earlier than you Think

Construction estimating process: Mistakenly, many construction professionals believe that the estimating process starts with the take-off. In reality, the estimating process starts much sooner than that, and it requires careful thought and consideration of many factors. So before you unroll that set of plans and uncap a highlighter, consider the following.

Start with knowing your business

It would stand to reason that contractors know their own businesses, right? Yet every day, we speak with owners and managers of businesses that do not know their overhead, labor or material costs, or even how much money they made (or lost) on a project. We’ve even met a few contractors that think that if there is money in the checking account at the end of the week, all is well!

Realistically, a contractor should not even consider bidding any projects, until they know the costs of running their company, and how much revenue they need to generate in order to cover their annual overhead. This is where a good relationship with your accountant comes into play. Quite frankly, if you don’t have a good relationship with your accountant, try to make it better or find a new one! Your accountant is the person that can help navigate your business into successful waters. That starts with knowing your overhead costs, and how to apply that to your estimates to make sure that your costs are covered. You can apply your overhead as a percentage rate at the end of your bid, or you can carry a “fully burdened rate” when you apply your labor rate/costs to an estimate. Either way works, but your accountant can explain the benefits of using one method or another for your company.

Analyze what project size you can handle

What types and sizes of projects have you successfully managed in the past? Many projects require bid, payment, and performance bonds, so another person critical to your company success is your insurance/bonding agent. Each company should understand its bonding capacity, both per job and the aggregate amount. If you cannot bond a project of a certain value, why chase it? Your insurance agent can also advise you on the steps to take to raise your bonding capacity over time.

Consider your labor force

In the construction estimating process, labor is the biggest variable in a construction project because of the human factor. You can estimate and predict material prices, but you cannot always ensure that your field labor will perform to the standards that you have estimated. Labor composition is important to your success! Both union and non-union contractors have unique circumstances with labor. Union contractors rely on the union labor available at the start of the project. (That isn’t to say that a union worker cannot be employed continuously by the same company for many years and many projects, just to clarify.) Non-union contractors must be able to continuously employ or recruit qualified workers. In either case, company management must evaluate the level of experience and competency of the workforce, when deciding the type and size of projects to bid.

It would stand to reason that a company will bid on projects on which they have the experience to complete the project and turn a profit. If a company has absolutely no experience in a type of project, they should probably think twice about bidding it. Of course, the only way to get experience is to take a project to gain the experience. A company may make a strategic decision to do this to break into a market, knowing that for the first few projects, there will be a learning curve and the anticipated profit may be low.

The labor component also includes subcontractor labor. A general contractor estimator will solicit bids for various pieces of construction such as site/civil, concrete, structural, mechanical, electrical and more. Having good relationships with subcontractors will ensure that a fair price will be reached, and that the work will be performed to the specifications. In many cases, the work of the subcontractors will make or break a project. The better the relationship and the communication between parties, the better the process goes.

Finally, estimators of every trade have their own methods to determine the cost of material on their projects. An important part of that is making sure that commodity material pricing is constantly updated in the construction estimating process to ensure that your estimate includes realistic prices, whether you are estimating a project yourself or putting together an estimate based on a multitude of subcontractor proposals.

You know your company now! Do your customers (or potential customers) know you?

Getting to the point of knowing your business, its costs, and its strengths leads to the point of wanting to find the right work for your company. One thing that your company should consider is: Do your potential customers know you? This is probably something that a lot of company management doesn’t think about too much because they may be fortunate enough to work for a long-term, well-established company with a great reputation. However, every company starts somewhere. What if a company is young? How does that company gain a reputation that will enable them to get more work?

The power of relationships

When a company solicits a bid from several companies and they have knowledge and/or experience with two out of three companies, guess who has the better chance of project award? It’s probably going to be one of the two companies with a relationship. Relationships can also help your company find private projects and jobs that the customer already has. Contractors who put time and effort into building and maintaining relationships with their client base, making it an integral part of their business, are generally more successful than those who don’t. On the whole, this is an advantage in the construction estimating process.

Also, do not underestimate the power of advertising! Granted, advertising has changed a lot over the years, and it is much easier to been seen and known within the realms of social media. That’s a good thing. However, the old “tried and true” methods of industry events, trade shows and the like are still viable ways to build your brand. It really does make a difference! Industry associations, such as NECA or IEC (union vs. non-union electrical associations), Associated Builders and Contractors (ABC), Associated General Contractors (AGC), American Society of Professional Estimators (ASPE), the Consulting Estimators’ Roundtable (CERT), and even local civic organizations are all great networking options. Pick the organizations and advertising methods that you think will work best for your company and can support you with the construction estimating process.

When to bid, when not to bid…

Company management must decide what to bid based on the size and scope of each project as it is important for the long-term success of the company. Some of the factors that a contractor must consider determines whether the project will be desirable to bid, and ultimately be profitable. Where is the location? Is it close to the contractor’s office or will a significant amount of travel time be required, adding extra expense to the cost of the project? Does the company have a relationship with the entity soliciting the bid? Are they reasonable to work with and do they pay their bills? What is the size of the project? Can the contractor handle a project of that size and do they have experience in that type of work? Does the contractor have the manpower, equipment and materials required to complete the project on time and within budget? What is the estimated time to complete the project? If a schedule is compact, labor efficiency will be lessened due to possible overtime work and stacked trades on the project. Finally, what are the liquidated damages if the project is not completed on time?

Ultimately, a contractor must decide if the potential rewards outweigh the risks of the project. And, the “right” project for one contractor may not be the right fit for another contractor. The ultimate goal is for each contractor to know their strengths (and their weaknesses) and to capitalize on projects that can ultimately earn a profit. After all, isn’t that why we are all in business?

Is it worth it to sink time into the “budgeting” phase?

When a project is in its infancy, a company may decide not to engage in the project because a project is rarely awarded in the budgeting phase. A company may expend a lot time and effort into a budgeting a project, while running the risk of never being awarded the project. It is frustrating for contractors who budget the same project many times in hopes of an eventual project award, to only then find out that the construction documents are issued and they are bidding against companies that did not put any effort to get the project to that point! Certainly there are no guarantees of a project award, but when a company budgets the same project several times, it would stand to reason that the company would receive some special consideration in bidding the project. The only way that this is guaranteed is in a design/build project where the entire construction team works together to design and build the project.

Construction contracting can be tricky. Knowing your company’s strengths and weaknesses will guide your company to bidding the “right” projects, and ultimately make a profit. Relationships with your customers, vendors, subcontractors, accountant, and your bonding agent enhance the estimating and construction process, and will lead to a more successful business.

Quotes and Expenses: Checking your take-offs for accuracy

Quotes and expenses are highly detailed and an important step throughout your estimating process. Check your take-off for accuracy with these steps!

Summarize your estimate
Sort the material cost from high to low
Does everything that is supposed to have a cost associated with it have one?
Does anything look unusual? (Sometimes in our rush to get things done, we type fast and “fat finger” an entry…for example, you might have wanted to enter a quantity of “7” but you ended up typing “77” or worse yet “777,” which can really throw things off.)
Sort your labor column from high to low. Does everything look normal?

Some other tips!

For every 100’ of EMT in your estimate, you should have at least 10 couplings.
For every junction box, you should have an average of 3 to 4 wire terminations.
For every 100’ of pipe (EMT, PVC, rigid), you should have at least 3 times the wire, or 300’ plus slack, plus 100’ of ground wire.
For an average job, your material cost plus quotes should equal 1/3 of your cost.
For every project, you should know the square footage. The ratio of labor hours to the project square footage can be telling. For a labor intensive job, this ratio should be 20-25%. Conversely, for a less intensive job (building core/shell), this ratio could be 10% or a little lower.

Generally, you should always complete a detailed take-off versus “square footing” the cost of a job. However, if you keep good historical data, an average cost per square foot for a particular building can be helpful to check to see if your numbers are “in the ballpark.”

Quotes

When you receive quotes (especially for lighting), check the quantities.

Does the quote match the counts that you provided the vendor? Often the vendor uses the first set of counts that he is provided, but they may not match yours. Differing quantities (high/low) can make a difference in your bid price (and the bid price of others), so be careful!
For gear quotes, check the bill of material.
Does it contain all the items from the riser?
Is it the right manufacturer?
Sometimes the items that a particular vendor doesn’t carry are simply excluded from his quote, and he might not tell you about it to make his price look “better.”
If your project requires “attic stock” or “spare materials,” make sure those are included in your quote.
Specialty testing can be an expensive item to miss. Make sure you know what you own, and be sure to include the price in your estimate.
Buyer beware! Ultimately it is the bidder who is responsible for everything on the drawings, not the vendor!

One last word about vendors. If you do not cultivate relationships with your vendors, they will be less likely to work with YOU on bid day. In today’s bidding world, you need every advantage you can get, so relationships become even more important. You won’t get the “whisper” number on bid day if you do not have a relationship with your vendor.

Direct Job Expenses

Direct job expenses (DJE) are costs that are directly related to the project. This includes:

Lifts, scaffolding, staging or ladders.
A place to store your material for the project which may include a trailer for a field office with fax/phone/network connections, computers, phones, copiers and furniture.
A site vehicle/shuttling costs. Depending on the site, you may also have to include money for parking or if the lot is remote, money to shuttle your workers from the lot to the site.
Depending on the tools being used on the project, it may include the appropriate training and certification that your electricians will need in order to work on the site.
- This could include lift specific training, harnesses and PPE, and NFPA70E and OSHA 10-30 training. If your project requires this, it is best to cover these expenses, and make sure you can have the training completed in time to start work on the job in case you are awarded the project.
If there is a generator or large switchgear on the project, rigging should be included as a DJE, as well as the cost of permits to complete the rigging such as “over the road” or “wide load” permits.
Check for “factory witness testing” and load bank testing also. Often general contractors will require a designated person at the factory to witness the testing of the generator.
Finally, don’t forget to include money for small tools! They can account for 2-3% of the labor cost of the entire project.

As with the take-off phase, checking your take-off and applying quotes and direct job costs takes time.

Look for Safety Protocols in the Specs

A seasoned estimator will know to look for injury prevention and safety protocols in the bid documents. Some contractors will require that all construction site workers attend a “stretch and flex” meeting every morning. On a recent job that we bid, due to the size and duration of the project and the number of workers this bid line item accounted for a cost of over $1 million over the life of the project! This is something that a company would not want to omit from their job costs before they submit a bid.

From an operational standpoint, avoiding employee injuries is paramount. Check your specs for safety protocols for your jobsite! Here are some tips:

Educate employees on safety. Ongoing safety meetings are required on many construction sites. Make sure all employees know how to properly use and store equipment.
Provide protection equipment. Some jobs require protective equipment; be sure it is provided to employees. Hard hats, safety vests, and glasses are usually a requirement on most construction sites.
Don’t take shortcuts. Taking shortcuts may save some time initially but in the long run, an injury will cost the business owner time and money. Or it could injure (or worse kill) a worker.
Monitor safety measures. Check periodically that everyone is in compliance with safety regulations. This gives the business manager the opportunity to correct bad habits before an injury occurs.
Keep the workplace organized and clean. Make sure equipment is properly used, and then stored.
Have a safety and wellness plan. By having a plan in place, employees should know how to act in case of an emergency.

Businesses should require their to always use safe practices when working, no matter how big or small a job is. With the proper investment in safety protocols and injury prevention measurements, accidents can be prevented, saving a business time and money.

OSHA reports that nearly 6.5 million workers are employed at approximately 252,000 construction job sites in America on any given day. With all of these workers, it is crucial that you are committed to job site safety. OSHA lists five of its safety standards that are most frequently violated.

Include 5 Safety Standards when estimating injury prevention

Scaffolding Safety
Fall Protection
Excavation Safety
Ladder Safety
Hazard communication

In terms of estimating, review the safety protocol for each job you are bidding. You may find that there are safety requirements and training for field workers that must be covered in your estimate. When it comes to injury prevention, it is better to be safe than sorry.