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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.

construction estimating process

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.

Lighting Fixture Take-offs & More

Lighting fixture take-offs need serious consideration.

The lighting is counted, the branch is wheeled, and you, the estimator, have sent your lighting counts to your vendors. Before you move on to the next system, let’s talk a minute about take-offs in the estimating process for lighting and dimming controls, daylight harvesting, and occupancy sensors.

Occupancy Sensors

Occupancy sensors can be like a simple switch. The light goes on when someone enters the room, and if the sensor does not “sense” anyone in the room, the light turns off. However, lately we have seen that there are many types of occupancy sensors which work in concert with lighting control and dimming systems. I must say, the first few times I saw a lighting control riser, I thought it was complicated and intimidating! However, when you break down the pieces, you realize that generally, for each item in the system, you need a stub-up or a box or both. And you must assign a labor factor to each as well as a material quote from your vendor, and carry the labor and material for the wire. That’s it. More daylight harvesting systems are shown lately, as a way to save energy on bright, sunny days. In this case, the sensor detects the presence of daylight, and adjusts the building’s lighting accordingly to save energy.

Branch Devices

Moving on to branch devices, take-offs for these items are pretty straightforward. The things you want to watch out for are notes pertaining to tamper-proof receptacles. They are not as expensive as they once were, but still a good deal more than a standard duplex. Leviton Decora devices and faceplates are certainly more costly than standard devices. Sometimes there are keyed notes or a schedule for items requiring something other than a standard duplex, even though the symbol on the drawing would indicate a standard duplex. Again, it always pays to read the drawing keyed notes before you start so you can be aware of anything “special” you might have to take off.

lighting fixture take-offs

The same is true of kitchen equipment. There is usually a schedule that will either state the proper receptacle. Or, you will be provided with information regarding voltage, amperage, and the number of wire. Then you will have to cross-reference this information with the NEMA configuration chart. This can be found either in the NEC code book or in one of the cross reference books, such as Ugly’s. I guess my point is…completing a take-off is more than counting. You have to know what you are looking at and what to look for.

Branch Wiring

Do you wheel off your home runs? What do you carry for each item? You can certainly review the drawings to see what you should carry for an average length for a receptacle, and then take the cable or wire off as you do take-off each device. Always wheel off the branch for specialty outlets to ensure that you have enough cable for these items. I look at the specs and determine how many circuits the specs say to carry in a conduit. If there is no information about this in the specs, then I do my conduit fill to code. Keep in mind that you should run your lighting home runs in separate raceways from your power and certainly from your low-voltage wiring.

Mechanical

Take-offs with mechanical equipment can be made much easier if you print the mechanical schedule and put your lengths next to the schedule as you find the equipment on the floor plan. Often, however, the electrical drawings will contain a mechanical schedule from which you could do the same thing. This is handy because you will be able to determine the wiring and voltage requirements of the unit, and whether or not you will have to carry the disconnect. Keep in mind that even if you do not have to carry the material cost for the disconnect, you will still have to carry labor for wiring the disconnect and any control wiring. Pay special attention to whether the equipment is inside or out. Anything outside will need a NEMA 3R disconnect, which is much more pricey than a NEMA 1 disconnect. If the item is in an area designated as “explosion proof,” then you’ll need to use the appropriate wiring method for the Division and Class, and use the appropriate explosion-proof fittings, devices, and disconnects. This can add additional cost to your job. In any event, you want to be sure to cover your costs appropriately.

Installation

The installation of feeders, switchgear and panels is often where most of the money in your job is. It is not just a matter of wheeling off the “from and to” this panel and that. You must ensure that you are using the appropriate method of running the conduit, be it in the slab, on bar joist or on steel beam. Many younger estimators wheel the feeders very tightly, but you want to be sure that you cover your cost and cover extra wire for terminations. Don’t forget to labor your panels and switchgear as well.

Many software programs offer an option to “build” your panel with the appropriate breaker fill. We have found that it is much more cost-effective to come up with labor hours that work for you. For example, we carry 6 hours for 100 amp panels, 8 hours for 200 amp, 10 hours for 400 amp, and this formula works for us. Be sure you know how the panels are going to be mounted. Will they sit on a pad or will they be mounted on the wall? If mounted, will you have to carry Unistrut for mounting? Also, do you have to carry the housekeeping pads? Probably not, but you should always be sure to exclude concrete work if you know you don’t have to carry it. The same would be true of the transformer pad or, if applicable, the generator pad. Speaking of the generator, don’t forget to carry the rigging; and determine whether you need to carry generator fuel, start-up, and testing. If you are not responsible for it, please exclude it from your proposal.

Does your project have emergency feeders? Please read the specifications carefully as emergency feeders may have to be run in MI cable, or they may have to be run in EMT that will be concrete encased. Again, be sure to exclude the concrete work if you know you don’t own it. If you have not bid a job with MI cable lately, call your supply house or check your material pricing service to ensure that you are carrying the right price.

Utilities

Incoming site utilities are generally run in Schedule 40 PVC, but read your specifications and drawing notes to ensure that you can use Schedule 40 PVC, as opposed to Schedule 80 PVC, or PVC coated rigid. In the event that there is a conflict between the drawings, the notes and the specs, submit a Request for Information (RFI). Certainly there is an appreciable labor and material cost difference between these methods, and while you want to cover your costs, you also want to be sure that you do not artificially inflate your labor or material cost. Also, while you will have incoming power requirements, you may also have incoming telephone, CATV or fiber, so be sure to carry what you should. Read the specs to see if you are responsible for manholes or pull boxes, too. Site lighting–are you responsible for site pole bases?

Low-voltage systems may or may not be part of your bid package on any particular job. Be sure you know what to carry: whether it’s simply “rings and strings” and EMT stub-up, or a full-blown system including device installation, pipe, and wire.

 

Construction Take-offs: Much More than Counting

There’s much to review before you start counting

When it comes to estimating construction take-offs within the estimation process, there’s much more involved than just counting.

A thorough review of the specifications helps you, the estimator, map out the entire bid process and set up your take-off. Most estimators want to “get the counts done” before they really review the job. That’s because they feel like the sooner they get this information, the more likely they are to get the quotes submitted on time. Although I agree that getting the counts out is important, I recommend “walking the drawings” before you even uncap your highlighter. By taking a proactive approach with this step of the process, you can get a feel for the scope of work and building layout – and quite possibly determine anything that seems to be missing from the drawings. You will also determine if there are alternates and allowances that must be addressed.

Construction Take-offs – Review the whole set of drawings

You may find upon your initial flip-through of the drawings that there is no fire alarm shown. It may be that fire alarm equipment/systems are not part of your scope. However, it could also mean there are separate fire alarm drawings you may not have downloaded – or maybe there’s no fire alarm on this particular job at all. Now is a good time to get whatever is missing from the general contractor so you don’t lose any precious estimating time.

Once you review the electrical drawings, you should also review the architectural drawings, looking for information regarding the building construction details. This step is critical in estimating construction take-offs because not only does this information help you determine the appropriate wiring methods as listed in the specifications, but it also gives you valuable data regarding ceiling heights and elevations.

For example, the specs might read “MC in concealed areas, EMT where exposed or subject to physical damage, and Schedule 40 PVC in the slab or underground.” With this spec – and a building made of steel with metal studs and a poured concrete deck with acoustical ceilings in most areas – you’d run your lighting and branch circuits in MC with EMT home runs, running as much as possible in the slab to save time and money. It’s always good to know the building construction up front because you will want to count those items that need to be surface-mounted separately from recessed, and you can measure the slab work “as the crow flies” versus surface EMT that runs parallel with building construction.

Other drawings you should quickly review are the civil drawings, which usually show the location of the incoming utilities, the transformer, and sometimes even site lighting. The mechanical drawings are handy to examine as well because they contain information regarding the equipment specifications and whether or not the disconnects are provided with the equipment.

Before you uncap that highlighter, I must mention one more thing when it comes to estimating construction take-offs. Every general contractor, construction manager, or building owner will tell you that you “own” everything on all the drawings, not just what is shown on the electrical drawings. Many times, items are “hidden” on another trade’s drawings, which is why I suggest you at least glance at the other sets, familiarizing yourself with the job as a whole.

Counts

Now that we’re finally ready to count, you may be asking what’s next in the estimating process. Should you pick up a piece of paper, a pencil, and a highlighter or let one of those snazzy “counting software programs” do the legwork for you? The answer is really up to you. Because I own an estimating consulting firm, we have to be absolutely certain that our counts are correct; therefore, we count or measure items manually with the use of an on screen take-off program. We do not use the “auto count” feature.

I usually count the lighting items first to ensure that I give my vendors plenty of time to get me a quote. On some smaller projects, when I count luminaries, for example, I will put the count directly into the computer software program. However, on larger jobs, we keep the counts in the on screen take-off software. Keep in mind that many estimating programs have count sheets built in, so you never have to use a piece of paper again if you don’t want to. Regardless of the method you choose for the estimating process and construction take-offs, you should always list the fixture types across the top and the drawing numbers down the side so you can easily isolate where you found a specific luminaire. Because you have already reviewed the building construction, ceiling types and heights, you know which luminaires you will have to assign a higher labor factor to, such as high ceilings, other areas that may be difficult to access, or locations where you’ll need to use an aerial lift.

Once your counts are done, it’s time to send them off to your vendors. I know I have mentioned this many times before, but if you do not have a relationship with your vendors, start working on them sooner rather than later. They are the ones who will ensure you get the “right” price on bid day. When you receive your quote, please review it to ensure the vendor has quoted “your” quantities.

 

Meet the Candels Team

The Candels Electrical Estimators Team is full of real people. We aren’t a faceless corporate machine or a one-man-band. We are a team of real people ready to help you with all of your estimating needs. We’re here to help!

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Labor Adjustment Costs

Now that you have determined that your take-off is accurate and you applied the necessary costs, let’s consider labor adjustment costs.

Depending on the size of the project you are bidding, you may have to carry money for a project manager (who is responsible to ensure the job is built to what was carried in the bid and/or negotiated upon award).

Oftentimes, the field labor force, for example, will have no idea that special provisions were negotiated with the owner for certain things such as the use of aluminum feeders (if allowable by local code) or open fire alarm cable. The project manager will communicate this to the job foreman, another labor component you should carry–again, depending on job size.labor adjustment costs

For very large or complex projects, you may have to carry more than one foreman. In union environments, the labor superintendent’s salary and/or a steward’s salary will probably be considered part of the company overhead, which we will get to a little later. Some larger companies also carry money for the estimator or clerical staff.

Labor Adjustment Costs – Escalation

Technically, for any building more than four stories high, the labor adjustment costs include an escalation rate of 1 – 2% per floor, which means that any item that is installed on the 20th floor, for example, will take longer to install than one on the first floor. How is that possible? Let’s not forget that a labor unit is comprised of the actual installation time, plus time for material procurement, coffee breaks, and actually getting to the area of work. So presumably, it is going to take longer to get to the 20th floor than the first floor, which includes not only waiting for the man lift but also transporting the appropriate material to the work area from the staging area.

In this competitive bid market, I realize that if you carry everything that I talk about, you may never be awarded a job. However, it is the estimator’s responsibility to identify ALL the costs in the estimating process. Then, upon review of the estimate and bid, items can be strategically cut to get closer to a more competitive number. At this point, decisions to cut items become strategic, but you have to know your complete costs before your strategy comes into play.

Estimating Overhead and Profit

Some companies bid their projects with a “fully burdened rate,” meaning the labor rate that they use to bid a project already includes a specified overhead amount in the hourly rate. Other companies apply their overhead rate as a percentage within a line item in their bid. Whichever option you choose, you should know what your overhead percentage is and carry it on every job. If you don’t know your overhead percentage, talk to your accountant. I suggested in a previous installment of this series that you should make friends with your accountant so you will already have this information. You simply cannot bid a job without covering all your costs, unless you want to risk the exposure of losing money on the project, if awarded.

Finally, profit is a beautiful thing. However, most estimators I know put in very little for profit: 2% to 5% — and for good reason. The market is just too competitive. This is where knowing your market, your customer and your competition will guide you to success. Only you can decide what will give you the magic number to get a scope review and eventual project award. Look at past bids and completed projects, review your numbers, and see if you can get an advantage somewhere.

In the next article, we will discuss your bid price and putting together a proposal (scope) letter to accurately describe what is included in your price. This is the final, and one of the most important steps, in submitting your price to the general contractor. Don’t miss it!

Never Underestimate the Power of Relationships

Now that you have assessed your business, know your overhead, and have a deeper relationship with your accountant, you are now ready for the next step. You know your business, but do your potential clients know you?

We know that price is a big driver in purchase decisions; however, when a general contractor, developer, construction manager or owner is faced with two similar prices, and they know one company, but not the other, who is more likely to get the contract award? That’s right—the one with the relationship. And, even better if you have a company history in the type of work you are bidding (and please let the contractor know that!).

Building Relationships is Key

Over the years, the theme that recurs is the power of relationships. Relationships help you find the private jobs and jobs that the general contractor may already have. Contractors who have remained busy, despite the economy, have put time and effort into building and maintaining relationships with their client base. They make this an integral part of their business, not just something to do “when they have the time.”

Just as many have viewed the task of “getting to know your business” as daunting, some may feel the same way about establishing, building, and maintaining relationships with clients. All you need is time! Over time, with just a bit of effort, you can build profitable relationships. Just do it!

The cold call method is a very good idea. You might not get to see the person you are calling on, but you can leave your business card, some company information, and even a box of doughnuts for the office staff. When you get your foot in the door, be prepared to bid a few jobs before you are awarded one. This is the contractor’s way of getting to know you as he watches how your prices come in. Watch for potential new clients when you are driving around, then stop in to introduce yourself. Check out construction sites too; it’s all about being in the “right place at the right time!”

Clients can also get to know you with documentation about your company. A simple folder with slip sheets detailing your staff, capabilities, tools and equipment, and past notable projects is a good start. For the more creative, create a brochure. If you do not have any experience in graphics, contact your local college. There are always students willing to share their new craft at a reasonable price. Also, adding a website always adds to your company’s credibility.

Meet New Clients in Networking Groups

An excellent way to meeting new customers is networking groups such as the Chamber of Commerce, the Rotary Club, the Elks or Eagles, and other social organizations. Chances are you will meet someone that will need work done, or they will know someone who does! Check out the Associated Builders and Contractors and the Associated General Contractors, too. Both represent all specialties within the U.S. construction industry and are comprised primarily of firms that perform work in the industrial and commercial sectors of the industry.

Cold calls, social clubs, and industry organizations will undoubtedly introduce you to potential clients. When you get the chance to bid, don’t expect to get a job right away, but persistence will pay off! Also, in our current world of technology, (think texting), it is still important to put your face to your company’s name and be able to explain why someone should do business with you. It’s a lot easier for a client to say “no” to someone they don’t know. Make it your business to get to know them and do everything in your power to become indispensable!

The Estimating Process – It Starts Earlier than You Think!

Starting - The Estimating ProcessWhen do you think the estimating process begins?  This article is the first of a 12-part series on the estimating process.  In starting the New Year, it is appropriate to examine the processes we complete but might not give much thought to, such as estimating.

Many of you might think that the estimating process starts with the take-off, but that is step 3 or 4.  The estimating process starts way before any actual “estimating” or “counting” begins, and certainly before you peruse the bid boards to see what is out there to bid.

Include your overhead costs in your bid

To get to the heart of the matter, you must know YOUR BUSINESS!  Knowing your business comprises of many things.  First, if you do not have an accountant or a relationship with your accountant, start the new year right and establish a relationship, because your accountant can tell you a lot of things about your business that you may not know. When I work with contractors to put together a bid, I often get a blank stare or silence on the other end of the phone when we get to the “overhead” part of the proposal.  When bidding a job, you should cover all costs, both direct, or those related directly to the job, such a commodity material, labor, quotes, direct job expenses, and the like, and indirect, such as your overhead.  If you do not know your overhead, how do you know that you are indeed covering your cost?  The process of determining (and changing) overhead need not be daunting, but this information is critical to the estimating process.

Other things should be considered before bidding a job.  What is your labor force like?  Are you a union or non-union shop?  If you are a union shop, then your field work is dependent on available workers when you call the union hall.  If you are a non-union contractor, you have a staff of electricians.  What is their experience level?  If you, your foreman, and your electricians have absolutely no expertise in a particular type of work, then you must think twice before bidding it.  A good example is a waste water treatment plant.  It’s not clean work, no pun intended.  It is full of a PVC-coated rigid conduit, explosion proof fittings, and a lot of equipment, definitely not “learning ground” for any contractor.

Speaking of which, do you know what your firm is “good at?”  Do you know what size project is most profitable for your company? Following that same school of thought, do you have the tools, equipment, supervision, and infrastructure for the work you bid?  Again, work with your accountant if you are overwhelmed with answers to your questions.  No sense chasing work which will not ultimately turn a profit for your company.

How about bonding capacity?  Many contractors wait until they are knee deep in an estimate to realize they don’t know if they can get a bond for the work.  How about project labor agreements?  If you have never bid a job with a PLA on it, are you familiar with the paperwork you will have to submit for the certified payroll?

I have given you a lot to think about.  Most of it probably isn’t new to you.  However, as we begin a new year, it is a good time to pause, reflect and evaluate what is and is not working.

In our next post, we’ll discuss the next step in the estimating process: Finding jobs to bid.

Candels opens its all new Candels Electrical Training Academy in Fort Myers Florida

Often we are asked the question “Where can I go to learn how to be an electrical estimator?” Until now, the answers ranged from on the job training (also known as “trial by fire”), peer mentoring, and one-on-one training with an outsourced estimating consultant.

The wait is over! Candels Estimating, the leader in outsourced estimating consulting, has launched a new venture called the Candels Electrical Training Academy.

Although our main focus is on estimating, we have a lot to share with you! Besides courses in beginning, intermediate and advanced estimating, Candels will also be offering classes geared to the office/estimating assistant, project manager, foreman, and the contractor.

Candels has always been dedicated to the betterment of the electrical industry through education and training. When you contract with Candels to do a take-off for you, we not only do the take-off but give you a lot of “value added extras” which differentiates us from our competitors. Our job doesn’t stop at the take-off. We are always available to discuss bid strategy, GC negotiations, claims and so much more!

If you want to learn to estimate the right way, you must understand the fundamentals. The Candels curriculum will give each student a solid basis on which to build his skills.

Why not learn estimating from the estimating experts?