Beware of the variables in estimating
Accounting for not-so-obvious costs makes the difference between disaster and profit. Brian Seymour explains.
The cornerstone of any project is a sound estimate, no matter how it is created.
However, a computer-generated version is quicker and more accurate in terms of calculations, and advances in user-friendly features allow estimators to build extensive material databases.
Yet a computer-generated estimate is not necessarily a panacea, as everything depends on accurate input.
Manually prepared estimates are slowly disappearing, but many ‘paper and pencil’ methods are still in use. Some contractors don’t trust computers, having read horror stories about disastrous results from computer-generated estimates when the operator has hit the wrong key.
I regularly see a cross-section of industry personnel, from small contractors preparing their own estimates to multinational companies employing teams of estimators.
Small contractors usually have developed an estimating procedure with its own checks and balances to ensure nothing has been omitted. If they are in a dedicated field in which most of the work is installing specialised equipment, then they will have records of installation time and materials that are accurate down to a few minutes and dollars.
Big contractors that employ teams of estimators, overseen by a senior estimating engineer, use computer software for all projects.
Some of the more expensive packages include an online platform designed to simplify management of the project tendering process. This provides estimators with a secure and systematic way of exchanging information with suppliers and sub-contractors.
Many large contractors have developed their own programs; others use a commercially available program and modify it to suit their business.
Tendering for major construction works may require multiple estimators working on the same project to enable completion by the closing date.
Many medium-size contractors are reluctant to change over to electronic estimating due to discomfort with computers in general and the investment in equipment and training.
The ideal way of making the change is to run parallel systems (manual and electronic) to determine that the new system reflects all the facts and themes of the old one. However, this can be very time consuming and not necessarily attractive to management.
Contractors moving across to electronic estimating need to start with a simple spreadsheet program which will make the calculations quickly and accurately without too many ‘options’ to distract from the objective.
What does the estimator want from an electronic program? Here are the basics:
- reliability and flexibility;
- speed and accuracy;
- technical support;
- materials data base;
- clearly defined segments;
- individual segment pricing sheets, and
- selling price assessment.
Many computer programs are complete business management systems, and estimating is only one element.
It must be recognised that the computer is only a tool. Although it can make high-speed calculations, it needs a thinking human to drive it. Even the most expensive and sophisticated programs cannot assess many of the multiple variables that present themselves in an electrical installation.
Competent trades people can make a count and measure materials take-off. Their dedication to quality will determine the accuracy of quantities entered in the estimate.
The count and measure is the simplest part of the job. However, it may be the largest proportion of the task, and many thousands of dollars may be represented by the following variables – which can be assessed only by an experienced and competent person.
What concerns need to be tackled? Here’s a list:
- heat or cold (see below);
- high-traffic areas, including vehicles and pedestrians.
- confined areas involving roof spaces, duct risers, underfloor spaces, switchboard cubicles and machinery;
- dangerous conditions involving high-voltage installations, hazardous locations (chemical plants and laboratories) and working at heights – all adding to non-productive labour.
The time taken to get from the site shed or the parked vehicle to the work area must be taken into account.
I have had projects with hundreds of workers taking 10-20 minutes to walk from the site sheds to the work area every day for two or more years. This can run into the hundreds of thousands of dollars.
Even sole operators working in the CBD and parking hundreds of metres from the work area can rack up considerable non-productive time. They may have to carry tools, equipment and materials to locations on multiple floors.
Working in extreme cold, such as in refrigerated cool rooms or alpine regions in winter will require a factor to the labour allocation.
Working in the extreme heat encountered in foundries, bakeries, heating devices and roof spaces in summer will need similar allowances.
Every facet of the industry has specific skills.
Do all the workers on the site have the skills to complete the installation within the estimated time, or do they need additional training and has this time and cost been considered?
Getting materials to the work area is another major concern.
Will vehicles be allowed on site? Is the lifting free of charge or do you supply your own? Is there free storage on site or do you supply your own? Can deliveries be made during normal hours? Is there a restriction on the quantity stored?
Is the job within the normal travel allocation or is it outside the award radius?
Does it require special transport to deliver labour? Do all employees have to pass through a security station?
The last point is not a great problem if there are one or two employees, but it can be extremely time consuming when there are large teams on site.
Do all employees have to attend a job-specific OH&S program? Do they all need a specific licence to be allowed on site?
High-quality estimating software may have some allocations built in, but none can deal with all of the above variables with any degree of confidence.
A well-trained and experienced estimator is essential for appraising the full extent of these ‘add-ons’ to ensure all costs are included in the tender submission.
Technology has enhanced productivity considerably and has taken a great deal of the drudgery out of estimating. It has also allowed more flexibility when applying ‘what if’ scenarios prior to final submission.
If the data is not supplied by a competent estimator, the final price may be no more than a guesstimate. Accounting for less-than-obvious variables makes the difference between disaster and a profit.