With no background in estimating, residential and commercial contractors can’t survive the first 12 months. Brian Seymour looks at what contractors need to keep their business running.

After a couple of decades of training estimators, I’m fully aware of a lack of formal training for this skill and the increase in business failures. Often, new residential and commercial contractors starting businesses with no background in estimating rarely survive the first twelve months.

Many electrical contractors (EC) started up during the pandemic and were signing up to meet customers’ needs for repair, maintenance and building extensions and without estimating training, these businesses put themselves at great financial risk. The owner/estimators without proper training, calculate the proposed material cost and estimate the hours with little or no regard for the service costs.

Most electrical estimators start as an apprentice in the trade and worked on-site as an electrician. The on-site experience and knowledge are great foundations for an estimator to be able to understand the challenges of various installations in variable conditions. While this experience is invaluable in reading the installation requirements of a proposed installation, it falls short without the training to evaluate the service and financial aspects.

I have quoted projects where the service costs (getting labour, materials and equipment on site) have exceeded the installation materials and labour costs. Particularly in remote sites where it may require a boat, helicopter or all-terrain vehicle just to access the site. Specialised equipment at the workface for accessing, lifting, penetrating or digging are all expensive and if hired, costs can run away for an extended duration due to weather or disruptions.

One of the major catastrophes for a new EC is the new home market where builders request a ‘price per outlet’ cost. This method implies a common cost unit for all types of outlets and such units to be ample to cover a pro-rata share of the cost of mains, earthing, metering facilities, switchboard and miscellaneous items. All this is irrespective of where the site is located.

For a certain class of residential installations, such units may be used provided the unit is properly prepared and applied only to the phase of installation they were intended. When used for overall estimating, they don’t reflect accurate costs.

When these prices are offered by the developer/builder, as the ‘going rate’, it can be the path to financial disaster.

The role of the estimator, whether it be a new porch light for Mrs Jones, a high-rise apartment building for Acme Properties or a new plant for Big Metals Mining, still should follow the same protocol.

Involving all aspects of the electrical components in a project; from receiving the initial documents or instructions, to overseeing suppliers, schedules and allocating resources including:

• Understanding the customer’s requirements.
• Assessing the levels of risk.
• Reading the plans and specifications.
• Taking off materials and equipment.
• Calculating the labour component.
• Gathering quotes from sub-contractors and suppliers.
• Analysing company data and prices.
• Preparing and submitting tenders and quotations.
• Monitoring the stages of a project to make sure that there are no variations unpriced.

Understanding customers’ requirements

While there is a massive difference between Mrs Jones’ porch light and Big Metals Mining, it’s important to know their requirements. The best estimators have an instinct for the personal aspect. Build a strong relationship with your customer right at the beginning and learn their likes and dislikes.

So many problems on jobs could be avoided with a better understanding. While it may be irritating with customers changing their minds on minor aspects of the job, often satisfying these requests can strengthen the relationship when the hard and expensive items need to be addressed.

Assessing the levels of risk

It’s the estimator’s responsibility to assess the risks prior to preparing a tender. This detail is just as important to assess whether Mrs Jones’s porch ceiling can support the new lighting fitting as it is that Big Metals Liquidated damages are workable. The tendering risks include:

• Clarity of the tender documents
• Time and method of tender lodgement
• Clarity of pricing schedules
• Criteria for assessment of the tenders
• Conditions of contract
• Process for dealing with non-conforming or alternative tenders
• Process for answering contract questions
• Process for site visits (existing buildings)
• Period tender is valid for acceptance
• Confidentiality and intellectual rights protection

Tender documents will usually contain the principal’s disclaimers regarding which tender documents will not form part of the final contract.

Reading the plans and specifications

It’s essential to read these documents to be able to understand the full scope of the job and your commitments before even starting the take-off. Once assessed, the decision may be not to tender a price.

The estimator must be able to understand and interpret the architectural plans to conduct the process of accurately estimating the cost of the project. The estimator must also understand the symbols on those plans.

Most electrical project plans include:

• Title sheets and site plans
• Floor plans
• Elevations and sections
• Details and schedules
• Structural drawings
• Electrical and mechanical
• Circuit diagrams
• Cable schedules

The most critical skill is recognising the various scales on each of the plans, it can make a significant difference using the wrong scale or misinterpreting the symbols.

If unsure, make an enquiry.

Taking-off materials and equipment.

A material estimate is also known as a quantity take-off or a material take-off. It refers to taking off information from the plans about the materials and what quantity is needed for the project. The materials are counted from the symbols and cabling, conduits, cable tray etc. in accordance with the relevant scale.

It is the estimator’s responsibility to assess the type and quantity of equipment required to complete the job efficiently and economically. How many scissor lifts, scaffolds, hoists or power tools will be required and for what period? Time can be an enormous factor if they are standing idle.

Allowing time to get the labour, materials and equipment to the workface can be an expensive task. However, even a small job for Mrs Jones can also be costly to get to the workface. If she lives on a main road with no driveway on her property and no kerbside parking, it can be time-consuming to leave the vehicle in the nearest parking option and carry everything to and from the site.

No matter whether this take-off is executed on the most sophisticated computer program or by manual count and measure, it is still reliant on the experienced estimator to use the appropriate scale and recognise all symbols.

Other documentation associated with the project that should be examined at the time of take-off includes:

• Equipment operation manuals
• Assembly instructions
• Fixing and installation instructions
• Maintenance instructions
• Safety precautions

Details contained in these documents can make a significant difference in the final pricing. Information from these manuals is necessary for such equipment as hospital operating theatre lights or explosion-proof light fittings – without which, the finer details of the installation could be a disaster.

Calculating the labour component

Once having counted and measured the materials and equipment to be installed, the estimator then must allocate the appropriate labour. This is more than just guessing a number of hours and multiplying by an hourly rate. Even with the company’s trusted Labour Unit Manual, the estimator needs to have an appreciation of the service factors that may influence labour costs.

While these trusted units may be accurate in allowing the time to physically install all the materials, accessories and cabling, they need to also reflect the service costs. The estimator needs to factor in adjustments as mentioned in the material take-off, plus the loaded labour time that may impact the final cost:

• Degree of difficulty: size, height, depth, multiple floors, multiple buildings, heat, cold, dust, access and building structure among others.
• Contract timeline: is it reasonable, if it is accelerated, will it need a larger work team? An accelerated schedule may also lead to overtime and/or multiple shifts.
• Phasing by area, floor or building is when a project is broken down into phases and those phases are sequential, it requires mobilizing and demobilizing. Installation efficiencies decrease due to added complexities, longer timelines, disjointed scheduling and other elements that need to be repeated for each phase rather than completed all at once.
• Multi-storey projects: the higher the building, the higher the labour costs. Labour units typically cover a building up to three floors.
• Overtime: this can have a considerable impact on labour costs, it produces physical fatigue and impacts workers’ mental attitudes, leading to a loss of productivity.
• Available labour: if the EC must recruit workers from outside the company, issues could arise regarding their skill level and abilities.
• Stacked trades: having too many workers in one area reduces labour productivity.
• Hazardous environments: require more safety precautions and a requirement to supply safety equipment and clothing.
• Relocation of tools and equipment: such as scaffolds, scissor lifts, work benches and job boxes all take time.
• Occupied buildings: adds considerable hours to the estimate because it involves additional clean-up as well as covering existing equipment and/or working around it.

Gathering quotes from sub-contractors and suppliers

Finding the right prices for the supply of materials and sub-contract works means having a good working relationship with suppliers. Many suppliers may also be familiar with the proposed project and be preparing prices for other contractors (your opposition) during the tender process. It’s important to buy products from a credible supplier to be on time and within budget while maintaining those relationships while dealing with complex contracts and deadlines. Additionally, it’s good practice to send a request for quotation (RFQ) to suppliers with specification details and quantities as early as possible to give them time to prepare their quotes which will strengthen your relationship.

Lighting fitting suppliers often need a good lead time to estimate prices for specialised diffusers, unusual dimensions, specialised fixings or non-standard ceiling structures. Switchboard manufacturers may need early site visits to establish access to switch rooms and modified engineering drawings for extensions to existing installations all require time when the tender period is limited.

Specialty electrical and communication equipment may be shown on detail drawings and should be provided, complete with specification references to your supplier. Be careful using alternative or substituting materials just because the specified material is unavailable. In this instance, you must notify the principal and make a note within your tender submission or risk having your tender disregarded.

Beware of owner-supplied materials, many ECs have had very costly experiences with this form of contract. Usually, the owner has an arrangement with a manufacturer or vendor of the material and believes they can purchase it at a discounted price. The problems the EC faces;

• Who owns it if damaged?
• Can they supply the correct quantity?
• Will the delivery dates match the schedule and who pays the cost of overrun?
• If delivered too soon, who pays the labour to move this material several times before installation?
• Is there a need to provide additional storage?
• Is it all complete or need assembly?

Some of the major problems with owner-supplied materials such as with lighting fittings are that they arrive on site completely unassembled. It may take the EC considerable time to assemble and if we’re talking large quantities, it could break the bank.

It is the estimator’s responsibility to query the above problems prior to completing final tender pricing.

Analysing company data and prices

It’s important that the estimator uses company field data when analysing and assessing the costs to be included in the estimate. Field data is information and records from previous jobs which may have an impact on the current estimate and will provide answers to questions such as.

• Were there any discrepancies in the labour units used on a similar installation?
• Was the material supply kept up to speed? If not, why?
• Were there adequate tools and equipment available?
• Is there a need to purchase/hire additional tools and equipment?
• Do we have the labour resources to service this job?
• Do we have the skilled labour for this type of work?
• Have we scheduled the labour on current jobs with completion dates?

If this assessment highlights a shortfall in labour and/or tools and equipment, you may consider it wiser not to submit a tender on this project.

Preparing and submitting tenders and quotations.

There is no value in tendering every single project you can get your hands on; you need to prioritise those with which you have a greater chance of winning. If the estimating department is bogged down with loads of tender documents, it lessens the chance of giving dedicated attention to a winning tender. The estimator needs to focus on projects that are best suited for the company’s performance and profitability.

Make an early start putting together the tender documents which may require a specific break-up of section prices or unit prices. There may be a specific cost required to be submitted separately because the owner still needs to consider the overall value.

When reviewing the completed estimate, ensure you have considered any addendums and associated documentation. Frequently, because of tenderers inquiring about omissions or conflicts in the tender documents, the originator may issue an ‘addendum’. This is usually issued prior to the closing of the tender and either clarifies the intent or requests the inclusion of a price that has been added, deleted or modified.

Provisional sums (PS) and prime cost (PC) items need to be studied before completing the estimate. These are effective contractual mechanisms to address works or items that are unable to be finalised at the time of contract signing.

A PS is a monetary allowance for works that will be carried out but cannot be priced exactly at the time of signing the contract. They often include a combination of items, materials, labour and plant hire.

A PC item is an item that has not been selected at the time of signing the contract. A PC item includes the cost of the supply of the item only. It is an expensive mistake to omit these sums from the final tender submission.

One of the most soul-destroying events for an estimator is to have their tender rejected due to late submission. Most tenders have a closing date and time with the tender box closing on the minute and any late tender submission is not considered.

Monitoring the stages of a project to make sure that there are no variations unpriced

Any deviation from the work scope agreed in the contract is considered a variation in a project. A variation order is a formal document issued either by the contractor or the client for changes in the project such as changes in the project scope, design, completion date, contract price, etc.

The accepted understanding of a variation is as follows:

• Changes to the quantities of any item of work included in the contract.
• Changes due to quality and other characteristics of any item of work.
• Changes to the levels, positions and/or dimensions of any part of the works.
• Omission of any work unless it is to be conducted by others.
• Any additional work, plant, materials, or services necessary for the permanent works including any associated tests on completion, boreholes and other testing and exploratory work.
• Changes to the sequence or timing of the execution of the works.

It must be noted that the variations may be initiated any time before the practical completion certificate of the works is issued, and the variation orders are formed either by the request of the client/owner or with the recommendation for a change from the contractor.

It usually falls to the estimator to monitor the project to ensure all variations are priced and accepted prior to contract finalisation.

In conclusion

One can see from the service costs and responsibilities above, that the estimator’s job is far more than a count and measure clerk. To be successful as an electrical estimator, you must have sound knowledge of electrical standards and be rigorous in detail. A highly skilled electrical estimator should be adept at reading building plans and demonstrate outstanding analytical and critical thinking skills.

Disclaimer: The information provided in this article does not and is not intended to constitute legal advice instead all information and content is for general informational purposes only. The reader should consult their own legal experts for specific contractual advice.