Avoiding costly mistakes
A forward-looking strategy helps to avoid costly mistakes when pricing complex projects. Brian Seymour outlines the steps.
As a young estimator many years ago I scored my first multimillion-dollar project, one of the largest in the country at the time.
My boss sat me down in his office and asked whether we would make a profit from the job. Full of bravado and confidence, I assured him that we could.
“Well then, you can manage it and I’ll hold you responsible for the outcome,” he said.
This was one of those moments when you wonder about getting a job in Abu Dhabi or the Republic of the Congo if the estimate turns out to be six figures short.
However, it was one the best training experiences I ever had. Because I was driven by the fear of ostracism from my company and the industry in general, the project remained with me 24/7.
I spent a great deal of time speculating how we could do better and, due to some rigorous supervision, the project made a healthy profit.
The most valuable lesson was to plan every aspect of the job well in advance. This included:
- material purchasing;
- sub-contractor programs;
- appropriate skilled labour teams;
- hours of work;
- tools and equipment;
- material storage;
- delivery schedules; and
- liaison with other trades and crucial personnel of the builder/developer.
So much of this information is at the fingertips of the estimator, who is the first person to consider these elements of the project and is therefore in a prime position to deal with them.
Although a manual estimating system can highlight these matters, there are many estimating software packages that will automatically include project management details such as project scheduling, financial management and customer management.
But it must be remembered that no matter how advanced the software, it will only be as good as the input.
This requires the best deal available for the project, and estimators have a list of preferred suppliers that they can rely on.
These relationships are of value only if you keep your dealings ethical. Make sure the suppliers that helped to win the contract get the orders. Don’t engage suppliers that submit their tender after the closing date and expect to pick up the order.
Your preferred suppliers offer more than a quoted price – they usually give discounts if you place all your orders with them. They may do even better if you combine a few large projects when ordering cables, switchboards, light fittings, accessories, etc.
With this sort of relationship, I have enjoyed continuous supply in times of shortage and been able to specify delivery times. I’ve even been given access to suppliers’ stores on weekends or in the wee small hours when desperate for components on emergency jobs.
Another consideration, after studying the contract documents early, is whether you can have elements of the project prefabricated to reduce installation time.
Material storage has a substantial influence on productivity. At the time of the estimate, you should consider how the site material will be stored. If an existing building is involved, is there a designated storage space? If so, how far is it from the workface? Walking time can have a huge effect on productivity.
On greenfield projects, do you need to allow for multiple job boxes throughout the site? If so, what arrangements must be made for restocking and relocating? Do you allow for mobile storage units, or can you rely on suppliers for just-in-time delivery?
These personnel are regarded by the customer as a part of the contractor’s staff, and any poor performance by them is seen as a failure by your company.
It is in your interest to confirm sub-contractors’ bona fides regarding licensing, insurance and performance on previous projects before they start work.
Your written contract with ‘subbies’ should state your expectations in a clear and enforceable manner. The project specifications must detail the payment terms and conditions, plus roles and responsibilities. You don’t want to hear: “We thought you were covering that sector in your contract.”
Regular meetings will ensure that sub-contractors have access to crucial information well ahead of schedule – especially variations. It’s a good idea to keep a diary to track conversations and note any disputes.
Skilled labour teams
Apart from mandatory licensing, skilled electrical workers can offer innovative ideas and contribute to project productivity.
The estimator should be conversant with the team members’ skills, talents and work ethic. It is a case of ‘horses for courses’ on difficult installations, and the question should be asked: “Can our workforce contend with this complex installation, or do we need to employ specialists?”
Hours of work
Some intelligent scheduling may be necessary to achieve the greatest productivity
For instance, you might pay overtime to a team to pull in sets of rising mains on a multi-storey project out of hours. This could be more efficient than competing with construction workers for access during normal hours, and it would need to be factored into the estimate.
Access to the site can be a problem for large teams on high-security government projects or industrial sites with extensive security systems.
Work teams need to pass through security to the workface, and few will arrive early enough to be at the workface on time. The estimator should find out whether there are several security gates so that groups can go through different gates. Otherwise, start and finish times could be staggered to avoid congestion.
Tools and equipment
Many construction projects have not achieved a profit due to insufficient plant, equipment and tools.
In addition, some contractors have poor inventory systems for tracking the location of such gear.
I’ve observed lots of construction sites on which hired equipment (scaffolding, scissor lifts, ladders, steps, etc) sit dormant for weeks while the hire cost goes crazy.
The estimator must determine when plant and equipment is required, and also the availability and possible other options.
Out-of-town projects with equipment sourced from a considerable distance will mean added mobilisation and demobilisation costs. If any of the equipment requires an operator, then the cost will increase.
A good rapport with the head contractor (builder/developer) is crucial for the smooth running of the project.
The quality of interactions between head contractor and sub-contractor often contributes to the success or failure of a construction project.
Without this relationship the likelihood of disputes is substantially increased.
The use of sub-contractors is more than just accepting the lowest price from an unknown subbie.
Without the detail mentioned above, the lowest price may turn out to be the most expensive element of the job. The project could end up being a financial disaster and a reputation killer.
The quality of your work teams has a big effect on productivity. We have all witnessed projects that were starved for labour and took on large numbers of itinerant workers.
They may well have been licensed electricians and were probably OK when pulling in cables or dealing with thousands of light fittings. However, such people can be lacking when it comes to using initiative to complete a quality installation.
Out-of-hours work can be a profitable move, but you may need to apply to various bodies for approval or a permit and, in some cases, you will be charged a fee.
Tools and equipment may need to be hired. In-house gear should be checked for OH&S compliance and maintenance issues. Also, the last calibration date of testing equipment must be checked.
The biggest drag on productivity is ineffective labour. Although it is the site management team’s (leading hands, foremen, supervisor, project manager) responsibility to keep lost time to a minimum, the estimator should be aware of potential lost-time activities and allow for procedures to minimise them.
This is achieved by planning well in advance and putting systems in place before any labour goes on site:
- Plan material deliveries and storage
- Establish where site materials can be stored
- Builder or client providing secure storage space?
- Supply own storage, and are areas nominated?
- Schedule major deliveries
- Large deliveries of light fittings must match the builder’s schedule
- Book site crane, lift
- Handle heavy equipment (switchboards, generators, transformers)
- Builder’s crane – to be booked?
- Supply own?
- Forklift or other lifting device
- Equipment to position and fix this equipment
- Require a plinth?
- Specialised brackets?
- Plan sub-contractor meetings; keep information and communication fresh
- Deliver and receive progress reports
- Confirm scheduled activities
- Pass on relevant site meeting information
- Plan relevant placement of skilled labour – do key personnel need to be relocated to this project?
- Deploy people with different skills to various sectors
- Schedule when these skills are required
- Plan work hours – do they need to be staggered, or at odd times?
- Large teams to the workface may need to be staggered
- Out of hours may be more productive with a clear site
- Plan and book specialised tools and equipment, and ensure all company-owned equipment is up to date and tested
- Plan the requirements and maintenance of specialised equipment.
- Establish where site materials can be stored
The most challenging project I have been involved in was a multi-storey site with plan dimensions of 300m square. The site sheds were up to 100m from the building, we employed 300+ electricians on site and the project ran for five years.
How much do you estimate for walking time? The answer is ‘planning’.
- First, we planned to break up the 300+ into controllable teams.
- Then we planned staggered start and finish times.
- Planned and purchased three ‘people movers’ to transport teams working on the far side of the project to and from the workface (about 500m).
- Planned and purchased multiple crib stations to be distributed throughout the site for tea, coffee, lunch beaks.
- Planned and purchased mobile job boxes for storing tools and materials throughout the site.
- Planned and commandeered each switch-room and plant room throughout the site for additional equipment storage.
There were too many other planning details to reiterate here, but the above items saved hundreds of hours in unproductive time.
The task of planning is not confined to multimillion-dollar projects: but it is just as relevant on small one-man jobs.
Yet it is common to see small contractors at a wholesaler picking up general installation materials that could be delivered without charge if planning was an integral process.
Nobody is paying you to visit the wholesaler unless it is an emergency breakdown job requiring a non-standard component and the cost can be passed on.