Estimating; More than count and measure
The world of estimating has changed with the introduction of digitised count-and-measure programs. Brian Seymour gives tips for small-to-medium sized businesses looking to organise their books.
This article is not intended to preach to the companies using big-ticket, world class digitised estimating programs, but rather to assist small/medium contractors with tendering tips.
The objective of estimating is to provide a quality appraisal with a price that will allow the company to make a profit, not just to win tenders. Although the team will be delighted and congratulate themselves on a winning submission, it is only of value if it is profitable.
The reason so many new electrical contractors (ECs) fail within the first two years is the lack of experience in estimating skills. Many of these failed contractors are good tradesmen but lack business acumen.
I recently asked a new contractor how he set up his pricing structure, his answer; “The builder told me the price per point to charge”. This is like asking a vampire to be a consultant at the Blood Bank.
It is the estimator’s responsibility to ensure all costs are included in the final tender price. This task is far more than just simply counting and measuring the installation materials. No matter how sophisticated and computational the latest electronic program, without a fully trained estimator to drive it, the project could end in a financial disaster.
I often use the analogy to my trainees, the comparison between a count and measure clerk and fully trained estimator is like the difference between the driver of a Hyundai automatic van and the driver of a Formula 1 Ferrari SF21.
The latest advances made in state-of-the-art digital estimating programs are capable of taking off the material items at the speed of light and certainly take the grunt work out of the count and measure tasks. However, the essential factors must be assessed even though some programs have the potential to be custom built to reflect your company’s strategies.
Researching this article for information on the latest in digital estimating systems, I spoke to Concept Electrical Estimating (CEE) chief executive Clint Hewish. CEE is a company that provides services including electrical and telecommunication estimates and tender preparation. It uses the most contemporary digital software programs and find these programs are invaluable for driving the digitisation of design, estimating and integrated data-driven workflows for the industry. These programs assist them in completing estimates for ECs from receipt of plans and specification through to tender submission.
However, Clint agrees that they still need to employ fully trained estimators to ensure an accurate estimate.
No matter whether you are using a fully automated estimating program or a manual entry, these factors will vary from job to job. The basics of a good estimate is an accurate take-off of installation materials. No doubt a good quality electronic estimating program will take a lot of the drudgery out of the task, although a committed manual take-off will have the same outcome. This listing of materials is only the first base, there is a host of other factors that must be included.
To reinforce the importance to trainees of the added factors that make up a complete estimate, I often relayed the example of one of our major projects. This was a 25-hectare site with a multi-storey building measuring 300 x 300m². The site sheds were located 200m from the building and therefore the distance from the site sheds to the workface on the far side of the building was half a kilometre.
The labour force peaked at 320 electricians and the project ran for three and a half years. The non-productive allowance for walking time (to get labour to the workface) was in excess of $400,000, not a figure to be overlooked.
When I had trainees say, “well, I will never have to worry about projects anywhere near that size”, I would then give them the following scenario: A one-man EC is requested to quote for the replacement of a lighting fitting in a CEO’s office on the 15th floor in the CBD. With no parking on site the EC would need to park in a loading zone, take tools, equipment and material to the 15th floor. Return to the vehicle and probably need to park in a commercial carpark, return to carry out the job and then reverse the procedure on completion. The non-productive time could well exceed the actual task time.
Labour, every EC knows that the greatest risk in electrical installation is the labour component. Many factors and conditions can cause a project’s labour productivity to be less than optimum. These conditions affect labour productivity adversely and these factors are percentage adjustments determined by the project conditions.
These added factors may be determined by project type, geographic location, size of team or required skills. The estimator must have the ability to recognise and make these adjustments.
Every project is different, and it is a falsity to think just because you can count the items that appear on a drawing and measure cable, duct and tray, you are an estimator. The key skill of a trained estimator is the ability to interpret the cost to the estimate that are affected by the following factors;
- Geographic location ― Alarm bells ring when the job is outside the normal geographic location, a distance away from the EC’s office or employees’ homes causing extended travel to and from the job. Travel allowance and lost time is an additional cost. Material and equipment deliveries will impact the job’s productivity.
- Building construction ― Multi storey, high ceilings, unusual layout buildings and structures spread out over a large site (such as schools etc.). The labour allocation can increase considerably to get to the workface and the increased time required for handling materials and moving equipment.
- Working conditions ― Hot, cold, dusty, muddy, wet, high, sub-terranean and dangerous environments can increase labour costs significantly. Maybe additional costs for safety and signage equipment must also be considered.
- Workface access ― Access through locked or restricted areas, security protocols, others controlling personnel and material lifts etc. These circumstances can add many more hours to the estimate
- Team size ― If the schedule calls for larger team sizes, then there will be additional cost of supervision as well as the risk of lost productivity. Consideration needs to be given to the availability of tools, or do we need to hire more?
- Hazardous environment ― Working in areas classified as hazardous, may require special safety equipment and clothing. locations where flammable, combustible or ignitable gases, vapours, liquids, dust or fibres may be present. Exposure time may also be limited.
- Multi-story projects ― Requires walking time to get the labour and materials to the workface. This labour time will be cumulative for every added floor. Is there a requirement to set up material storage units on specific floors? Are the construction lifts allocated and scheduled for start and finish times?
- Staging location ― With regard to multi-storey buildings and major projects scattered over a large area. Materials are stored away from the workface, requiring additional labour moving materials to the workface.
- Quality Assurance ― The cost of resources committed to continuous improvement of a QA system can be quite considerable when applied to the electrical installation.
- Liquidated Damages ― Negotiating completion dates can be an expensive exercise if you are unfamiliar with the legal obligations, it would be wise to consult a legal opinion PRIOR to submitting a tender. Be aware of practical completion dates and understand obligations when claiming extensions of time and variations.
- Sequential phasing by area, floor, or building ― When a project is broken down into phases and those phases are sequential, (such as chequerboard pouring of concrete), it requires mobilising and demobilising of tools and equipment.
- Occupied buildings ― Occupied buildings typically slows workers’ progress involving additional clean-up and working around personnel. An even greater concern if it is a 24-hour workplace.
- Overtime and shift work ― Can impact labour costs significantly, the longer the overtime schedule, the greater the loss of productivity due to worker fatigue. With shifts, time is lost due to the need to communicate project information to the incoming team and a need for additional supervision.
- Stacked trades ― This is a situation where multiple tradespeople are working simultaneously in the same location. Having too many workers in one area reduces productivity. This usually happens when there is a major refurbishment and a short time frame.
- Weather ― This is dependent on the job’s location, and often reduces labour production radically in hot or cold climates. However, this factor needs to be considered when there is considerable outdoor works (underground trenching or aerial works etc.).
- Work experience ― The estimator must know the skill and ability of the workers, not all electrical workers have ALL the skills for ALL the various installation opportunities. It would be folly to try to compete on an automated industrial site with a team of residential electricians OR vice-versa.
- Warranties ― The words “you warrant and agree that you will ensure the works are fit for their intended purpose” or similar. For example, you may be required to warrant that the goods or services you provide, is performed according to the contract as well as any relevant consumer affairs laws. Furthermore, are you prepared to provide a warranty for materials specified by others and, will this be an additional cost?
- Payment ― It is essential to read the payment clauses prior to finalising the estimate. Are the payments and progress payments to your satisfaction. Will the terms of payment cause additional cost to your company?
As ECs continue to look for greater benefits in productivity, safety, and cost reduction, the estimating and take-off process is constantly looking for better methods. Digital estimation and computerised take-offs tools are becoming more sophisticated from design through to construction but be aware these programs are only tools to assist the estimator, they do not replace.
To deliver the most accurate estimate on any project, you must clearly understand the scope of work, necessary materials, labour hours and the technical electrical/telecommunication specifications required to bring the project to fruition. As you can see from the above there is far more effort required for a successful estimate than just an accurate count and measure.
Addressing these factors will give you a considerably more confidence when signing the contract.