It ain’t fair: the estimator’s lament
Brian Seymour discusses the ups and downs of estimating and who takes the accolades and blame when wins and losses are experienced.
AFL supporters will be aware that the darling of the team is the full forward because he kicks most of the goals and is feted as the match winner. The less acknowledged ruck must get the knockout, grapple and force the ball to the front line to give the full forward the opportunity to kick the goal. Or could Lewis Hamilton win a Grand Prix without the expertise of the Mercedes F1 chief mechanic?
The same goes in electrical contracting when a high profile, prestigious project is completed with great results, and the project manager receives all the accolades. However, if a project ‘hits the wall’ and returns a loss, predictably the blame is laid at the feet of the estimator.
During my long industry career, I have experienced every position from apprentice to CEO and ultimately a consultant. The most stressful and thankless task I managed was a couple of decades as an estimator.
The general attitude was, ‘if you won the tender, – well that’s your job, but if you lost, everyone would have an opinion of how you could have structured it to be a winner’. However, nobody else was prepared to put their name to the final proposal.
During my time as the senior estimator for many multi-million-dollar projects, there were times when I was designated as project manager. This is not unusual in major contracting companies where the estimator, who is already familiar with an overly complex project is more efficient to manage the job.
One of the first major industrial projects I estimated caused me many sleepless nights and deprived me of free time. When completed and sitting around the board table with the managing
director and accounting director, I was asked, “Are you confident you have everything covered and there will be no surprises?” When I answered in the affirmative, the MD said, “OK then you
can manage the project and assure the company of a profit”. This is when one puts one’s head on the chopping block.
During my tenure as an estimator, I visited electrical estimator’s offices in England, Ireland, Scotland, Holland, France, Singapore, Canada, USA and all states of Australia. In every country, the estimators lament was the nonrecognition for the contribution to the successful projects. A keynote speaker at an international, electrical contractor’s conference said, “The project manager would be out of a job without the estimator.”
There have been myriad projects where, due to the estimator’s expertise, the tender has been won at a price higher than the lowest submission. This has been due to the estimator’s expertise and offer of alternatives.
It may be suggestions of different methods or systems which, although may be more expensive in the beginning, will future proof the project and be more economical in the long term. Or the alternatives may include savings by changes to the original tender documents.
It is a team effort. A quality estimator needs to be accurate, and project manager must be efficient for a company to make a profit. Therefore, what is the estimator’s role? It is far more complex than that of a ‘count and measure’ clerk. I recently came across this quote from Eduard Antohie, Faculty of Construction, University of Technology, Romania “Main purpose of estimating costs
is to provide a size reference for cost control, to verify that the resources consumed during the execution of the project are kept in the costs assessed in feasibility phase of the project. Deviations from these issues can endanger the profitability of the project and a successful project can turn into a disaster. Accuracy of estimates of cost depends on existing information to reflect and their calculation.”
There are so many industry personnel who have never had the responsibility of calculating the expected cost of a total project. Many believe that if you have a sophisticated electronic estimating
program, all the estimator has to do is count the total symbols on the drawings and feed in the square meterage of the building and there is your tender price. Nevertheless, no matter how hi-tech
the computer program, it can only calculate input, and bullshit in = bullshit out.
Although the count and measure of materials is essential, it is the most fundamental of the estimator’s tasks. The essentials of the estimator’s role is to set standards when analysing an estimate to determine accuracy by the following the key criteria:
- Sourcing tender opportunities
- Identify factors affecting costs, such as installation time, materials, and labour
- Read the plans and specifications to prepare estimates
- Collaborate with sub-contractors
- Calculate, analyse and adjust estimates
- Recommend ways to reduce costs
- Maintain records of estimated and actual costs
- Budget or Preliminary estimate
- Tender application caution.
Sourcing tender opportunities
The electrical estimator must have procedures for achieving tender opportunities. The first decision to make is what sectors of the industry you wish to work. Is your company’s expertise in commercial, industrial, residential, telecommunication, fire services or mechanical services?
Public and many private sector electrical tenders are advertised in local newspapers and on-line. There are others that are only available on an “invitation only” basis. Usually, if your company has developed a reputation, or it may be a case of “who you know” to gain the opportunity to submit a tender. This highlights the importance of building networks for electrical contractors and estimators. “Who you know” can definitely play a role in finding the right tender opportunities!
Identifying factors affecting costs
Prior to expending time on the take-off, it is important that these factors are addressed. It may be that it would not be viable for your company to submit a tender on the project considering factors such as.
- Lump sum, conceptual or budget estimate?
- Payment – Time frames, progress claims, retention, and contingent clauses.
- Type of work – do you have the skills?
- The location of project – the cost to the site may price you out of contention.
- The size of the project – do you have the resources to deal with the extent?
- The type of contract – fixed price, cost plus, time and material.
- Design and build – site conditions, project schedule, quality of plans and specs.
- Closing date – time to accurately assess and bid on the project
Read the plans and specifications
Are they complete? Do you understand the scope, the schedule, environment, OH&S concerns?
Collaborate with subcontractors and put it in writing
- Clearly define roles and responsibilities for both the subcontractor and your company. Do not assume the sub understands the job; set down every detail and describe the support you will provide to make sure this partnership is successful.
- Prepare a payment schedule for the subby to both complete the work on time and manage the job.
- The estimator needs to manage the cost of the subcontractors. By requesting quotations from each of the specialist trades. Only accept the submissions that are returned on time. It is poor business practice to accept a subby’s quotation after the tender has closed.
- Educate your subby in customer service, some assume it just involves great workmanship, and they neglect critical areas such as communication.
- Request clients for feedback about the sub’s performance. Use that information and your own observations to evaluate them.
- Be wary of subcontractors’ prices which are significantly lower than the others. It is a good indication they have either left something out, not priced in accordance with the spec, or made an omission.
Calculate, analyse and adjust estimates
- Has every sector been priced? Having a good ‘Tender Final Summary Sheet’ will be of great assistance assuring nothing has been omitted.
- Have suppliers’ quotations for lighting fittings, switchgear, cabling etc. been priced as complete packages?
- Do quantities balance in each sector?
- Does each sector of the estimate meet your company’s mathematical rates?
- Are subcontractors’ quotations in reasonable conformance with previous tenders?
- Have all the legal clauses been addressed? This includes payment, insurances, OH&S, time schedules, liquidated damages etc.
Recommend ways to reduce costs
- Does the workforce have the technical ability for new systems? Do they need additional training? The cost of training may well be far less than rework and call-backs.
- Consider whether it is more viable to purchase or hire specialised equipment.
- Is there worthwhile savings in bulk purchases? Maybe combine purchasing for more than one project.
- Can there be savings in varying contact hours?
- Offering alternatives.
Estimating is an overhead cost and estimators will be assessed on their success rate. If the estimator keeps comprehensive records of each tender, the information can be invaluable when assessing future projects. These records can also be used for comparing estimated costs to actual costs.
Budget or preliminary estimate
Approximates the cost of a project, prepared for budgeting and planning purposes only. This is usually requested by the end user who needs to have a ballpark figure on the overall cost of a proposed project to ascertain if it is affordable. This is not accurate enough to provide a basis for a firm commitment, but it represents only an understanding of the scope and expense for each sector of the project.
This is usually a free service by contractors which is part of the advertising budget. By offering this service to builders, developers or clients will ensure you the selective tender list and will often be considered as the winning tender if final costings are close.
Tender application caution
A common mistake made by estimators and companies when their strike rate has fallen, is to tender on everything they can get their hands on. If it is for the type of work the company is not familiar with, it could be a disaster. Without the skills in the workforce, without the specialised tools and equipment which may be required, could put the company at a great disadvantage
and finish with a substantial financial loss.
It is far better to tender selectively, to be able to allocate dedicated resources to the project and to avoid a floundering approach. Most companies would prefer to have a better rate of success than to fill the order book with unprofitable jobs. This means thinking carefully before, during and after the process, and having a good strategy in place.
After the tender has been submitted
Once the result is known, the estimator’s job is not finished. Now is the task of conducting the post-mortem after government and public tender results are published. Private and ‘invitation only’ tenders result can only be obtained if the estimator has a good rapport with the client. This evaluation invaluable especially if the tender was unsuccessful, it allows the opportunity to analyse the process when seeking future work in the sector.
Once the project is under way, the estimator is still a back-up to the site staff as a consultant on the economics of process and method.
The days are long gone when the client tells the contractor to ‘do the job and send me a bill’. Today job costs require the skills of a competent estimator