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lifting facilities, material handling
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building schedule
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completeness of documentation
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distance from site shed (or truck) to the
workface
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height, depth, confined space, heat, cold
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stacked trades.
ESTIMATINGMANUAL
A labour unit manual is an invaluable
tool for assessing labour in a variety
of situations.
The manual’s data indicates the
average time (in staff/hours) it takes for
the average worker to install a unit of
material under average conditions.
The first distinction an estimator must
realise is that a labour unit is not absolute:
it is a benchmark, a starting point.
There are basically two ways of
determining expected labour hours
and related costs: personal work
experience or an industry researched
labour unit manual.
The labour unit, whether from a manual
or calculated by the estimator, is a cost/
data figure, indicating the cost (in hours)
for installing a given item of material or
performing a given labour operation.
Experience is the greatest resource
in understanding the conditions that
affect labour cost. Regardless of the size
or scope of the installation or service,
a successful tender depends on the
estimator’s knowledge of the company’s
cost factors gathered from its history.
THE ESTIMATINGDEPARTMENT
Whether the department consists
of one person or several, it needs to be
organised and take into consideration the
company’s range of work.
Does it operate in a specialised sector
or is it diversified? The more specialised
the work, the more that current and
previous cost experience will apply. This
increases the prospect of accurately
estimating new business.
As the estimating department
increases in size, specialists develop in
various functions to handle sections of
the estimate.
There is no hard and fast rule for
setting up the estimating department –
it’s a case of horses for courses, and some
people are just better at some functions.
A senior estimator who can recognise
various skills will have an efficient
estimating team.
However, establishing standard
procedures to guide the whole team
will save time and money through
even greater efficiency, and the
senior estimator will spend less time
overseeing the day-to-day running of
the department.
NEWCONTRACTORS
Having conducted contractor
training programs for more than 20
years, I am still amazed by trainees
who don’t understand the cost of
electrical contracting.
It’s no surprise that 55% of new
contracting businesses fail within the
first 18 months..
Many new contractors, when
determining their charge-out rate,
believe that 20% above their wages when
working for a boss will see them right.
It comes as a shock to learn about the
‘loaded on-site rate’, which is generally
62% above their pay slip figure.
The loaded rate includes the often
hidden costs paid by a company on behalf
its workers, such as travel time, fares,
superannuation, annual leave loading,
long service leave, payroll tax and
workers’ compensation.
This loaded rate pays only the cost of
putting someone on site. There are also
business overheads, including motor
vehicles, telephone, insurance, advertising,
stationery, computers, depreciation and
fees – just to name the basics.
Then there has to be a profit margin if
the contractors want to stay in business.
The new contractor calculating a
charge-out rate may need professional
help to assess the cost of overheads and
determine a profit margin to arrive at a
realistic figure.
The calculation needs a formula similar
to this:
Expected wage + 62% (loaded wage
add-ons) + overhead + profit = charge-
out rate
However this rate is based on 1,621
chargeable hours per annum (38-hour
week less holidays, etc). It is not much of a
problem to work that number of hours per
year, but the charge-out rate needs to be
calculated on what is achievable.
For instance, if the new contractor can
achieve only 1200 chargeable hours, then
the rate needs to be increased by 35% to
maintain the expected return.
EDUCATINGESTIMATORS
The education of estimators never ends
– they must school themselves to meet
new problems and explore newmethods.
Whether the business specialises in
industrial, commercial or residential
projects, newmaterials, equipment and
methods emerge as technology improves
and customer requirements change.
New contractors are able to draw on
a multitude of accountants, lawyers and
bookkeepers to assist in unfamiliar areas
of the business, but there will be a distinct
lack of assistance from such professionals
when it comes to estimating.
It is therefore advisable to enrol in an
estimating course.
The estimator is constantly
investigating opportunities to offer
alternatives and so increase the chances
of winning a tender. This comes with
experience and, as some unknown sage
said, experience is a wonderful teacher.
Brian Seymour, MBE, is an industry
consultant and author of
Electrical
Estimator’s Labour Unit Manual, Starting
Out and Electrical Contracting in
Australia
. He conducts regular industry
training programs throughout Australia
on behalf of the electrical and air-
conditioning sectors.
BY
BRIAN
SEYMOUR