Table of Contents
Stay Consistent
Understand Your Costs
Understand Your Risks
Consider a Price Cut
Ask an electrical contractor and they will tell you that electrical estimating is an expensive endeavor; many consider it a necessary evil. In the economy we face today, contractors need all the help they can possibly get.
It can be difficult to come to the office as an estimator and feel the weight of knowing that so many jobs are riding on your ability to not only weather the storm, but to flourish within that storm. It is possible to be successful in today's economy, we just need to look at our opportunities differently. Below are a few of the items I use to stay successful currently.
Stay Consistent
It is critical that the projects you bid are consistent with your firm's capability to complete them profitably. A company business plan can document your firm's expertise.
I utilize a pre-bid evaluation on every bid before expending the resources to bid it. Most good estimators complete this mentally; the difference is that I document the evaluation in a consistent manner. Below are a few of the key points of this sixteen question evaluation:
Each question has four possible answers ranging from extremely desirable to extremely undesirable, each worth 1-4 points.
After completing the review of a set of bid documents and a job walk, I complete the written evaluation. If it evaluates between 16 and 30 points, it is important to bid. Totals between 31 and 45 are questionable unless I know something that others do not. Anything above 45 points is probably a waste of time, and the evaluation has allowed me to excuse myself from expending the resources needed to bid the project in the first place.
Periodically, I may be required for political reasons to bid a project that does not fit our firm's needs. With the evaluation in hand, at least we are proceeding with the knowledge that our chances are slim, and thus can proceed cautiously.
These evaluations help determine the viability of current proposed estimates and if filed in a manner where quick reference can be obtained, can help with future similar projects.
Understand Your Costs
You must understand your labor burden and overhead costs. Without these two costs being accurate, your estimate cannot reflect what your true estimated costs are.
Breaking a project into small manageable sections is critical to even the experienced estimator's efforts, so that a project can be looked at in small portions. I typically use three breakouts:
Base bid, alternates, value options, temporary are all typical first breakouts.
Fixture, switchgear, special systems, fire alarm, feeders, branch, devices, etc. are generally second breakouts.
The drawing number is typically a third breakout.
Labor units used in the estimate must be in line with your firm's expertise levels. Prior project history is an indicator of what your labor units should be, however if you're new to contracting and unsure of what labor units to use, the breakouts listed above can make it easier to look at a project and determine whether your labor is accurate or not.
Understand Your Risks
The combination of labor rates and labor units comprise the majority of an electrical estimator's risk. However, an estimator should be aware that material still represents a small percentage of your risks. Many contractors do not address these risks, but here are a few ideas how:
Make certain that the materials in your estimates are the same materials that are actually being used. Standardize how you assemble items both while estimating and in the field.
Make certain that your commodity pricing is accurate for your firm. We have found a vast difference from what a pricing service prices and the actual prices paid for commodity material. This is generally not the pricing service's problem, but it is a simple fact that most contractors do not get their discounts from their suppliers and adjust the pricing services prices accordingly.
I often send my commodity material out for quotation, but this generally does not include wire. Set this up with your vendors ahead of time and ask for a plus/minus factor because you are quoting commodity material. Ten to fifteen percent should cover the discrepancy between the estimated amount and what may be actually used. This plus/minus factor only includes your common commodity material; specialty items such as floor boxes, 5-8 gang boxes and other special order items will not be given this percentage. Explain to your vendor that you will get three quotes for this material and whoever is low will get the order on a purchase order. You will release and pay for the material as needed. The value of the wholesale house is that they will get the entire order and not need to price small lists repeatedly. The value to the contractors is that a 15 to 20% break in cost at bid day is possible as well as being able to lock in those costs with a purchase order.
Consider a Price Cut
As a final note, when my pre-bid evaluation is good and the fixture or other quoted package is packed full of high-priced items, I will occasionally bid the project using the specified items as requested. While evaluating the job, I would have noticed the high-priced item. I can then ask my supplier to quote an alternate package with a similar item. At bid time I will supply cut sheets of both the specified item and proposed item and offer a voluntary deduction, if the alternate package is accepted. This opportunity is not for every project or even most projects, but does come in handy occasionally.
This economy is difficult to work through, but not impossible. All that is needed is to select projects that are in line with your expertise and then exercise a few ideas that other contractors are unwilling to do. When times change and the economy improves, can you imagine how these tips may help? These ideas work; some take a little extra time, but some should be a part of life in your estimating efforts. In today's economy, we need all the help we can get.