Preparation is key—said every construction manager ever. However, what happens when being over-thorough on your numbers leads to a higher bid? What happens when there’s a short-term decision resulting in inaccurate figures? If an architect or project planner doesn’t set up a clear criteria or format for submitting estimates on a project, there is no way to drill down on details with lump sums leaving items up to interpretation. If estimators don’t recognize the importance of ethics in their work along with the need for attention to detail, the road ahead can be a bit rocky.
What can estimators do to maximize their effectiveness and overall project success record? What does it take to get it right?
1. Dive Deeper than the Obvious for a Strong Takeoff
Of course estimators need to address the pronounced labor/material costs a design calls for, but there also should be numbers involved that aren’t spelled out in the plans. The Nine Secrets of Estimating by Don L. Short, II, FCPE brings up that an estimator that can think critically would involve the impact of stipulations like testing, inspections and start-up activities along with the location of the work. Even with the additional consideration to specifications, a perfectly planned project is a rarity, but any additional consideration lends itself to more reliability in nailing down variable costs. Although no company has psychic estimating abilities (from my knowledge), all successful firms know one of the secrets to a successful project is having a reliable, detailed foundation.
2. Ensure Information is “Apples to Apples”
An unorganized data overload is never a good thing when you’re looking to be competitive with other bidders. Without an itemized bid form, the owner cannot effectively judge estimators comparing a different scope in each of their break downs. Regardless of the parameters the owner provides (or doesn’t provide), it is in an estimator’s best interest to itemize each line item to provide a comprehensive scope. Legitimate change orders can be needed if an area is neglected in an estimate. With the added cost and time commitment that accounting for missed considerations adds, it is key to focus on detail early on to avoid unforeseen complication.
3. Stay True to Your Labor
Labor man-hours should be encompassed in estimates. Although a few firms think these man-hour figures should remain confidential, it is a major factor of a well-developed estimate. There is an interesting link between clearly expressed labor hours and productivity. A strong estimator can assess all conditions affecting workforce productivity on site and include well-thought figures in the estimate.
4. Equip Estimates with Strong Equipment Costs
Since equipment and material numbers are dependent on conditions of the project (what can fit on site, what is most compatible with other equipment), these estimates need to be catered to the specific requirements of the project. Expert estimators strive to find situations where efficiencies can be realized through potentially using one piece of equipment for multiple tasks. This should be approached with caution however, as equipment with over or under-sized volume can equate to higher costs and waste. With materials, the case isn’t much different—although timing is a bit more important. Material rates go up and down with price curves and delivery requirements adding complexity to the equation. Practice makes perfect to understand historical trends and forecast the wisest time to buy.
5. Profit, Profit, Profit
Don Short claims, “From the overall perspective, historical determinations can be made as to profit amounts. If a company has a cost basis similar to their competitors (this should be the case, but there are exceptions), the profit of their competitors can be determined with a reasonably high degree of certainty after a project has been bid. By analyzing historical trends in the bidding process, one can determine, with a reasonable amount of certainty, the likely amount of profit on an upcoming bid by the competition.”
6. Maintain Your Ethical Code
To form an estimate, there are frequent judgment calls and decisions made that can have a drastic impact if there is a lack of integrity or lack of compliance with confidential material. Since estimators usually have the fullest perspective of a project, there must be a strong moral compass applied that isn’t pressured by any factor that would skew the accuracy of the information.
Whatever the application, an accurate cost forecast can mitigate a good deal of risk and headache. Being a good estimator is a feat that comes with time, however with a combination of the considerations outlined above, this goal can become a bit closer.