Estimating and bidding are among the first systems a successful contractor will need to implement. Whether you are a roofer, painter, home builder, commercial contractor or any one of 100 different types of contractor, you are going to need to estimate and bid a lot of work to have any chance at financial success.
We need to formalize that process into well-organized Estimating & Bidding Systems.
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When I ask people what the single most important goal of an estimator should be, I get several standard answers.
Some seem to think the goal is to bid a lot of projects. Others hold on to the thought that it may be to make the company a profit. While still others think it should be to maximize vendor coverage for the best possible prices.
Think about this for just a minute...What do you think the Estimator's biggest responsibility should be?
The ONLY honest answer to that question is...
Produce an ACCURATE estimate of job costs!
It doesn't matter what the final price is, as long as it is accurate. You may not be the "low bidder", but if your estimate is accurate, "low bidder" is irrelevant.
Accuracy in the estimate is dependent on several controllable factors.
1. Accurate time sheets
2. Accurate equipment rates
3. Accurate overhead calculations
4. Accurate production rates
5. Accurate general conditions
6. Accurate labor burden & fringes
7. Accurate mark-up to meet profit goals
You must put forth an effort initially to track each portion of the project individually so that an ACCURATE cost history library can be put together in an understandable format.
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For instance, if you are hanging and finishing drywall you first need to know how much drywall you have. For this example we have 10,000 sqft of drywall.
Then, how long it takes to actually do the work, not a "guestimate" of how long you THINK it takes.
It takes three guys 14.25 hours (42.75 man-hours) to hang it and four men 23.5 hours (94 man-hours) to finish it.
Next, you need an accurate labor rate.
Your labor rate is .76/hr. (/hr base rate + 32% burden and fringes).
Now, do the math to come up with the actual COST.
Hanging: 14.25 x 3 = 42.75 mh
42.75 mh x .76/mh = ,015.74
,015.74 / 10,000 sqft = .102/sqft cost
Finishing: 23.5 x 4 = 94 mh
94 mh x .76/mh = ,233.44
,233.44 / 10,000 sqft = .223/sqft
Enter the cost into the Cost History Library
Drywall Hanging: .102/sf
Drywall Finishing: .223/sf
For a total ACCURATE cost of ,250.00
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Now you have an accurate number to plug in the next time you estimate the cost for hanging and finishing drywall, instead of and educated guess.
If you were to go the lazy route and round things off a little, you might say:
We have 10,000 sqft of drywall, it will take three guys two days to hang and four guys four days to finish and it costs me about .00/hr for these guys.
Your estimate would then be ,400.00 before any overhead and profit mark-up.
A whopping difference of ,150.00! It might not sound like very much, but that's an incredible 35.38% increase in your estimate and you haven't even added any margin!!!
This alone would probably throw you completely out of the running in a highly competitive market.
On the other hand, what if it took you 3.5 days to hang and 4.25 days to finish?
You just lost your ass.
And if the job was a much more significant size, maybe your shirt, shoes, pants, and everything else you worked so hard to have.
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You can replace the above example with any portion of work within any given project; equipment time, rough framing, metal stud work, excavation, laying underground plumbing, anything.
The point is you must be accurate to be profitable.
....This is only the beginning. You must build your own Cost History Library based on what type of work it is that you do.
I will have a much more in-depth discussion in the near future about how to put your Estimating System together from start
to finish. You can check out http://MyConstructionArticles.com for any updates or additional resources available.
Simple and Accurate Estimating & Bidding Systems For All Types of Construction Contractors
Dave Fadorsen, Founder of The Consolidated Construction Group, is known across the industry as "The Construction Guru." With over 19 years in the business and as a consultant, author and publisher of successful contractor's business strategies, Dave has his finger on the pulse of today's construction business heartbeat.
His no-nonsense style and unique take on finding and fixing your weakest links will undeniably give you that edge you've been looking for.
To sign up for his free seven-day eCourse about How To Build A Profitable Construction Business, VISIT http://MyConstructionArticles.com NOW! Big things are just around the corner.
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