JOB MANAGEMENT - ESTIMATING PROCEDURES (Part 1)

Before you begin the estimate, you must understand the scope of work to be completed according to the contract. To accomplish this, you must have all of the information about the job and a complete and current set of blueprints and specifications.

While the duties of estimators may vary from contractor to contractor, the basic principles remain the same. The system must be efficient, accurate, and attempt to prevent common mistakes. Generally, the duties of the estimator include (but are not limited to) the following:

Determining the cost of the job (estimate).
Purchasing material.
Ensuring bid accuracy.
Project management/tracking.

A good estimator is identified by:

A willingness to learn.
A good knowledge of construction and the ability to visualize specific requirements.
An orderly mind and a tendency to be careful, accurate, and neat.
An open mind willing to change and take advantage of new products and new technology.
Decisiveness and the ability to make decisions and not be intimidated by details.
Fairness, honesty and integrity.
Knowledge of applicable codes and the ability to read blueprints.
Patience - you must be able to finish the estimate without losing your cool.
Procedures, and the ability to follow them.

There are three primary methods of estimating a job:

The manual method.
Computer-assisted method.
Estimating service.

Each method has its own set of advantages and disadvantages. You need to be honest and select the method that works best for you. Once you understand manual estimating, you can determine which method is the most cost effective for you.

Manual Estimates - The manual method has been used for decades. The advantage of this system is that it does not require you to gain any computer skills, nor does it require you to purchase a computer. Because it takes so much time to estimate a job manually, you must learn to utilize your time and resources effectively. On an average, it costs about $800 and takes about 32 hours for every job that you are awarded. This is assuming it takes an average eight hours for each bid at $25 per hour and you’re awarded one out of every four bids you submit.

Computer-Assisted Method - The computer-assisted method of estimating is actually the same as estimating manually, except that a computer is used to perform the thousands of mathematical calculations millions of times faster and more accurately than a human. The margin for error when using a computer is reduced significantly. Your bids will become clearer, more legible, and professional in appearance. And you can reduce your estimating time by as much as 75 percent.

Estimating Service - An estimating service is a temporary agency that you only pay for when you need it. You might use it to double-check a bid, or if you don’t have the time to do the bid yourself. It’s an excellent tool to help you gain estimating experience at a reduced risk. And, you can enjoy the benefits of computer-generated estimates without investing in your own computer estimating system. Estimating service fees are generally based on the total bid dollar amount.

Not all expenses can be anticipated in advance, but experienced estimators accept a satisfactory margin of error in the accuracy of the bid. If you break the job down into its smallest possible parts, then the magnitude of each mistake will be reduced, and hopefully the mistakes will cancel each other out.

An accurate estimate must include labor cost including burden (fringes), material cost including fixture and switchgear quotes, sales tax, subcontract and rental expenses, direct job expenses, and overhead. To determine the bid price, always include a margin for profit.

NOTE: Because of the length of this article, it is being published in two separate newsletters, Part 1 (#67) and Part 2 (#68). Be sure to review both sections.

Mike Holt’s Comment: This newsletter was extracted from my Business Management and Management Skills’ Workbook. Watch for our next newsletter, and as always, we encourage your comments and feedback. Send us your real-life experiences. Please respond to Barbara@mikeholt.com.

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