Your construction estimates make a real difference in determining the overall success of your company.
Estimating can be fraught with pitfalls: underestimate and perhaps you win the job, but lose too much to be profitable. Overestimate and you might knock yourself out of contention for the project.
Estimators always walk that fine line. The challenge is to produce estimates that are the right balance between profitable and “reasonable” to the client. Here at Countfire, we have a few team members who are veterans of the estimating field. These are some of their thoughts on improving construction estimates:
The key markers of a quality estimate
What are the key markers that matter in terms of the quality of a construction estimate? Usually it’s about three key factors:
- Accuracy. It’s vital that you’re able to accurately account for everything that goes into an estimate. For example; counting takeoffs, labour costs, equipment, travel, subcontractors…
- Speed. You’re often on the clock when it comes to meeting deadlines for submitting tenders or proposals. Customers often expect rapid turnover of estimates, whilst maintaining accuracy.
- Pricing. Once you calculate your costs, you apply a mark-up for profit and come up with your final figure for the customer. This figure is a critical output for any estimator; will it be high compared to other bids? Will it be low? This could be attractive to the customer but may leave your company struggling to make a profit.
Improving your construction estimates can be achieved by looking at how to do better at each of these three elements. Fortunately, today you have more choices than ever before on how to go about creating a quality estimate…
Improving estimation accuracy
How do you currently gather all of the information you need to produce an accurate estimate? Your methodology can make a huge difference. For example, if you’re still reliant on manual methods, where you count takeoffs with printed drawings and a highlighter, that leaves you wide open for mistakes, even if you’re a very experienced estimator.
Manual counts are prone to human error because, as the famous quote goes, “to err is human.” All it takes is a distraction of some kind - your phone rings or someone pops their head through your door and asks a question while you’re in the middle of counting. The next minute, you’ve written down the wrong figure or you’ve missed counting an entire area.
While there are still many estimators who count manually, technology innovation means you have a choice. For example, automated takeoff software like Countfire allows you to upload drawings to the program (no paper required), and follow the process to have takeoffs counted and recorded accurately.
Another important part of accuracy is checking your work. On manual counts, this is tedious and still open to error. Then, if you discover significant differences between your first and second counts, you’re probably doing a third manual count just to make sure. You can end up with something of a moving target.
Takeoff software has checking features as well, so that you can easily see if anything has been missed in your initial count. This helps with both your accuracy and your efficiency in getting the estimate completed.
Besides takeoffs, there are a few other common items that should be checked for accuracy:
- Sales tax requirements – Have these been included or is this particular project exempt from sales tax?
- Pricing breakdown – Have you filled out the pricing schedule / formatted your price according to your client’s requirements?
- Should any cash allowances be included in the bid price?
- Insurance – Does the project require special insurance and have you included this in the pricing?
- Have you accounted for any security deposits or performance bonds?
- Equipment – Is all equipment your responsibility, or will some be furnished by the owner?
- Materials – Have you obtained accurate costing from suppliers?
- Changes – Have you included a clause for any change orders or extras that the project owner may come up with during the course of the project?
- Temporary power – Who is responsible for furnishing and paying for temporary power?
Improving estimation speed
Deadlines for project tenders are common in the construction world. One of the key roles of an estimator is to know the deadlines and to ensure that all work is completed in a timely fashion so that tenders can be submitted on time. Outside of formal tendering, sometimes having a project estimate turned in early makes the difference for the client in choosing a company to work with.
It sounds simple, but the reality is there can be a lot of moving parts to manage, which can impact timeliness. Some common hold-ups for estimators include:
- Unclear specifications. This can require that the estimator checks for clarification or sends a formal RFI (Request for Information) to the client. Sometimes, clients aren’t quick to reply, which can hold up the estimate.
- Requiring quotes from subcontractors. Again, the estimator has no control over how quickly a subcontractor responds (although they can set a due date).
- Having to re-count takeoffs. It happens! But it always means extra time.
Our team has a few thoughts on how to improve the speed of your estimates. For one thing, it’s important to know how long you usually need to produce an estimate. Do you have the ability to produce a “rush” estimate or is that too risky in terms of compromising accuracy? Knowing how much time you need can help you determine a policy for what you bid on. For example, you might say it’s a “no-go” if the estimate is due in less than 48 hours (depending on the size of the project).
Secondly, it’s important to have a process that you follow when producing estimates. Time management is one of the key skills of a good estimator and having a process is a good way to manage time effectively. Some ideas include:
- Having your time blocked out so that you won’t be interrupted
- Carefully reading through the specifications first and taking the time to compare to any similar projects you have undertaken recently
- Sending out any RFIs or requests for subcontractor bids as early as possible. One of the worst habits is leaving anything that relies on a response from someone else until the last minute. No one likes being forced into time pressure and it’s important to remember that subcontractors probably have similar “rules” to these for producing their own estimates.
- Using automated takeoff software to count and check takeoffs
- Building in time for anyone else to check over the estimate who should be part of the process.
What can estimators do to improve how they come up with the final price? For one thing, be smart about how you’re using any estimating software or other technologies. Automated software is only as good as the data it is given, so for example, if you’re getting an automated takeoff count of 12,000 widgets, but your recorded price of widgets isn’t up-to-date, you’re probably going to under-estimate your costs.
Good knowledge of construction methods and materials is also important. Labour is a frequently under-estimated component of construction bids and can quickly lead to slashed profits. Remember to consider factors such as overtime or any work done outside of regular hours.
Of course from the client perspective, a lower estimate is usually more favourable. Another key skill for estimators to develop is cost optimisation. For example, by proposing construction methods and materials that will allow the job to be done well for the best price.
Last, (but not least), construction estimates can be improved by staying up-to-date on what’s happening in the industry. Building good relationships with other contractors and procurement managers, staying updated on news and understanding how the needs of organisations or companies are evolving can help estimators to do the best possible job of creating a successful estimate. This helps to provide vital context that is required for ensuring your estimate meets expectations