Understanding the Estimating Process - Part 1 of 12
Many electrical contractors believe the estimating process begins with the take-off, when in reality that’s step No. 3 or 4 down the line. The estimating process actually starts way before any estimating or counting begins — and certainly before you peruse the bid boards to see what’s out there.
To get to the heart of the matter, you must first know your business. This task is easier said than done, however. First, if you do not have an accountant or a relationship with your accountant, start the new year off right and establish one. Your accountant can tell you a lot of things about your business that you may not know. When I work with contractors to put together a bid, I often get a blank stare or silence on the other end of the phone when we get to the overhead part of the bid. When bidding a job, you should cover all costs — both direct (those things related directly to the job, such a commodity material, labor, quotes, direct job expenses, and the like) and indirect (such as your overhead). If you don’t know your overhead, how do you know you’re truly covering your cost? The process of determining and changing overhead need not be daunting, but this information is critical to the estimating process.
Other key point must be considered before bidding a job. What is your labor force like? Are you a union or non-union shop? If you are a union shop, then your field labor is dependent on available workers when you call the union hall. If you are a non-union contractor, you have a staff of electricians. What is their experience level? If you, your foreman, and your electricians have absolutely no experience in a certain type of work, then you must think twice before bidding it. A good example is a wastewater treatment plant. It’s not clean work — no pun intended. It’s full of PVC-coated rigid conduit, explosionproof fittings, and a lot of equipment — definitely not “learning ground” for any contractor.
Speaking of which, do you know what your firm is good at? Do you know what size project is most profitable for your company? Following that same school of thought, do you have the tools, equipment, supervision, and infrastructure for the work you bid? Again, work with your accountant if you are overwhelmed with getting answers to your questions. There is no sense chasing work that will not ultimately turn a profit for your company.
How about bonding capacity? Many contractors wait until they are knee-deep into an estimate to realize they don’t know if they can get a bond for the work. How about project labor agreements (PLAs)? If you have never bid a job with a PLA on it, are you familiar with the paperwork you will have to submit for the certified payroll?
Next month, we’ll discuss the next step in the estimating process — finding jobs to bid. Happy New Year!
Candels is president of Candels Consulting, an electrical estimating consulting firm in Niantic, Conn. She can be reached at [email protected].
