THE NOTION THAT AN ESTIMATE can never be perfect is what separates the schools of estimation and accounting. Estimating and the costs associated with the final quote result from making judgments based on past experience, and in that frame of mind, the variables between estimating and accounting are never the same.
The brass tacks estimating responsibilities begin with obtaining drawings, bidding, following up tenders, tracking bids, and adjusting future quotes accordingly to ensure the company is getting the maximum available profits through an appropriate market.
Estimators put as accurate a bid together as they can, allowing risk money or man-hours for areas of the drawings and specifications that are not cleared up prior to tender closing. The estimate (accurate guess) acts as a budget for the operations manager, project manager, project co-ordinator, outside supervisor, site foreman, field crews, shop supervisor, shop foreman, and fabricators to work from. Cost certainty is never attainable because of the multitude of job variables.
The materials, sub-trades, supplier’s items, and shop labour costs are easier to predict as these areas of the construction process are fairly controlled. Field performance varies greatly from foreman to foreman, crew to crew, PM to PM, customer to customer, and between general site conditions, not to mention general contractor and developer differences. The most successful projects are usually ones in which the field labour meets or is below the estimate.
The estimator has other responsibilities beyond creating the bid. He or she is responsible for sales duties associated with estimating including liaising with customers, engineers, and owners; making the company aware of present and upcoming market conditions; and, through contacts, searching out select tender opportunities as well as helping negotiate favorable purchase orders. They must get to know the competition and understand when they are flush with work, in need of work, and when they have way too much work on the go because all of these factors will affect the available markup on the project. In response to these and other fluctuations, the estimator must rework the estimating data as the need arises (ie: new machinery is purchased increasing productivity, materials pricing changes); and, upon completion, he or she must perform reviews of completed contracts to ensure the estimated figures match the actual. Understanding why they don’t and applying this knowledge is critical to the success of future bids on similar projects.
Estimators also prepare project budgets and sometimes place purchase orders with sub-trades and suppliers. It is up to them to review the project with the construction team, specifically the project manager, during the start-up and construction phases as required. Normally the estimator will quote any changes that may occur throughout the project’s lifespan.
A quality bid takes into account the company’s need for each specific project it is bidding on, the company’s capabilities (is the project a good fit?), the capabilities of the mechanical contractor, the probable markup, the customer’s capability to promptly pay his bills, the known site conditions, the condition of the market place, the company’s ability to properly perform the work, the schedule, any outside influences, banking pressures, bonding capabilities, capacity issues, the company’s corporate goals/budgets for the year, any personal connections that may be affected performing the work, and, of course, the availability of time (does the estimator have enough time to put together this bid in a manner that gives the company the best opportunity to secure the project?).
Estimating is not just stripping off drawings and sending quotes out to customers hoping to land a project or two. An estimator takes years to learn and perfect his or her craft. Industry connections with a company’s competition, its customers, and the engineering community will assist a quality estimator with performing his very important piece of the construction team’s puzzle with the greatest proficiency. Estimating is a passion for perfection that can never be mastered. Estimates, after all, are only educated budgets with targets for a company’s construction team to attempt to achieve.
Estimating can be a very rewarding profession. The thrill of compiling an accurate takeoff together with industry intel that leads to a quality quote can be exhilarating. But, generally, an estimator should strive for a 20 per cent success rate. Any more than that and his bids are probably leaving some profit points on the table. Any less and he or she is probably not spending the time required to search out and eliminate the risk factors involved that ultimately force a company to add risk dollars.
Be aware, though, although an estimator may fall in love with the project and the bid he has put together, 80 per cent of the time he is not going to be successful. Estimators should be passionate and disappointed if they do not secure the bid they just poured their heart and soul into, but they can’t take losing one project too seriously. There will always be another and the good quality work will flow towards those who do their due diligence and always strive to put out the best bid they can.
If you live by that mantra you will be successful in estimating. Patience is surely a virtue with this profession.
Mark Halvorsen
