Category Archives: Uncategorized

January 13, 2016

Conceptual estimating, client capture or wasted time?

By Anton Takken

Where do projects come from? As estimators we’re often less concerned with the steps that came before plans landed on our desk that we should be. Everything starts with a client and their idea. There’s an awful lot that has to come together to translate a clients idea into a reality. The American Institute of Architects (AIA) has outlined the Best Practices for architectural design into three main phases.

Basic concept

Schematic design (SD) is the earliest phase and it’s where the required functions of the project are defined and refined. A lot of effort goes into the research and due diligence necessary to ensure that the project will conform to zoning, jurisdictional requirements, etc.  Estimators often refer to these as the “napkin sketches” because the intent is to convey the magnitude and orientation of major project features without necessarily providing much detail. Smaller projects may feature a narrative which can be as simple as a list of required functions, assumptions, and minimum requirements. The SD drawing set may be put out to contractors as a “gut check” to level the project requirements against the client’s budget. More on this later.

Conceptual estimating, client capture or wasted time?

“It may not look like it, but I’m here to help…”

Rough draft

Design Development (DD) is the next phase and it’s here that more detail is slowly added. Generally, (but not always) these plans lay out the Mechanical, Electrical, Plumbing (MEP) details as well as the structural and architectural details. It’s at this stage that signature elements are typically selected, often based on comparison between one or more schemes. When these plans are sent to contractors, you’ll often see them referred to as “Pricing plan” (PP) or clearly marked “NOT FOR CONSTRUCTION”. The DD phase is typically concluded with a formal presentation to the client in hopes of getting approval to proceed to the next phase.

Final plan

Construction Document (CD) phase is the final phase of architectural design. Complete CD’s are sent to contractors for final bidding and subsequent contract award. Many clients and/or architects require contractors to bid on incomplete CD’s which are marked with the percentage complete.

Concept to contract

Estimators are frequently asked to price SD and DD drawings as a courtesy to the client or the architect. It’s understood that designs must progress in order for there to be work for GC’s to do. Beyond simply aiding a design development, many GC’s seek to lay the groundwork for contract award or negotiated agreements by making themselves indispensable to the client and/or architect.

Conceptual estimating, client capture or wasted time?

Savvy bidders are quick to lock their competitors out

This tactic is called “client capture” and there’s a lot to recommend the practice because GC input early in the design can reduce prices, and increase the odds of project success.

Refine by bid

The GC’s motivation to capture the client is understandable, however their effort can stray into becoming an unpaid construction consultant.   There are clients who limit their design team’s scope of work to SD or DD level drawings, which are then sent out to bid with requests for “complete” proposals. Estimators pricing these projects balance between hard-bidding and design-build as they attempt to fill in the blanks. Each round of bidding provides the client with information to refine their drawings for re-bidding.   Bidding GC’s will find their good ideas incorporated on plans sent to their competitors to bid. It’s entirely possible to spend so many labor hours in conceptual bidding, that the subsequent contract work is no longer profitable!

Conceptual estimating, client capture or wasted time?

Window shoppers

Competitive bidding is the most reliable and consistent means to ensure market pricing. Clients who find their budget’s blown on bid day are getting valuable feedback on their projects. There are some clients who continually re-bid their projects hoping to “beat the bushes” for a better price. If the client can’t raise their budget to market-value, or reduce their scope to suit their budget, they’re not a real client. These “window shoppers” have no concern for the time and money they cost their markets. There are always more window shoppers than real clients, so estimators are well-advised to bid judiciously.

Some clients find themselves debating between two or more different addresses which require tenant improvement (TI). Metro areas often feature design firms that specialize in tenant planning for leasing negotiations. These firms specialize in drawing plans that facilitate conceptual pricing, but never lead to construction contracts. In fact, there’s little reason for these design firms to involve contractors because historical data coupled with some basic estimating skills would provide their clients with sufficiently accuracy to negotiate leasing terms.

Signs to watch for

Estimators looking to maximize their chances of success must develop judgment to pick the best opportunities to bid. There’s an old maxim that states : “Good judgment is based on experience you can only get through bad judgment”. As a logical starting point, estimators must understand that functional relationships are based on reciprocation. Bidders understand that submitting the lowest complete proposal (for free) by the deadline is their obligation, and awarding the contract to company with the lowest complete proposal is the client’s obligation. Bidding for “free” is the contractors commitment, awarding a contract on the basis of those bids, is the client’s commitment. Moral flexibility separates the window shoppers from the real clients.

Conceptual estimating, client capture or wasted time?

Here are couple examples of how life is better without gray areas.

Many ethical clients see conceptual estimating as an expected courtesy, if not an outright prerequisite for future invitations. If the client isn’t promising to select a contractor based on the outcome of a conceptual bid, the GC’s are forewarned that they can expect additional rounds of competitive bidding before the contract is awarded. Estimators are well-advised to pay particular attention to what is and isn’t promised at the “final” bidding opportunity. There are clients and design teams who expect “do-overs” whenever there’s hope of capturing some additional savings. An awfully old trick is bid the job before submitting plans to the building department, then re-bid the job after they’ve got inspector’s comments. Lots of value-engineering (VE) ideas from the bidders get rolled into that last set. This effectively gives your competitors a chance to capitalize on your good ideas for the client.

Clients who consider conceptual estimates to be a prerequisite to inclusion in the final bidding should be starting with a short list of pre-qualified GC’s. Pricing all the SD, DD, and CD revisions can range from three estimates, to dozens of pricing exercises that could take place over many months. Clients who expect this courtesy should reciprocate by limiting competition to a short list of qualified competitors.

Clients who demand extensive competition throughout conceptual bidding will generally accept any bidder on the final round. These clients may pay lip-service to GC’s making themselves indispensable but they’ll only award after they’re sure there’s nobody cheaper on the market.

Estimators should be especially wary of bidding projects which have different deadlines for participating GC’s. Sharp-eyed estimators will pay particular attention to the dates on the plans. It’s very rare for a legitimate conceptual bid to have plans that are more than a few days old at the time of the request for proposal (RFP).

Often Architects will revise the plan legend as progress is made on the sheets. “Final” or “Pricing set” drawings that aren’t quite 100% complete are fairly typical for hard-bidding, however estimators should consider the timeline of the updates in the context of the final set’s date. If there was steady design progress between updates however the “Pricing set” you’re looking at is several months old suggests that this isn’t the first time these plans have been out to bid. Especially long gaps between “Pricing” and “For Construction” sets, begs the question “why didn’t they award the job on the pricing set?”

Never underestimate the value of direct communication with the client and their design team. Job walks are a vital social opportunity to gain insight into the project and where it’s heading. Clients may freely admit that a project has been out to bid previously. Design teams may drop hints about expected changes, budgetary issues, or client expectations. GC estimators should cultivate their leads in the subcontractor community. Reputations are earned, and people have long memories when it comes to hard-earned judgment.

It’s much easier to close a deal with a client when you’re well-informed.

Tips and techniques

Conceptual estimating, even as a courtesy carries a certain amount of risk. Regardless of what qualifiers, clarifications, or exclusions you might make, the one thing that every client remembers, is the lowest number they heard. Estimators need to be VERY careful about how information might be misconstrued especially at the earliest stages of design.

We all understand that complex assemblies are built of smaller parts and pieces. Clients tend to think of these pieces as individual and uniform when it comes to cost. The cost to furnish and install any given thing seems like it’s an easy enough question. The problem with this thinking is that it’s simplifying the context, and ignoring the impact one part has on the larger system. For example, adding one more faucet may require another sink, which may require another drain which may exceed the design’s capacity in numerous ways.

To the estimator, “menu pricing” conceptual elements is not only risky, it’s potentially never-ending. It’s important to pull back a little, to get perspective on what the client is actually trying to achieve. Rather than indulging in micro-managing breakouts, the focus should be on guidance to achieve the clients project goals within their budget. Identifying cost centers and their proportional contribution to the total gives meaningful feedback on incomplete designs. Estimators looking to capture a client through conceptual pricing should look beyond pricing every request to address the clients root concerns. Helping a client with their problems should not give them the tools to hire your competitor. A pattern of brute-force low-bidding on multiple rounds of conceptual estimating isn’t a substitute for strategy either.

Conceptual estimating, client capture or wasted time?

Hitching their wagon to the wrong horse is a recurring trend in the estimating field…

Not every client will be interested in selecting a GC during the conceptual bidding. In many cases the courtesy bidders find themselves losing to firms that didn’t bid the conceptual rounds. If conceptual bidding won’t lead to client capture, it should at least lead to successful pricing strategies. There’s never an end to going-nowhere conceptual pricing requests because clients and their design teams are getting free construction consultants. It’s hard enough to win profitable work as it is without giving our best efforts away for free.

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© Anton Takken 2016 all rights reserved

 

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December 18, 2015

Stress and boredom

By Anton Takken

Life as a construction estimator involves a lot of ebb and flow. Building estimates, doing quantity take offs (QTO’s) and tabulating results can range from steady progress, to boring slogs through minutia. Sharply contrasted are bid days which can move at a fevered pace studded with snap decisions that will make or break all the work that’s gone before.

There’s a hidden nuance to this pattern; boredom is its own kind of stress. Tedious or repetitive measurements are prone to error because it’s difficult to recognize subtle differences when everything looks the same. Conscientious estimators know that boredom can lead to mistakes. It can be very frustrating because checking for mistakes often means going through the same boring material. Each review loses its potency until you’re so familiar with the material that you’ve lost perspective.

Stress and boredom

Even estimators who aren’t worried about making mistakes can find boredom stressful. Tedious and repetitive tasks are the “grunt work” of estimating. In firms with a dedicated estimating department, the hierarchy often dictates who does what. Since General Contractors (GCs) employ fewer estimators than Project Managers, Project Engineers, and Superintendents, the estimator advancement potential at any given firm is typically tied to vacancies or company growth. This can lead to situations where seniority is a greater factor in advancement than skill, ability, or performance. For the perpetual “junior” or “assistant” estimator, this can mean years of doing the grunt work without much opportunity to advance your skills. Human Resource professionals refer to this condition as “underutilization” and it’s been shown to harm morale, and reduce productivity.

Stress is often discussed in exclusively negative terms which can serve to conceal the real picture of what’s going on. For example, bid day can be described as a hectic experience with plenty of hazards to negotiate. Bid day might also be described as the culmination of weeks of labor where all the parts come together according to plan, ending in a well-deserved victory. Lots of folks are so used to thinking of estimating as a brief process in a larger chain of events that it becomes reasonable or them to think that generating a price is like turning a crank. Smooth and uneventful bidding reinforces this perception while concealing the work it took to get there.

Being part of a well-organized and highly motivated team of professionals can be exhilarating. Spending the day in constant motion makes it seem like time is flying past. However it’s often difficult to “let go” of everything in your free time. As an estimator I’ve lost more sleep thinking about mundane jobs than I’d like to admit.

Stress and boredom

Smoothing the peaks and filling the valleys

From an outsiders perspective, it might be difficult to see what estimators are getting so worked-up over. To most folks, estimating is a combination of ringing up a total like a cashier, and running an audit of the plans. The reality is that estimating is about controlling risk. There are many forms of risk to contend with, but uncertainty is the one that attracts the most estimator attention. QTO’s go a long way towards becoming certain of what’s required. The natural extension of this thinking is that greater detail leads to higher certainty. The problem is that time is always limited, and there are risks beyond what’s depicted in the drawings that must be accounted for. Minutia nourishes limited perspectives while starving big-picture thinking. Estimators need to understand the driving forces of a project in meaningful and actionable terms. GC estimators should build their estimates to furnish pertinent information for comparing and scoping subcontractor bids. For example, it’s not as important to know component level pricing (screws, nails, etc) as it is to know assembly level (meeting room carpet, air handling unit, etc.) pricing.

There’s a balancing point to be struck on relative detail. You’ll always feel better with a bit more information, but you can achieve a lot with a bit more time early on. When it comes to the really tedious QTO stuff, it’s worth taking the time to consider how useful that information will be. It damages a lot of ego’s to point out that perfect QTO’s of low-value and high tedium items have little bearing on successful bidding. Time sunk into tedious tasks early in the bid cycle robs you of time to develop strategies, answer questions, and direct resources to make the entire estimate successful.

Rather than strictly recording quantities for later comparison, your time might go towards communicating intentions which leaves less potential for discrepancy on bid day. Estimators looking to control risk should remember that losing the job through misplaced priorities is a very real possibility. Perfect spreadsheets are little consolation for lost opportunities.

Routine tasks

Some routine tasks lend themselves to interruption or working in stages, like QTO’s for example. There are some tasks that must be completed entirely or you’ll lose time constantly attending to remaining items that won’t wait.  The Invitation to bid (ITB) is a simple document that conveys the who, what, when, where, and why of the project to the invited subcontractors. Incomplete ITB’s are distressingly common, especially among GC’s who are using a bid-letting software/service. Documents that generate more questions than answers ensure that the estimator will be constantly interrupted by bidders looking for necessary information. Creating an ITB that gives bidders everything they need will take longer to assemble, but it leaves much less for follow-up. Being able to move on from a routine task not only reduces your stress, it’s a vital stage of a successful bid.

It bears mentioning that time spent on bidder convenience is often an investment in reliable turnout. One obvious and constantly overlooked element is the how the Construction Documents (CDs) are configured. It’s a waste of a subs time to download an enormous drawing file just to access a single page. The old argument that giving subs the entire set guarantees they’ll catch the buried architectural note, is hollow because it’s the GC estimators job to find all the “gotcha” nonsense, and communicate it to the subs. Label the individual sheets with accurate and understandable terms. Whenever possible, group the sheets by discipline (Civil, Structural, Architectural, Interior Design, Mechanical, Electrical, Plumbing, etc.) to speed bidders to the files they actually need. Be advised that delegating this task to the office receptionist, or summer intern is a risky move because they rarely understand the pivotal importance of naming things properly.

Stress and boredom

Office designers are finally addressing interns in the workplace

Estimators should develop the habit of organizing their work to maximize expediency, reliability, and professionalism because it’s very likely they’ll need answers in a hurry.

While we’re on the topic of file storage, it’s a good practice to maintain saved copies on more than one machine. For example if the company server goes down, you might need to progress on your standalone computer. Having older iterations on file allows you to “fall back” if your most current version gets corrupted. Plus, it can be handy to have time stamped “save points” to plot your progress through your work afterwards. Don’t forget to maintain this practice on bid-day. It might save your bid should the “war room” computer falter at a vital moment.

Perspective on pressure

About the only thing worse than a tedious takeoff, is knowing that you’re running out of time to get it done. Procrastination and poor planning leads to a lot of unnecessary overtime. We hear about how working well under pressure is a vital quality in an estimator, but there’s little curiosity about the source of the pressure. Estimators need to get their heads up and pay attention to the scope of their own operation. How long does it really take you to get the QTO done for this or that? Working backwards from the deadline, how does the sum of your estimated durations line up with reality?

Fighting the clock

It’s ironic that stressed-out estimators are often unwilling to apply their craft to their own schedule. Create a schedule, then track your time against it so you’ll see when and where you’ll need corrections. Every successive schedule will become more and more accurate. Identify where most of your time is spent, and take stock of what that means. If you’re constantly answering bidder questions, you might consider publishing a bid-directive that proactively answers group questions.

Slow grind

If you’re mired in QTO, it might be time to look into better software, hardware, training, or templates. Looking back at your performance, you should see an increase in QTO speed without any loss in accuracy. If you’re not improving with experience, you’ll almost certainly stagnate or stress out. It’s not discussed much, but lots of GC’s do painstaking estimates on things like paint, but square foot cost items like Mechanical, Electrical, and Plumbing (MEP) simply because they don’t know enough about those trades. The MEP trades are among the most expensive subs on a typical project. These estimators would be better served by square foot costing the paint, and spending the time learning what drives MEP pricing.

Quick-hitter quicksand

If you’re constantly transmitting RFI’s, Addenda, and bid-directives for quick-hitter bids, you might find relief in a higher level of client. Insincere, underfunded, and unprofessional clients rarely attract top-level design teams. It’s a LOT more work to bid an incomplete design for an underfunded client and you’ll have little to nothing to show for it. Marketing folks are loath to admit that low barrier to entry clients are the most likely to waste an estimators time. Tire-kickers aren’t clients, pretending otherwise is busy work theater and you’ll be the star of the show! Conceptual pricing techniques shouldn’t drift into design-build territory.

Stress and boredom

Bob’s not sure why he never wins, but he’s having fun and that’s the important part.

There’s a lot of fast ways to render a courtesy bid without wasting your companies (or your subs) resources. Good record keeping builds a vital reference resource for these tasks.

Redundant department of redundancy

Some GCs strongly believe that good sub turnout on bid day is directly tied to “working the phones”. Nagging subcontractors to bid is an incredible time-sink that’s based on a fundamentally flawed perspective of how bidder relationships should work. Estimators often call a project an “opportunity” because a competitive bid offers professionals a chance to win a contract by doing their best as part of a team. If the GC or the project lack sufficient luster to attract market leading subcontractor attention, it’s spectacularly unlikely that any amount of nagging will change that. Building “pull” with subcontractors is a function of establishing a valued relationship with the market. Winning bids obviously gets the market’s attention, but so too, does transparency, honesty, and leadership. There’s a lot a GC estimator can do to bid an “ugly” project successfully. Nagging is never the answer. Voluntary, accurate, and timely bid results are the single most effective means for building pull in your market.

Furious futility

Some GC’s respond to lost bids by increasing the volume of bidding in the hopes that volume will lead to victories. Grinding out bids as quickly as possible means that there’s never time for strategy, skill, or teamwork. There’s never a shortage of low-end clients looking for quick-hitter bids. Sadly, the majority will be fruitless because insincere clients and urgent bid requests are constant companions.

If you’re tracking your estimates, you’ll be able to assess projects in terms of how successful you expect to be. Lots of companies think they’re excellent at everything, but the reality is that most companies are only market leaders in specific areas. Estimators should keep in mind that the project management side of their firm may adore a client or design team that’s generated profitable change orders. Being profitable on the basis of what might happen is better known as gambling. Estimators should be looking for work that will be profitable at the bid amount. GC estimators should learn to look at their market potential in terms of their subcontractor base. If the GC can’t attract market leading subs for the work in question, they’re going to lose to a contractor who can. Picking work that aligns with your best subs abilities is critical to success. Most GC’s see this entirely backwards. They pick projects that look profitable, easy, or fun to manage. If they chose work that aligned with their market leading subs, there would be less difficulty, and more profitability, regardless of how fun, pretty, or prestigious the project appears to be.

Blind faith in the process             

Estimators need to maintain a sense of purpose. You’re there to profitably win work by controlling risk. While we spend a lot of our time building estimates, it’s vitally important to maintain perspective on the market, competitors, and clients. There’s entirely too much blind faith placed on QTO’s, spreadsheets, and bureaucracy. Estimators need to see what’s really going on and they need to respond accordingly. Contracts are awarded to the best market value, if you don’t know what that is, you’ll struggle to profitably compete.

Perspective is an investment

The key to building a meaningful perspective is to faithfully record what’s happened on past bids. Bid results are often treated as a vestigial appendage of the estimators craft. “Yeah, yeah, we lost but we’ll do better next time…” neatly sums up the attitudes of many estimators. The bid cost real time and real money to produce. It’s truly remarkable how little effort goes into defining how a job was lost, compared to the work put into bidding. With a more accurate picture of what happened on a loss, the next bids benefit from refined judgment. REALLY simple things like getting a winning competitors sub on your bid list can make all the difference. There’s an interesting element to post-bid investigations that’s constantly overlooked. You get more information from your allies, when you share more information with your allies. Once an estimator has lost their bid, they’ve got plenty of useful information to exchange that can materially change their position on the next bid.

Stress and boredom

Earlier I brought up career stagnation in estimating and it’s here that I hope to offer some help to the folks trapped on the lower rungs. Most GC’s aren’t particularly scientific about tracking their bids, their subs, or their markets. By and large, they trade on their established contacts in their market which brings them varying degrees of success according to luck, market conditions, and subcontractor quality. If you’re doing the grunt work without seeing much opportunity for advancement, I encourage you to build your own tracking systems to help define for yourself what is and isn’t working. Be advised that your daily tasks are higher priorities to your superiors so it may be necessary to invest your personal time.

Be cautious about relying on small data sets, or those with wide-ranging values that will skew results. In time you’ll develop perspective on your clients, your market, and your subs. If you decide to offer suggestions on how things might change, you’ll have facts and figures to lend credence to your perspective. Advancement is never guaranteed, but you’re wiser for the effort and you’ll learn what to look for wherever you go. It’s worth pointing out that we’ve all learned from those who went before us. Do your part to improve our craft by sharing what you’ve learned. I’ve found that a policy of forthright honesty has been a profound and enduring advantage against my competitors.

Policy driven pinch points

The bid-day blitz can be a terrifically stressful experience for a GC estimator. Bids come rushing in at the last moment and everything must be done at high speed if you’re to make the deadline. Last minute sub proposals aren’t happening by accident. It’s a calculated effort to limit or obstruct bid-shopping by starving the estimators of time to act. Getting right to the root of the problem, last-minute bids are a sign that the market views corruption as a serious threat. The lack of trust may be anywhere in the supply chain. Corruption thrives in secrecy and wherever it’s possible to curtail competition.

Accountable transparency is the only effective way to counter corruption. It’s predictably unpopular because it requires a strong moral compulsion to act when it won’t help you directly or immediately. Lots of people opt to remain silent which prevents the honest majority from working together.

Stress and boredom

Estimators need to understand that they can’t win work alone. Company policies that work against transparency, accountability, profitability, and good judgment should be questioned and if necessary, changed. Estimators need to be able to show the market that they are ethical professionals if they’re to be market leaders.   It’s worth saying that accountability means facing repercussions for mistakes. Estimators should take heart in knowing that while accountable transparency will reveal their honest mistakes, it won’t conceal their honest intentions.

To recap, much of an estimators daily stress comes from incomplete tasks, dysfunctional relationships, and misplaced priorities. With greater perspective, we can find avenues to re-direct our energies towards successful outcomes. Boredom is an insidious source of stress with roots in minutia. We must make the connection between utility and effort before we commit our valuable resources to proving things we already know. Growing our base of knowledge and sharpening our decision-making skills should be constant pursuits. Finally, we should all do our part to improve our craft by acting ethically, sharing what we’ve learned, and facilitating advancement in our ranks.

 

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© Anton Takken 2015 all rights reserved

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November 30, 2015

Reliable Estimating Part 2 Building momentum!

By Anton Takken

The plans are on the street, now what?

Once the Invitation to bid (ITB) is drafted, and sent to every subcontractor on your bid list, you’re free to pursue the other work that piled up. The more your internal systems are built to output an accurate ITB and an optimal bid-list, the more these tasks will depend on a thorough review of the Construction Documents (CD’s). By having an ITB template that requires answers to the most common bidder questions, you’ll be able to focus your review of the Request For Proposal (RFP) and Construction Documents (CDs). Be advised that defining which trades you need to invite isn’t necessarily a quick process.

Reliable Estimating Part 2 Building momentum!

“Sure you’re doing six things at once, but could you go a bit faster?”

A specialty trade or a really small scope of work may be required via a single note in the drawings. It may be a better choice to get the ITB out to the obvious trades, than to hold everything until you’ve scoured the plans for a buried specialty vendor.

An absolutely pivotal concept of reliable estimating is knowing that time is more valuable earlier than later.

You get more out of the early minute than the final hour.

Learning you need to fix a “hole” in your estimate one hour to deadline means you’ve got 60 minutes to get a viable bid together. Until that problem is solved, the idea of winning takes a back seat to the risk of submitting an incomplete bid!   In comparison, an estimator who found just 20 minutes three weeks earlier could have addressed all the issues completely.

I’ve been in the war room in the final hour when we discovered that nobody had invited an entire trade of subcontractors! Until we found a sub with a complete bid, we had only our historical pricing to go on. If we bid and won using our historical pricing, we took a risk that subcontractor proposals would be substantially higher than what we carried. Given the great value of that scope of work, our exposure threatened the success of entire job.   We were in such a hurry with the bid letting software that a single trade was left out.

Reliable Estimating Part 2 Building momentum!

Even with the satellite, Dave couldn’t make the connection…

Nobody found time to verify the invite list in the intervening weeks. Don’t let it happen to you.

Series of sweeps

It’s really simplistic to assume that estimating is a function of counting, pricing, and totaling. The efforts that make the difference between winning and losing are rarely attributed to punctilious spreadsheets. Broadly speaking, a GC estimator needs to conduct a series of sequential sweeps through the CD’s looking for four basic criteria.

Sub sweep

Getting the ITB on the street required the first sweep of the CD’s to determine who needs to be invited, and what information they’ll need to get started.

Scope sweep

This is where the estimator gets a handle on what’s supposed to happen in the project. Estimators must pay particular attention to where scopes of work overlap between design consultants. Architects are famous for not telling their engineering consultants about an alternate request, and engineering consultants are famous for not sharing requirements that should be included in another consultants documents. For example, an electrically operated smoke damper which is shown on the mechanical plans, but not on the electrical. Estimators must review plans looking for where trades will overlap on scope. If the plans aren’t clear on who does what, it’s the estimators job to provide direction to all concerned. Leaving this to chance on bid-day ends up with double-ups or holes. The scope sweep should enable the estimator to roughly define how much work there is for each trade. Any trade with an especially small scope of work should be noted for a mandatory follow-up with a trusted sub. The same goes for sub-tier subs like Fire Alarm, Pavement striping, HVAC Controls, Coring/Drilling, Imaging, etc. I call these “ghost trades” because they’re never clearly visible, but they’ll haunt your bid if you ignore them!

Error Sweep

After two sweeps of the plans, the odds are good that you’ve already come up with some questions for the design team. The goal isn’t to pick the plans apart, so much as it is to resolve issues that are likely to impact the bid. CD’s often fall short of defining vital project information like site logistics, alternates and phasing. Getting these questions into Request For Information (RFI) format early in the process gives the design team more time to answer which may in turn allow you more time to communicate the answer to your bidders.

Strategy Sweep

There are lots of GC estimators out there whose entire strategy is to simply rely on subcontractor bids to deliver their victories. This flawed approach hinges on two fallacies. The first fallacy is that there’s something magical about their company that makes subs want to give them better prices.

Reliable Estimating Part 2 Building momentum!

You can howl, but then you’re singing along!

The second fallacy is that all subs are bidding all jobs at all times. By inviting everyone, they feel sure that the market leaders will send them a bid. This “strategy” is successful only when there’s no real competition.

Estimating is about controlling risk. If it were possible to simply add everything up and arrive at an accurate price the industry would use cashiers instead of estimators. Risk and how it’s controlled is how a plan becomes an opportunity. A lot of estimators get hung up on risk as a one-sided concept. I hear a lot of GC estimators looking to press project risk onto their subcontractors. Poorly defined scope, misleading diagrams, or counter-intuitive specifications are all treated like it’s the subcontractors problem. These GC’s fail to understand that the uncontrolled risk raises subcontractor prices, making the GC noncompetitive. It’s of pivotal importance for a GC estimator to understand that winning bids is a function of reducing risk for everyone.

Taking responsibility for sorting this out is how a GC estimator can set themselves apart from the field and thereby attract the market leaders. It’s pivotally important to understand that this is a proactive measure administered fairly to all involved parties. Bid directives are an effective means to mass-communicate a plan of action but they can be easily shared with your competitors. I recommend using bid directives to provide clear and accountable leadership that your competitors would shirk. Strategies should be treated as confidential information, and communicated accordingly.

Very few jobs will present an opportunity for a single overarching strategy to secure a victory. That being said, if you can’t find any advantage, you won’t likely land a job. Very often the greatest advantage a GC will have is due to an existing relationship with market leading subs. In that case, picking work that’s best suited to the top performers becomes the GC’s strategy for success.

Measuring time!

Finally, we’ve reached the point where most folks believe the real estimating begins; the quantity take off (QTO). I’ve written about software technology for estimating before. There have been notable advancements in how estimators tasks are completed, like computerized QTO. For example, it’s now possible to measure, count, and color the plans without the printed plans, scale, paper, calculators and pencils. While that’s a huge advancement, most of these proprietary programs lack the logical “polish” of standard business programs. These programs offer an exponential increase in the speed of QTO’s provided the estimators learn their idiosyncrasies.

Whether you’re using a digital system or manual takeoffs, there are some aspects of reliable estimating that never change.

“One pass” takeoff

After all the effort to define which Construction Specifications Institute (CSI) Masterformat divisions pertain to your project, it’s tempting to conduct the QTO in “CSI order”. Lots of estimators will begin their takeoffs with Division 2 Sitework and skim through the plans looking for anything that pertains to that division. Unfortunately there are often solitary notes pertaining to a small scope of work that’s unique from everything else shown on the page. This means that the estimator skimming for a specific CSI division will ignore that solitary note figuring that they’ll get it when they sweep for that division. When the note is on a particularly unlikely sheet, it’s often forgotten. Later, when their Project Manager comes down the hall complaining about how they missed something, that note will be very familiar.

I advocate what I call the “one pass” takeoff. I make sure that absolutely everything depicted, noted, or specified on the page be taken off before I go to the next page. If you’re doing manual takeoffs, this means you’ll have to start a CSI division sheet for each division as they present themselves. It’s a lot of shuffling to record your measurements, and the sheets tend to look less tidy from the many edits. This is still worth the effort since it not only catches the one-note traps, I’ve found it’s actually faster than repeated skimming.

Knowing where to stop is as important as knowing when to stop

Unless the job is fairly small, chances are good that your QTO’s will be interrupted or at least spread across several days. Estimators should understand that co-workers have no comprehension of how much focus it takes to complete some takeoffs.

Reliable Estimating Part 2 Building momentum!

I’m…gonna need a moment here…

Something as simple as the height of a concrete stem-wall may require calculations based on information scattered across several sheets. It’s therefore good practice to write (or type) notes on the plans providing the necessary information where it would actually do you some good. General items like area and perimeter measurements for each room can prove incredibly helpful since a myriad of takeoffs are based on these two pieces of information. By leaving a record of basic measurements, you’re able to pick up where you left off with minimal wind-up.

I would also recommend that your day’s work be paused at a meaningful and reliable point. Stopping mid-way through a sheet is sure to keep you up worrying about what you missed. Choose to either stop early or work late in order to leave yourself a clear conscience.

Before you begin an intense take-off, consider your schedule and the day’s obligations. It’s unwise to get a half-baked start on something complicated right before a meeting. One of the advantages of the one-pass takeoff method is that you don’t have to do the sheets in order. If you’ve got a limited amount of time before an appointment, pick a sheet you can complete. Estimators must accurately track and predict how long each element of a QTO will take. The fastest QTO’s are the ones that aren’t interrupted, however estimating is about more than take offs. Getting interrupted at an inopportune time is part of the job.

Three round review

Checking for errors is the best way to catch them but how you go about it can greatly increase your reliability. Huge data sets and tiny differences can stymie even the most dedicated review. The key to catching errors is to structure your workflow around meaningful review points. The simplest problems are most easily caught earlier in the process. Breaking the QTO down, this begins at the page level. Before moving to the next page in the plans, the estimator should review everything they took off on that sheet. The minute detail is fresh in your memory, and transposition errors are more easily spotted. The vast majority of errors are caught at this level.

The next round of review is when tallying a division as a GC, or a major component as a sub. The errors found at this level tend to be more dramatic because you’re moving the contributions of several plan sheets. A flooring subcontractor might take a moment after tallying the carpet and the tile measurements to see if the relative difference they’re seeing aligns with what they’d expect. These order of magnitude comparisons can tell you if you’re missing an individual room or an entire floor.

The third round of review is after the QTO’s have been entered into the estimate. Does the estimated cost outcome align with the division level review? By using the earlier reviews as benchmarks to compare against, the subsequent reviews become more reliable.

Reliable Estimating Part 2 Building momentum!

You could say the process leaves a mark on you…

I would strongly caution an estimator against more frequent reviews of their work because reviews without benchmarks are little more than skimming plans looking for stuff to add. After a person has looked at the same information a few hundred times, their ability to recognize new information diminishes. You have to be able to trust your work by testing it at intervals that allow you to know if you’re right or wrong.

Taking notes

An awful lot of estimating comes down to judgment when dealing with uncertainty. It’s not fair, but an estimators judgment is often criticized after the uncertainty is removed. People don’t care that you had a good reason for your decision, they only care about the outcome of your decision. It’s therefore absolutely critical to develop the habit of clarifying, stipulating, and excluding anything that requires judgment on the proposal. Effective proposals define with minute clarity what is driving the uncertainty. For that, you’ll need to take notes of where you found the problem. Keep in mind that as an estimator, your work is laying the foundation for the Project Manager’s efforts. Everyone needs to know where the tricky bits are located. Plus if you’re expected to present your estimates for review at your company, it’s good to be able to provide references for all the hard decisions you made.

Schedule slip

As mentioned earlier, interruptions at inopportune times are part of the job. I’ve had multi-million dollar estimates interrupted at the last moment over questions on a $50.00 change order! Estimating is about controlling risk even within the estimating process. Plainly speaking, an estimator must not only predict how long a QTO will take on a piecemeal basis, they must also be capable of plotting a path to recovery when they’ve been derailed. It’s at this point that many, many, “old-school” estimators just plan on spending the night. I believe that most estimators could substantially improve their quality of life by committing themselves to solving schedule problems with overtime as a means of last-resort.

Schedule recovery may involve many approaches ranging from additional workers, to less detailed takeoffs. Estimators should consider the value and the risk associated with each scope of work they’re taking off. A perfect paint takeoff can take a considerable amount of time, yet the paint scope is relatively inexpensive when compared to plumbing. Since the paint scope is relatively inexpensive, the relative risk of an imperfect takeoff is quite low unless you can’t attract more than one painting bid. Estimators should always prioritize on high value, and high risk scopes of work. As a GC estimator, knowing which direction to go between similar bids on bid-day is why you’re doing the takeoff. Continuing with the paint example, a pressed-for-time estimator might shift to a square foot cost for the paint scope followed by a list of scope inclusions that painters might miss. Providing sufficient information to scope sub bids is FAR more important than knowing the precise square footage of Paint color 1.

Lots of GC’s have a team of people working on an estimate. If you’re heading up the effort you will need to think on your feet when people call in sick, show up late, or otherwise drop the ball. Project Engineers are frequently “loaned out” to help in estimating, however they are rarely relieved of their normal responsibilities. Many will prioritize their ongoing projects at the cost of your time-sensitive estimate simply because they don’t work for the estimator. Lead estimators must provide and enforce deadlines for every task. Never give a helper sufficient time to squander your recovery. It’s better to check on them too much, than to find they’ve dug you a deeper hole.

Estimators who are working with interns, Project Engineers, etc. should make a special effort to simplify and compartmentalize the tasks they are delegating. Estimators are used to thinking in terms of length, area, and volume measurements, however these terms can quickly overwhelm someone who’s facing their first takeoff. Estimators should understand that “standard” units for takeoffs are arbitrary to a newcomer. For example carpet is measured by the square yard, yet ceramic tile is measure by the square foot. Taking the time to explain that there are nine square feet per square yard can make the difference between a useful takeoff and a mess that nobody understands.

And for goodness sake, if you’re having people do this work without a digitizer, or on-screen takeoff system, then at least give them a courtesy lesson on how to measure areas that aren’t squares or rectangles! While we’re at it, teach them to use decimal feet in lieu of inches! For some reason, this rather obvious point is overlooked in most construction education.

Addenda of mass distraction

Many architects will respond to bidder questions via an addendum before the deadline. Projects and professionalism will vary which means that GC estimators will have anywhere from over a week to only a few hours to incorporate changes made via the addendum. This practice is easily the single most stressful aspect of professional construction estimating because unclear, misleading, and outright contradictory information is often presented without sufficient time to get clarification. Estimators should note that shoddy plans, municipal or “public work” clients, and last-minute addenda are constant companions.

Reliable Estimating Part 2 Building momentum!

The architect finds last minute changes to be the most fashionable…

The absolute #1 priority is to get that information disseminated to the bidders as soon as possible. The second priority is to provide the necessary leadership and communication to ensure your bid-team isn’t derailed by the Addendum.

As a start, every Addendum should be scoured for changes to the deadline, proposal format, etc. Everything that goes to the bid-team should have the most current deadline printed where it’s easily seen. Wherever possible, notify bidders when an Addendum has little or no impact on their scope. If the Addendum ONLY affects the GC’s, don’t bother the subs with needless panic-inducing addenda.

If your Request For Information (RFI) was answered in the Addendum, you might reference whether the Architect response is consistent with your earlier bid-directives. The better your direction, the lower the risk your subs will face. Lower risk leads to lower prices, this is where the truly professional estimator earns their keep. If you do your best to get in front of issues, you may be rewarded with an addendum that confirms all of your bid-directives which means your subs are the only ones who don’t have last-minute changes.

Preparing for the blitz

Bid day is a real test of your skills, knowledge, tools, endurance, and patience. The better part of victory is preparation. Heading into bid-day you’ll need several critical elements in place. First and foremost, you’ll need your estimate “built” which is to say that your QTO has been imported or entered into your template form and prepared to accept subcontractor proposals. You should have a reasonable estimate of every trades worth, and a decent idea of what the final cost will be. Second, you’ll need your bid packet, which is all the completed forms identified in the Request For Proposal (RFP). Generally, this is the proposal itself, a CSI breakdown, a construction schedule, bond, etc. Everything should be as ready as possible for the bid-runner to deliver.

Third, you’ll need the “bid tab” or “scope sheets”. These are the scope of work as broken down in the estimate in anticipation of how the subs will bid. The scope of work is generally listed in rows, and a series of columns are made for subcontractor comparison. As the subcontractor proposal is compared against each row, the item is either checked as included, marked for follow-up, or an allowance is inserted. Once all the columns are filled for a given sub, their tally is calculated at the bottom and the subs are ranked by price lowest to highest for entry into the estimate.

I should mention that every Alternate that affects the given scope of work should be built into the scope sheet. Poorly defined Alternates can wreak havoc on bid-day. It’s important to know what to expect.

Estimators with plenty of time often export their bid-tab as a checklist which they have their subs fill out, endorse and return. This helps to prevent the “gotcha” nonsense that comes with indecipherable inclusions, exclusions, and clarifications on subcontractor forms.

Projects with special requirements for Minority Business Enterprise (MBE) participation should be tracked in real-time in the estimate. Allowing for “what-if” strategy is a crucial tool to making timely decisions. Very rarely will MBE companies be the lowest bidders, so it becomes a balancing act to meet participation goals, without undue cost.

As you head into the final hour, all of your hard work preceding the bid will be paying off. Be sure to “close the loop” with everything you’ve learned on this estimate by tying your estimate tracking to your bid results. An awful lot of an estimators daily struggle comes down to reconciling the big picture against today’s efforts.

Reliable Estimating Part 2 Building momentum!

Winning profitable work is the estimators constant goal.  Very little has more influence on your ability to win than choosing the right opportunities. Everything is an opportunity to people lacking perspective. Estimators must take it upon themselves to provide not only estimates for projects they’ve bid, but perspective on the market in which they compete. It’s vitally important to show your work in much the same way as an estimate validates the proposal amount.

Reliable estimating practices not only improve bidding, they enable decision-making.

 

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© Anton Takken 2015 all rights reserved

 

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November 12, 2015

Reliable Estimating Part 1: Getting stuff out the door!

By Anton Takken

Estimating is a deadline driven vocation that can be equally exciting and stressful. Many estimators are expected to manage multiple projects concurrently. With time at such a premium, anything that goes wrong on one estimate has the potential to disrupt several projects. Estimators must keep a wary eye on their entire system from Request For Proposal (RFP) to the Project Manager Handoff meeting.

Much of what goes into a reliable estimating comes down to a consistent process. The focus here is on building a consistent and flexible process to accommodate the various projects you’ll encounter. Estimators must balance the speed of modularity, against the need for specificity for every part of their process.

Reliable Estimating Part 1: Getting stuff out the door!

Nobody figured the “kids eat free” special would have caused so much trouble…

Request For Proposal

The RFP gives an estimator some information on the project, deadline, client, where to get the plans, job-walk date, and potentially some narrative of how the client wants the bid to be handled. Nearly all of this information is as useful to the subcontractors (subs) as the General Contractors (GC’s). Yet very few GC’s will share this document because the prequalified /selected GC bidders are listed. Nobody wants their subs bidding to a competitor. RFP’s also convey when the GC was notified of the job.

GCs may have a lengthy evaluation process for RFP’s to decide whether they will bid. Some GCs wait until the job walk before committing to an opportunity. This hedging can consume the lion’s share of the allotted time to bid the job.   These GC’s are always rushing their subs to bid in a fraction of the time allotted. Revealing that their ever-present urgency is a bid tactic might encourage their subcontractors to pursue their more forthright competitors.

GC estimators may be hard-pressed to find time to evaluate an RFP when they’ve got hard-bid deadlines peppering their bid-board. The urgency of the short-term, consumes the planning for the long-term. The only way out of this pattern is to streamline the front end of the process so that there are fewer problems consuming time later on.

Invitation To Bid

An Invitation To Bid (ITB) is how the GC invites subcontractors to bid on their projects. It should be obvious that the ITB should include all the information from the RFP. This is where we meet our first opportunity to balance modularity against specificity.

The ITB is a simple document conveying the Who, What, When, Where, and Why’s of the project. Estimators looking to quickly get through this process might opt to provide scant detail on the ITB since they can readily refer bidders to the Construction Documents (CD’s). A currently popular approach is to insert a hyperlink into the text which leads the sub to a website where the files are available. From the subs viewpoint, a virtually meaningless document arrives, obliging them to further inquiry just to know why it was sent to them.

Reliable Estimating Part 1: Getting stuff out the door!

On second thought, maybe I’m afraid to ask what this is about…

Estimators making templates should configure the template to show only relevant information. An itemized list with check boxes is a tedious means of communicating vital information. I recommend configuring the templates to sort each common job requirement into separate lists for inclusions or exclusions. Forcing the GC estimator to answer these questions, obliges them to become sufficiently familiar with the job to know what they’re asking subs to bid.

The entire purpose of the ITB is to solicit subcontractor proposals which will only happen when subcontractors are interested in the opportunity. Whenever obviously necessary information is buried, it makes subs wonder about the GC’s motivation. Maybe the GC isn’t really trying to win the job or perhaps the information is buried in hope that mistakes will lower prices?

Does this document make me look bad?

Unprofessional ITB’s do more harm than good to a GC. Every savvy sub could rattle off a list of GC’s they’ll never bid to again. Most of the time, the firm was just as bad as their ITB.

Most GC’s use some kind of bid-letting system. Quality ranges from excellent to terrible. The only way a GC can really tell what their subs are getting is to create a false subcontractor with an email address they can check throughout the bid. If this was done, I solemnly believe that nearly half the bid-letting systems would go out of business in a fortnight. The ITB’s out of some really popular systems are an embarrassment to the industry.

Reliable Estimating Part 1: Getting stuff out the door!

Efforts to shed light on code development are ongoing…

Translating to trades

Before we can begin selecting subs, we need to know about the project scope. Unless you’re bidding repetitive projects, odds are excellent that you’ll need to go through the plans carefully considering how you’ll get everything handled. Since everything relates back to the estimate, this process should follow some basic principles. First and foremost, is organizing the project scope according to the Construction Specifications Institute (CSI) Masterformat system. The CSI format codifies every conceivable construction scope into a numerical section broadly defined by divisions. The advantage of this system is a universal organizational structure for everyone in the construction industry. The disadvantage is that CSI divisions are not always related to how subcontractors will bid the job. For example, an Electrical contractor’s proposal will often include everything in division 26 (Electrical) , however it might take a dozen or more different subcontractors to cover everything in division 9 (finishes). Even a fairly modest project may generate an extensive list of CSI numbers. Adding further difficulty, some trades cover multiple CSI numbers, or even multiple divisions.

This is where estimators face an entirely unique problem. Most companies maintain haphazard contacts databases that are tied to Project Management/accounting software systems. It’s incredibly rare for these databases to be searchable for fields like trade or CSI numbers. Some bid-letting systems include extensive subcontractor databases and they are generally categorized by CSI numbers. The GC estimator simply checks every applicable CSI division, and the system generates a list of subcontractors for the GC to send an ITB.   Most GC estimators end up creating their own in-house contacts database using a spreadsheet program.

If you decide to build a database of your own, stick to the significant details. GC Estimators virtually never need a subcontractors mailing address, yet they always need the name, email address and direct phone number of the subs’ estimator. I recommend that the subs contact information be listed in rows, ordered by a column defined for CSI numbers. If a sub bids multiple CSI numbers, copy their information for each individual number.

Estimating is a time-sensitive operation, you’ll need fast answers from subs. If one company doesn’t answer, you’ll need another one to contact right away.

Estimators keen to save time might consider using the specification manual’s table of contents to list out the applicable trades. A very complete specifications manual might include a CSI number for every applicable scope on the project. Far more often, the specifications manual will include sections on work that doesn’t apply to the project. Architects often recycle their specification manuals from larger projects without culling the items that don’t apply. This thrifty approach creates huge files with small pockets of useful information.

GC’s who use the specifications manual to list out applicable trades invariably invite subs who find there’s nothing to bid. The wasted their subs time which eventually leads to ignored invitations. What’s worse, easily overlooked notes on the drawings may still require trades not mentioned in the specifications.

Bid list

The an old adage; personnel is policy has a tremendous bearing on a GC’s ability to profitably win work. Pick the wrong players and bid-day prices aren’t going to be competitive without being risky. This is probably the single most common mistake of GC estimators. They use the same bid-list for absolutely everything they bid. Somehow its assumed that “teamwork” will compensate for fielding subs who are too big to be profitable, or subs who are too small to make production. Profitless work is rarely a priority so big subs get there when it’s convenient for them. The job languishes until suddenly they mob the scene. Change orders ensue then you’ll be waiting for them to return. Too-small subs can’t keep up and they can’t get out of the way. Either case ruins the job for any related trade that wasn’t causing problems.

GC’s spend fortunes on scheduling and project management software systems intended to fix this problem. Pick a better team and it’s amazing how little work it is to make them successful. Please note that better doesn’t equate to more expensive. Market leaders are cheaper AND better than anyone else. GC’s with stagnant bid-lists are the least likely to believe market leaders exist because it would disprove their favorite excuses for losing.

Every estimator needs to be clear on some fundamental points. First, the odds of winning are NEVER even. Second, the estimators who know the odds will either win, or they won’t be surprised at the loss. Third, bureaucratic inertia and dysfunctional relationships are responsible for nearly all the bidding problems between subs and GCs.

Reliable Estimating Part 1: Getting stuff out the door!

Bad relationships will trip you up and keep you down

Soft-headed software for hard-headed bidding

Think about how noteworthy it is that there are extensive bid-letting systems with millions of subs on file. None of them are tracking market-leadership. None of them are tailored to the GC’s interests. There is no such thing as a subcontractor selection system that’s based on anything beyond geographic proximity, CSI designation, Union status, and Minority Business Enterprise (MBE) status. The reason it’s not available, is because GC’s are insanely stingy with bid-results. Nobody knows who won the bid in each division, even among the losing GC’s. This code of silence means that every single estimator will need to figure this out for themselves.

These systems offer little more than a searchable directory of potential bidders. The idea is to blast the entire market, and hope that the market-leader sub will send you a proposal. This approach cuts both ways, since market leader GCs aren’t likely to use a cattle-call approach with their subs.

So what’s the solution?

The answer here is to generate your own classification systems to define the best fit for each subcontractor. Please don’t assume that classification based on dollar value is sufficient. Some subs excel at remodels and struggle with ground-ups regardless of the value. Every descriptive quality that makes a difference towards selecting a market-leading team should be part of your analysis.

Every bid-result should be used to tweak your rankings so you’re staying current. There’s no sense in inviting a sub who won’t be competitive, or worse, who wouldn’t perform. The entire system should be built to sort a subcontractor list based on the calculated likelihood of each sub being the low-bidder. Not only are these subs the most likely to help you win, they are the most likely to bid the job because it’s what they’re good at.

Reliable Estimating Part 1: Getting stuff out the door!

Pat’s really cheap on jobs that don’t require pants

I would recommend using a spreadsheet based system for this. Whatever can be done to format the output to match the ITB template will prove helpful. Building a worksheet which allows the estimator to select the job-specific qualities will leave the estimator free to consider what the job needs, rather than populating their sub list. If the job aligns with your job-tracking recommendations, it won’t be difficult to come up with the right subs. Chasing work that’s a bad fit for your subs shows up as low probabilities for everyone. That’s a strong sign you’ll lose the bid unless you find some new subs.

The hidden catch

Since this spreadsheet system is based on data you generated, it’s very critical to differentiate between internal and external perspectives. The GC estimator has very accurate bid-results on all their subcontractors. This internal data is your version of what happened. Unless you won the job, you aren’t looking at what happened on the market. What you must learn on every job you’ve lost is which sub was contracted for each trade. This external data will tell you with confidence which of your subs were market value, and which subs you need to add to your invite list. External results are much more significant than internal.

Even if you don’t know much about the sub, you do know all the descriptive qualities of the job they won. Entering what you do know about these subs allows you to run the probabilities and determine when it’s time to contact them. If they’re fiercely loyal to a competitor, you’ll know which jobs are going to be harder to win as a result.

Some throughput suggestions

If every job generates an estimate, it also generates a list of subs which can be ranked. Smart estimators will notice that it’s entirely possible to simply add your winning competitors sub to your sub rankings and list them as “low” when you don’t know their actual bid amount. This adjusts your job-level output to reflect the external market outcome. By not obsessing about dollar amount, you’re free to track by job descriptors which you can accurately define.

Reliable Estimating Part 1: Getting stuff out the door!

“Spiraling descent into madness” may describe a lot of jobs

Every estimate is for a job which has those aforementioned descriptors so useful to sorting subs. Estimate tracking for the GC is vitally tied to sub performance, all of this information serves that purpose.

Estimators should make their estimate template so that a separate worksheet is populated with the ranked subs and the job specific qualities.

Copying that worksheet into the sorting database file allows you compile trending data on all of those data points.

Making it easier to move this information around, makes it more likely that it will be done. Having a job-specific bid-list of bona-fide market leaders on day one is going to significantly increase your hit-rate which means you’ll be able to bid less often. Which means you’ll have more time to perfect your craft. None of that happens if you’re stuck updating spreadsheets for hours after every bid.

Reliable data relies on short memories

Big-data projects get out of hand quickly. The relevance of historical data falls off quickly beyond one year. Most construction work is seasonal, so last month is potentially less relevant than this quarter of last year. It’s useful to “freeze” weekly, monthly, and quarterly databases by saving locked copies separately on a server. Whenever you do a weekly freeze, take the calculated output of your week’s worth of bids and start the next week with that as your first bid. By never carrying more than one week’s worth of bidding in the database you’re able to re-create any files that were corrupted with a minimum of fuss and bother.

After a year’s worth of records, your weekly update would have the previous weeks rollover plus last year’s data for that week. You might run a bid-list search and be reminded of a sub who fell out of touch. GC’s who decide to re-visit an old revenue stream would be able to call up whatever year they were last doing that work. Old allies are better than cold calls.

Useful tools work in many ways

Take this concept and apply it differently, if a GC created a subcontractor pre-qualification form which helped to rank them according to their relevant job metrics, they could do a bid-list search based on that feedback. Appraising the new sub in the context of existing subs could provide meaningful comparisons and insights into how they might work out. Taking a different tack you could search your estimate tracking to see examples of past bids that were well aligned with this subs metrics. Lots of subs will be a poor fit to the work you’re pursuing. Being forthright about their odds and the frequency of relevant opportunities shows respect for their time, and keeps you focused on fruitful pursuits without offending anyone. Giving everyone an equal shot at wasting their time doesn’t breed loyalty. Calling them when you’ve got an awesome opportunity does.

Reliable Estimating Part 1: Getting stuff out the door!

They’ll love you for it!

Speed is your friend

Estimators are constantly interrupted by demands from projects that are all in different stages of delivery. Getting distracted at crucial steps is where lots of mistakes get their start. It’s therefore critically important to reliable estimating to work quickly and systematically. Every repeated process should have a systematic approach that’s complemented by templates, spreadsheets, and databases that are all built for speed and reliability.

People are very adaptable which can often cloud judgment about what’s faster or more reliable. Programs, databases, templates, or spreadsheets that force you to search through long lists for basic and repeated stuff are wasting time. Just because some program or spreadsheet has “always had” some quirk, doesn’t mean it should remain. It’s far better to have a short list of stuff you’re always using, than a long list covering every eventuality. Buried information is wasted time.

The estimator who can get their team rolling on an opportunity in less time and without skimping on information will have better coverage on bid-day. Bureaucratic estimators often take exorbitant amounts of time to get their invitations out to subs. Subs facing short deadlines and slow-moving GC’s are more likely to decline the invitation because it looks like that GC isn’t committed to winning.

A late hit is better than a fast miss

It takes a lot more work to fix miscommunication than it should. A typo may attract hundreds of emails asking the same question, even if you sent a clarification moments after it was initially discovered. Lots of contractors adopt a “do what I tell you” philosophy with their subs. If your instructions aren’t clear, the subs have little choice but to ask you about it. If their questions aren’t answered, they may withhold their bid until you call looking for it.

My next post will pick up from the ITB and will cover how to increase reliability in quantity take offs, communications, plan changes, bid scoping, and so forth.

 

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© Anton Takken 2015 all rights reserved

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November 4, 2015

Stuff nobody will tell you about estimating

By Anton Takken

I suspect every profession has a few hidden qualities you wouldn’t discover until you’d been at the job a while. Estimating has some interesting features that can really make or break your chances of success, provided there’s somebody to point them out to you.

Speed is your friend

On the surface, estimating seems to be about careful measurements, considered accounting, and an overwhelming obsession with minute detail. In practice, successful estimating is about time management. General Contractor (GC) estimators are responsible for getting the information out to their subcontractors (subs) as well as getting the subs questions answered by the design team. Every problem needs time to resolve so it’s really important to maintain rapid communications during the bid.

Stuff nobody will tell you about estimating

Mobile office solutions, speeding you on your way to the next crash…

It’s really tempting to silence your phone and ignore your email for a few hours to get something done. Which leads to the next item…

Leadership is more important than takeoffs

If your estimate relies on sub or vendor quotes, your first priority should always be to providing direction, insight, and encouragement to those bidders. Specifically, your efforts should be directed towards finding a unique and advantageous approach to the project. Ineffective estimators tend to assume that there’s something special about their company that will ensure that bidders will give them their best efforts. In a vacuum of leadership, subs will hedge towards protecting their own interests which never means low prices.

Perspective, then persistence

Hard work and persistence are admirable qualities that absolutely will not lead to success on their own. Lots of estimators assume that bidding and winning have a cause and effect relationship. It’s true that you can’t win if you don’t bid. However the reverse is not always true because there are insincere/unfunded clients with projects bidding that have no chance of being awarded. Sadly these clients consume the lion’s share of the slow market. While they can occur at any level of the market, these clients tend towards the bottom strata wherever they appear. They can be identified by their incomplete plans, short deadlines, multiple alternates, and resistance to answering questions. Everything is supposed to start right away despite the lack of permits, or even plans that would pass building department review. These clients range from uninformed neophytes, to jaded negotiators. What they have in common is the general belief that they don’t owe the low bidders a contract award in exchange for the free bids.

In the worst cases, the client will use the proposals to inform their negotiations for bid shopping. “Helping” an unethical client to award your competitor is a destructive use of your time. Morally flexible estimators might think it’s great to be the person such a client calls to “negotiate” with. Clients who bid shop are cheating all the companies who bid in good faith.   These negotiations open with two assumptions; the client is never fair to their contractor, and they think you aren’t smart enough to see that.

Any estimate that will not lead to contract is a waste of time. Better estimators don’t make better clients. Until such time as estimators can seek recompense for time wasted on feckless clients, we must protect our companies interests by declining to bid. In hard times, the estimator must be prepared to accept that this means precious few real opportunities will exist. This reality escapes those consumed with hope that behind every half-baked set of plans lies a great opportunity. The fact remains, when the good clients exit, the market declines. Down markets always have lots of terrible clients wasting everyone’s time with profitless jobs that rarely happen. It’s the only time they can attract bidders.

Stuff nobody will tell you about estimating

“Attention everyone, ship Desperation is now boarding..”

There is no market for bad news

Estimators looking to trade publications, and mass-media for relevant information on their market are bound to discover that there are precious few articles that will admit when things are bad in the present. Unless the article is written to influence an election, you can count on the article to refer to bad markets in the past tense framed in the perspective of steady improvement since then.

Periods of intense bidding with low backlog should indicate that contractors are starving for work and are chasing whatever is out to bid. Often, these times are couched in phrases like “Bidding picked up in the 4th quarter signaling potential growth this spring”.

Once spring rolls around and the summer rush work comes out to bid, these articles will say “Despite holiday season slow-downs, construction steadily climbs”.

This optimistic world-view is on display whenever you talk to other estimators. Go to a job walk and eventually you’ll hear someone ask; “You guy’s staying busy?”. With rare exception, the response is merely a list of the most impressive sounding projects that estimator won within the last nine months or so. Nobody likes a downer but it’s important to understand that what you’re hearing is not the entire truth. Estimators must learn to look beyond what’s said, and listen for what is missing.

If you’re struggling to land work, consider what you’re hearing from others. If the projects listed at a job walk are all finishing up, that’s a strong indicator that new victories aren’t newsworthy which may suggest that your problems are shared. Subs bidding to GCs should pursue bid results aggressively. GC’s are often more candid about the client, and the market after they’ve lost a bid. Estimators who speak truthfully and share what they see often benefit from information shared in kind. GC estimators are often listening intently to the nuance of what their subs are telling them. Don’t get too involved in trying to appear strong when you’re trying to find work.  Posturing sends the wrong message.

Decisions define us

Estimators exist because it’s not possible to simply “add everything up” like a cashier. Simply put, estimators must make decisions about what to do when things aren’t perfectly clear. The lack of information is a risk, making a decision on how to handle that risk means you’re accepting responsibility for the outcome of that decision. It’s easy to see that decisions based on the worst case scenario is the most likely to add money and time to your estimate. GCs who habitually sandbag their estimates are communicating their priorities. Competitive sub bids will go where they won’t be squandered.

While on the topic of unclear plans, it’s worth commenting on motivations. Missing, incomplete, or contradictory requirements may be a symptom of design team motivations. Estimators who’ve reviewed plans from a design-build project may notice that the plans have far fewer notes, and shorter specifications than projects developed for hard-bidding. Design professionals working on hard-bid projects are primarily concerned with their liability.

Design teams know that budget blowouts are a frequent outcome of bidding. Costly items are often sparsely mentioned on plans in the hopes they’ll be overlooked by the contractors. These buried notes are an owner-placating feature that the designer is trying to buy with the contractors money.

Stuff nobody will tell you about estimating

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Their decision to be predatory speaks volumes on their character. Exposing these traps through Request For Information (RFI’s) is how you can control risk without losing the job.

The advantage of ethics

Dishonesty is rampant in the construction industry. Incomplete plans labeled “100%”, or unrealistic schedules, are simple examples but this issue runs deeper. Information is withheld simply because it’s less risky to remain silent.

Bid results are traditionally provided upon request.  In practice, this typically means the GC estimator plays “keep away” with the information until it’s all but assured that the sub will never profit from it. Some GC’s are so focused on their own interests that it borders on cruelty. Providing bid results is seen as additional work that only benefits subs.

The deal offered to subs is to either award them a contract or furnish them with bid results in exchange for a free bid. GCs should promptly and publicly furnish this information to recompense subs for their bids. Better informed subs deliver better bids.

Acting ethically can present huge advantages beyond good-will. Trustworthy estimators benefit from stronger relationships with their vendors and subs. There’s less risk in working with honest people, lower risk means lower prices, which means you’re harder to beat and more profitable than your competitors.

It won’t do much good to pursue the bottom of the market with high-minded principles. However an established reputation for fair-dealing has a way of opening doors to quieter opportunities. The very best clients choose to work with honest contractors. There may be fewer opportunities compared to the hardscrabble market. However the work you’ll land is more successful, and reliably profitable than the high volume of profitless work out for public bidding.

Good estimators have pull

With all the information going back and forth, it’s easy to overlook a vital aspect of an estimators craft. GC estimators rely on subcontractor proposals to help define, describe, and value the scope of work. Attracting market attention is a function of a good opportunity, minimized risk, and profitability. Market leaders will avoid unprofitable, risky, or difficult projects. As an estimator it’s easy to think that the project’s intrinsic qualities aren’t under your control. To be sure, there are definite challenges in bidding ugly work.

The estimator must understand why they’re pursuing a project. Simply grinding out bids because a Request For Proposal (RFP) landed on your desk is what I call bid-milling. Bid-milling is the practice of chasing everything in the hopes that higher volume of bidding will create profitable wins.

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It’s not a good look

This never works because each firm will be a market leader for specific opportunities. A contractor with a high volume of losses communicates that they’re not a real contender. The market-leading subs won’t waste a bid on GC’s who aren’t sincere about winning.

A GC estimator needs to understand that a mediocre project with a good client can be made into a profitable and low-risk opportunity through their leadership. GC’s who habitually work for good clients naturally attract market leaders. Contractors with a history of well-managed and reliably profitable projects are able to reduce the risk of less professional clients and their design teams. All of this starts with the estimators commitment to controlling risk.

Estimators who pursue good opportunities with accountable leadership, ethical dealing, and meaningful feedback are more successful than their competitors because they are the professionals, that everyone wants to work with.

I encourage you to consider those actions carefully. These simple actions are profoundly rare in professional estimating because most folks think their situation is different, therefore some aspect doesn’t apply to them.

Success in this craft requires clarity and intent above all else. There are no shortcuts with something this simple.

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© Anton Takken 2015 all rights reserved

 

 

 

 

 

 

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