Is Your Bid Only An Estimate?

As a general building contractor, you know what I would really hate? It’s when you negotiate an easy project to build with a great repeat customer, and after the project is finally completed, you haven’t made any money. The customer trusted you, didn't question your costs and then awarded the job to your company at a fair price. Seven months later, you find out your estimator didn't have enough in the bid for labor or equipment to do all the work required by the contract. This is your worst nightmare! All the effort, time and energy invested building a loyal customer relationship enabled your company to negotiate the project. And now, it is now wasted!

So, you go and ask your estimator ‘what happened?’ He blames it on the project manager, or the superintendent, or the weather, or the engineer, or the city, or bad plans, or his bad childhood! So, what do you do? You can’t fire him. You need to bid lots of work to keep the pipeline full. Now what?

What is your estimator’s #1 priority?

When I speak at construction conventions, I get many different answers to this question. They include:

• Bid lots of jobs
• Get lots of profitable work
• Maximize sub-bid coverage
• Be competitive
• Know what things cost
• Make a profit

I want accuracy!

As a general contractor, my estimator’s top priority is to arrive at accurate job costs. I don’t want our bid to be an estimate of what it might cost plus or minus a percent or two or ten. Accuracy is the key. The only variable on any bid should be the profit mark-up. Excellent estimators know what things cost. Their bid estimates versus final actual job costs don’t vary more than one percent. They look at their past bids and compare them to the final results to see how they did, and then make adjustments for their next estimate. They’re in constant contact with field superintendents, foremen, erectors, installers and crews to review how they should arrive at estimated costs. They continually review labor, material, equipment, subcontractor and supplier costs to insure they know every possibility for differences in jobs they bid. Use this checklist to improve your estimating accuracy:

Accurate Estimating Checklist

1. Accurate Time Cards – Excellent estimators know accurate estimating starts with accurate information from the field crews who actually do the work. Step one is to insist your timecard is divided into the cost codes you want to estimate with and keep track of. Then, it’s the estimator’s responsibility to insure field workers and foreman are filling out timecards correctly. Regularly meet with job foreman or field superintendents to make sure the time shown is for the work done in each category. This will insure accurate job history to refer to on the next bid.

2. Accurate Labor Burden Rate – Do you know how your labor burden rate is calculated? Is it accurate or an approximation of what your accounting department thinks it should be? An accurate labor burden rate is essential for accurate estimating. If your rate is padded, you are too expensive or if it’s not complete you’ll bid too cheap. Each employee has a different rate based on their age, dependents or tenure at the company. Review all of your field employee’s burden raters for accuracy and be sure to include accurate: taxes, worker’s compensation, medical, liability insurance, vacation, union dues, safety training, small tools, overtime and down-time.

3. Accurate Crew Bid Rate – Excellent estimators use different crew rates to bid different projects based on what or who the job needs. A crew on a difficult job needs more experienced people, while a larger simple project can use less trained crew members. Figure different crew sizes and make-ups to determine your accurate man-hour crew bid rate. I like to calculate bid rates for 2 man, 3 man, 5 man and 10 man crews. You will find your bid rate varies considerably for different crews and teams.