In a previous column we discussed work load management as a basic requisite for keeping your company on an even keel through these challenging economic times. The next basic, perhaps the most important one of all, is estimating.
To use a construction metaphor, you can't erect a sturdy building without a solid foundation. No matter how pretty the finished product looks, without a solid base it can tumble down in a heartbeat. The estimate is, or should be, the foundation of every job you have, large or small. Not everyone believes this to be true, but I hope to have at least a few converts by the end of this column.
There are various estimating methods employed in the trade today; there is the per foot and fixture method, the modular method, the detailed takeoff method and the weigh the plans method. So what is an estimate exactly? An estimate is simply an educated guess of a project's costs based upon available information. It includes or should include an accurate quantity count of all material, labor, sub-subcontracts, overhead and profit for any given job. An accurate material takeoff is a must. A solid knowledge of your crew and how much work they can produce in any particular phase is another. Although all computer estimating programs all use a variation of the standard labor scale, they are usually inaccurate on the high side and must be adjusted manually by the estimator to reflect actual man hours for any given phase of a project. Sub-subcontractors such as excavators, saw-cutters/core drillers or concrete patchers can give written quotes for a particular project or a price per unit that is easy to include in your takeoff.
Whether you use a computer program or do the takeoff manually, the important thing is to include as much detailed information as possible about what it will take to put the job together in the real world. Peripheral information such as allowing time for long lead items, specialty inspections (medical gas piping certifications, etc.) and phasing delays (pulling a crew off a job to allow other trades to work, and then remobilizing on the project) should be assigned a cost and accounted for in the estimate.
Once you have the estimate
Once you have a complete and detailed estimate, you have much more than the approximate costs and expected profit margins of a project; you have a foundation that will underpin all parts of the entire project, large or small. For example, most general contractors and architects require the standard AIA form 702/703, or variations thereof, for payment applications. These forms detail the estimated dollar amounts to be billed for each phase of a given job. If you did your takeoff by phase (which is the best way to do an estimate in my opinion), you will have all material, labor and sub-subcontract costs for each phase at your fingertips. Add in profit and overhead, then plug those numbers into the 702/703 form, and you've got all your billing for the entire project right in front of you. Walking the job with the project manager is all that it should take to achieve agreement of percent complete for any phase of the job when it comes time to bill. Believe me, the general contractors will think highly of the subcontractor who can provide detailed and accurate 702/703 data. After all, they have to sell it to the architects and owners to get paid too. If you provide an accurate and detailed payment application, you are less likely to have it reduced by fiat of the powers that be.
If you are accurate in your material takeoffs, you can use your estimate to get quotes from several suppliers or to have materials or long lead items bulk ordered and available when needed, as well as keeping track of what materials are ordered for which job, making cost control much easier. Change orders also become easier to price and justify. We all know how much haggling there is over change orders. Shift the advantage by providing detailed information regarding even the smallest change orders. You can show the contractor or the architect your consistent methods to prove the costs of the change order rather than have to defend the costs of every item. If you produce a professional estimate that is the same for each change order, you are harder to argue with.
The estimate as a touchstone
After all is said and done, a detailed estimate will keep any project on track and profitable by using it as a touchstone throughout the course of the job. You will also be able to answer a variety of questions during a project. Want to know if you overestimated or underestimated copper tube? How much labor was there in the top-out phase? Did your excavation estimate come in high or low? Was your overhead percentage accurate, too fat or too thin? Did you hit or exceed your profit margin? All this information, and more, is at your fingertips if you start the job with an accurate estimate. At any point during the course of the project you will be able to quickly retrieve important data from the estimate and use it to guide any project to a successful and profitable conclusion. Which brings us to the next basic: Inventory control.
The Brooklyn, N.Y.-born author is a retired third generation master plumber. He founded Sunflower Plumbing & Heating in Shirley, N.Y., in 1975 and A Professional Commercial Plumbing Inc. in Phoenix in 1980. He holds residential, commercial, industrial and solar plumbing licenses and is certified in welding, clean rooms, polypropylene gas fusion and medical gas piping. He can be reached at [email protected].