I have been told there is a coming storm in the electrical construction industry of which the impact will be felt far into the future. It’s the loss of our trained labor force. Many workers soon will be retiring—I’ve heard more than 40 percent—and apparently there will not be enough younger-generation electricians to replace them. If this is true, your company soon may find itself with a limited work force, which could prevent you from bidding many projects simply based on size, duration and schedule.
The requirement for performing a value engineering (VE) estimate is almost a given these days. In fact, it usually is a line item on the bid form. But even when it isn’t, should you perform one anyway? Why would you spend the time doing this? After all, it’s like performing twotakeoffs at once. Who has time for that? Then again, who has access to an unlimited labor force?
When your labor force is limited, you may need to VE estimate a project simply to find out if you can actually build it on time. Taking on a project your company can’tbuild on time could potentially cost you serious money. Liquidated damages, legal fees, overtime costs—all very expensive and probably not carried in your current “per spec” estimate.
Even if you already factored for the additional costs of overtime labor, it can result in the overworking of your electricians and project managers. This, too, can have costly impacts to your other contracts. The result: You potentially could be losing money on more than one job. Additionally, a late job can ruin your client’s trust in your company’s ability, which can lead to a lost client (aka more lost money).
But how will you know on which bids to pass? Maybe it simply will be a decision of size. Concerned if you win a big one, you won’t be able to build any others—all your eggs in one basket so to speak. But you could be passing on great projects your company actually could build profitably. What if you didn’t have to? What if you could VE estimate the project and figure out how to build it better and faster, using less labor? You’d save the labor you don’t have.
As you review your next bid project, immediately asses the potential size of your contract. For electrical, 20 percent of the total project budget is a relatively safe place to start. Of course, this depends on many factors—so be smart and try to verify this by determining how much of the total project is electrical. Then, find out the duration and phasing, if possible. Try to assess how many man-hours you may need, how many electricians, crew sizes, etc.
Once you have a decent idea of what the project might require, you need to know and factor the status of youravailable work force, e.g., what jobs they are on now, how long they will be on those jobs, when they will become available and how much time they could put into this contract. Also factor in the potential for—or lack of—new hires.
After an hour or so of burning adding machine tape, you may come to realize that even if you win the bid, you wouldn’t be able to man it properly, unless you find ways to build it faster. This is where VEestimatingcan become a determining factor.
The first place to look is labor-saving products. However, you need to determine which ones you can use and on what installations. How strict are the specifications? What will the engineer let you use? Have you worked with the city’s inspectors before? What will they let you use? (Just because the National Electrical Code says you can, doesn’t mean you can everywhere). What about the owner? What will he or she allow in the building? A few RFIs may provide answers.
The early days of VE simply used to be “put everything you possibly can into or under the slab” (sometimes it still is). Then the standard became swapping out as much EMT and No. 12 solid as possible with MC cable. Subbing the fixture package often helped, but that really just takes margin out of your material markup. Cheaper fixtures aren’t necessarily faster to install. Today’s VEmethods offer many choices and multiple levels of re-engineering a project. There are many more labor-saving products on the market today, and most are widely accepted by engineers and inspectors.
Don’t give it all away!
In my opinion, there are two schools of thought on VE estimating. One involves saving the client money, which is a good thing. The other involves building the project with less manpower and increasing the company’s margin, which is better. In the “less man-power” scenario, don’t be so quick to give back all your savings to the client. You should sell your client on the value that your company can complete their project on time and within their budget, both of which are better for them than just saving money.
VE has been done for many years, mainly because the client is asking for ways to lower his or her price (as if it isn’t too low already!). Today, it’s practically a necessity for beating the competition. As we march forward into the coming storm, it will simply be a necessity just to get the jobs built. EC
SHOOK is the president and chief estimator for his estimating company, TakeOff 16 Inc. He has worked in the electrical construction industry for more than 18 years. Reach him at 707.776.0800 or sfs@TakeOff16.com.