Recent events require some further precautions to be taken when preparing an estimate. Safety has always been a concern that contractors have had to cover as far as a cost basis, productivity and worker morale. Allowances for safety training have taken on much greater cost portions of the overhead and direct costs of a project. Some firms have begun using loss prevention methods and specialized personnel that, while increasing overhead costs, do produce lower insurance rates. Hopefully, the cost factors and resultant savings are a “push.”
In previous years, estimators had to include the cost of checking in at various job sites as well as the cost of transporting workers from the check-in point to the actual work site. These costs vary widely from the run-of-the-mill to the extraordinary costs involved in the training, background checks and check-in procedures at nuclear plants and similar security-sensitive areas.
Estimators should learn about any changes in job site procedures. Other arms of the firm should make certain that workers who are expected to be assigned to security-conscious sites have the proper paperwork required for identity purposes. While the specifications should contain this information, it’s always good practice to verify the finite details with a knowledgeable client company representative.
Most states have or are in the process of increasing workers’ compensation insurance rates. Some states are also increasing payments to injured workers. These costs must be recovered in every estimate, at least from the estimator’s viewpoint. At a later time, others may choose to trim some of these costs to “get the job.”
In clear estimates, the various labor tasks are separated. For example, high time is filtered out because it usually involves additional wage costs. Filtering can save on workers’compensation insurance, because not all types of work or classifications are rated at the same per-hour costs. Just as overtime workers’ compensation rates are based on the hours worked rather than the increased overtime hourly costs, the same holds true for the type of work being done at various times. This is information that should be segregated in the estimate, and then passed on to the accounting staff.
A low-experience factor means lower workers’ compensation rates, which can convert to lower project costs and make the difference when the bids are opened. Firms with low-experience factors transpose lower rates into lower costs because they have had fewer reported accidents. These firms have a distinct advantage over firms with higher loss ratios. These cost factors are not lost on cost-conscious buyers of contracting services. Construction service user organizations, whose membership includes large corporations, are prime candidates for considering good safety records. A good experience factor should be included in every company’s sales-oriented information program. It should also be a positive sales tool to include pertinent safety information in the literature, especially when commendations are received.
Safety has also become a major buyers’ consideration when projects are awarded or contracts enforced. Recently, a firm was removed from a $1.7 million project for, among other complaints, a poor safety record on the job site. In this case, the bonding company was required to take over the project, thereby depriving a safety-conscious firm of a possible profit.
With insurers’ huge losses resulting from Sept. 11, more are tightening requirements. It is imperative that estimators update their cost sheets to reflect probable increases. Multi-residential work has been affected more severely by some of the record claims awarded for defective construction.
Estimators first encounter insurance and safety requirements at the invitation to bid. While insurance requirements are mostly routine and repetitive of similar invitations, the estimator should review them to become acquainted with any recognizable changes. Better yet, the loss prevention manager of the company or the insurers’ underwriter, as well as any necessary legal counsel, should review these requirements. Estimators need to learn about clauses they might find in the special or general conditions of a planned estimate.
As with good tooling, a vibrant concern with safety and its related concerns can yield beneficial projects for the company. An educated work force will result in better safety practices. Much educational material is often available from the insurance carriers. The bottom line is that a safety-minded firm with equivalent field practices can result in a much higher-leveraged customer base and projects. EC
DAVID is a professor of electrical technology at Long Beach City College, Calif., a consultant, and an expert witness. He can be reached at 562.597.1877 or by e-mail at email@example.com.