For each forward-looking company that embraces building information modeling (BIM), tablets and time-capture technologies, there are two or three who still use spreadsheets to estimate and paper for daily reports and timesheets, according to a survey, “The 2012 Construction Estimating Benchmark Report,” about estimating software conducted by SoftwareAdvice.com.
Houston Neal, SoftwareAdvice.com’s director of marketing, announced the survey on the website in May. According to Neal, the survey reached out to contractors, estimators, building owners and others about their estimating processes. More specifically, it delved into what respondents were using to bid projects and how those methods were performing.
“Our mission was to establish industry benchmarks that can be used to gauge the efficiency, effectiveness and performance of cost estimating systems,” Neal writes.
Of the approximately 100 survey participants, about half were contractors earning less than $5 million per year, and about one-fourth were firms with annual revenue of more than $100 million, which is relatively representative of the industry.
Getting into the results, Neal writes, “The majority of participants use spreadsheets and software for cost estimating. While the verdict is out [on] spreadsheets, the majority of estimating software users say their systems are working” (see Figure 1).
Barry Cassell, CEO of Cassell Consulting, a construction training and consulting firm, analyzed SoftwareAdvice’s survey in a blog post. Cassell writes: “The survey revealed that the leading estimating software isn’t estimating software at all, but good ol’ spreadsheets. While that is not surprising, it is, in my opinion, more proof that we are in a very conservative industry.
“If your company does use a dedicated estimating system, kudos on being in the game. Regardless of which brand your company chooses, I would argue that any of the top choices is better than spreadsheets. I would say that you can’t make a mistake to buy one, and the critical inch to successful implementation of that system is management’s commitment to the process, and to require that personnel embrace its adoption,” he writes.
Cassell writes that the survey showed that 50 percent of the diehard companies still using spreadsheets reported dissatisfaction with their results, compared to only 20 percent of the companies using estimating software being unsatisfied.
“Overall, companies that participated in our survey win 33 percent of the projects they bid on,” Neal writes. “However, those that use estimating software produce faster and more accurate bids. They overestimate less than 35 percent of the time, and underestimate only 5 percent of the time. On average, it takes them 8.5 days to turn around a bid while it takes spreadsheet users 10.5 days.”
As Cassell writes, “while the percentage of overbidding was equal among systems and spreadsheets, the percentage of underbidding was triple among the spreadsheet crowd” (see Figure 2). Underbidding can often be costly, as contractors may secure work but actually at a loss. Reliability in bidding accuracy could be the best reason to invest in an estimating system.
Cassell offered an example of a time when not having estimating software hurt his bid: “Early in my contracting career in Hawaii, I was successful bidder on a project, only to find that a line in my spreadsheet that appeared to be in the total, wasn’t. Ouch. And that amount was coincidentally the cost of the estimating software that I hadn’t purchased. The following week, the company’s checking account was $20,000 lighter, $10,000 for the missed bid item and $10,000 for the software I’d just purchased, determined that it would never happen again!”
The SoftwareAdvice.com survey featured top estimating challenges and priorities, the most difficult costs to estimate, the benefits to using software, what causes the most errors, and a few more.
Cassell was surprised that the most cited cause of estimating errors was material price increases, a prevalent issue before the recession. He writes, “There were months when steel, copper, drywall, and pipe prices were so volatile that construction contracts often contained material escalation clauses, which spread the risk of the rising commodities. The recession cooled most of the erratic and unpredictable material spikes, so it surprises me to see that factor leading the list.”
Overall, according to both Neal and Cassell, the survey provides support for estimating software being worth its up-front costs, as it saves money in increased productivity and reduced error frequency.
Check out the full survey results at blog.softwareadvice.com. Select “Construction” under the “Blogs by Market” drop-down menu.
This article was edited by Electrical Contractor staff.