No matter what is considered the amount of materials versus the labor, the ratios will vary.
Experience indicates that there are no hard-and-fast percentages, unless the statistics are sorted according to the type of work and several other factors. Materials and their prices are not a small part of the estimating process.
Materials can generally be divided into two distinct sections: quoted and nonquoted. Within those classifications are further subdivisions, which vary.
Whether the estimator uses a hard-copy or a computerized pricing system, an exact description via a catalog number is critical for establishing a price that will benefit the estimate. The estimator’s task begins with the specification review. If a choice is given among several catalog numbers, select the lowest-priced unit that will meet the project requirements. Also, consider the availability of the items in the project’s geographical area or in your purchasing locales.
Assembly units and other materials need to reflect the specific product, rather than a generic description. This should also apply for over-the-counter items bought for the project to protect you from getting the high-priced unit, rather than one less costly that will meet the job requirements. Using catalog numbers is one way to ensure that the correct materials are bought.
Computerization has brought along the product code, which is applied to each specific item produced by each manufacturer. While these numbers may be cumbersome, their use ensures the correct selection of materials.
Quoted materials require detailed information. This requires an accepted take-off method so the manufacturer ultimately produces the required price and product.
What is the best method to get these prices? One path is to call in the distributor and manufacturers’ representatives and let them make their salient take-off. The other is for the estimators to make their own take-offs and submit them to the distributors for quotation. Both methods have built-in traps. My preference is to combine them, which provides the answers needed to apply the correct labor to a bulk item quote.
Another reason for the estimator to prepare a take-off is that a lump-sum price will not provide a reasonable basis for an accurate labor application. There seems to be a differing attitude regarding switchgear, yet the same problems exist. Switchgear quotations based on a manufacturer’s listing may not include all required items. The estimator’s take-off of the items will represent the project needs. This is especially confusing when getting those last-minute telephone quotations.
Unless we’ve had extensive experience, there is no way of knowing if there are similarities between what was asked for and what was quoted.
A further benefit of making an in-house gear take-off is that the labor application becomes more defined. Multiple sections of switchgear are usually not identifiable from a manufacturer’s quotations, yet there is added labor. Other cost items, such fuses or other accessories, are often not included in a manufacturer’s quotation, although they need to be bought and installed.
The last-minute crunch for estimate preparation includes sorting out the various quotations from several sources. These prices are usually delayed because there are too many lapses of confidentiality, which result in increasingly shorter time periods when “price peddling” can be prevented. Your major defense is to set up estimating procedures so that all the known factors are included and brought to a bottom line.
Next, calculate a percentage multiplier to add or deduct on the known items to be used when the final materials prices are sorted out. Depending on how many sources are used to get quotations, they should all be listed on a sheet to allow for comparative sums.
Though such a sheet may indicate a tendency to “cherry pick,” estimators should realize that continuous bargain shopping would eventually result in higher quotations—distributors are not naïve.
The discount percentages applied to over-the-counter items that are subject to pricing from pricing services, as well as to some quoted materials, can cause errors. In a recent meeting, a well-educated individual summed up that discounts of 10, 7, 15, and 7 percent equal 39 percent.
If, however, the discounts are applied progressively, or compounded, the same percentages would amount to 44.8 percent. Prices may be based on a published standard to which the supplier may apply a percentage multiplier.
Further discounts may be applied if bills are paid on time. So, on a $100 purchase with a 30 percent discount, the price would be reduced to $70. If a further cash discount of 2 percent is applied, then the net price would be $68.60, while a 30 percent plus 2 percent or 32 percent would indicate a price of $68, leaving 80 cents, or less than one percent in suspension.
These figures multiplied for a large project become larger sums. The percentage game is a serious one, and each estimator needs to sharpen his or her skills in this area.
DAVID is a professor of electrical technology at Long Beach City College, Calif., and a consultant, and expert witness. He can be reached at (562) 597-1877 or by e-mail at firstname.lastname@example.org.