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.
This column’s headline might initially turn many people off. Estimators will probably mumble that accounting has nothing to do with estimating. The realities are that understanding some accounting principles is essential for providing an all-inclusive estimate and producing a bid document.
Avoiding costly surprises with a bid requires some precautionary diligence. A complete estimate and followup on the job after a successful bid are parts of the equation. Understanding and noting out-of-the-ordinary costs is the balance of the formula.
Much project estimate information can be readily gleaned from the plans and specifications, but some requirements are hidden in “boilerplate” wording of the contract documents. A typical area that is often left in limbo is the utilities that are to be connected to the project.
Taking literary license from real estate, to a contractor, the most critical issues are documentation, documentation, and yet more documentation. While there is a practical limit, efficient means of recording information are readily available and increasing daily.
Continuing with the effect of changes on a project, unforeseen labor difficulties may be an item whose extended costs can be recovered, albeit with more difficulties. Obviously, any problems that may lead to a change must omit those created by the contractor’s own forces.
In the estimating process, quotations of specialized large-quantity lot, or project-specified materials will put the estimator in touch with the firm’s suppliers. Some contacts will also originate in the purchasing department.
A survey states that electrical contractors buy over 90 percent of electrical materials.Cooperation between these parties is required to get these materials to a project. Electrical contractors determine the type and brand of about half the materials purchased.
Unlike an electrical apprentice, who follows a finite curriculum and training termination, estimators have no such benchmarks. Instead, an estimator’s value is calculated from many points of interest, which places a burden on the estimator to continue training.
If your estimate has followed any organized standard, assembling the factors should be less confusing than it is to those starting from scratch. Investing minimal time earlier to organize the estimate can make the final price one that the estimator can support.
There’s a thin line between overhead and direct costs in project estimating. Further implications exist in those direct costs that relate directly to project coordination. Many factors cause price fluctuations on the same project depending on the expected efficiencies of administering the project.
When we began discussing overhead last month, we recognized that a number of variables affect the recovery of overhead expenses, and also that overhead expenses not only depend on contractor size, but also on operational efficiency.
When I first heard the expression “making the nut,” I wondered what it meant. Then, after watching a squirrel store nuts for winter consumption, I realized that this action depicted the operating costs also known as overhead.