The last line of the estimate is the most complex Picture this: The estimate is complete, including all direct and indirect costs, and overhead and net profit have been calculated as well. Any applicable additional taxes have been added to the bid.
Contractors’ feedback in the preparation of NECA’s Financial Performance Report (Index #1055) indicates that project costs divide among three major divisions. In general, the job costs will generally consume about 60 percent by way of material and labor costs.
Once upon a time, as fairy tales go, designing engineers produced workable electrical plans with very few errors. Of course that was when the average electrical project amounted to a mere 5 percent of a project’s overall costs.
Like many a novice, overworked contractor, I once found myself spread out on the dining room table making a takeoff when my teenage daughter asked if she could help. My first inclination was absolutely negative, but then I figured she could count symbols too.
In the past, the headline on this column would have turned off most estimators from reading further. They would have claimed this as part of the controller’s job. The facts of life, though, are that reviewing estimates before they become a binding bid is a relatively painless and simple procedure.
Most of what project estimators work on resembles what they will be working on in the next six to nine months. But what of those longer-term projects? How can labor and material predictions be sufficiently accurate to cover such periods and ensure that the project will benefit the contractor?
Most contractors fail to assert their rights on projects when added costs are incurred. Instead of commencing the change order process, most contractors hope to reach an amiable agreement after the job is completed.
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.