In my April column, I covered the material and direct labor sections of a recapitulation. Here, I finish the other sections and finalize the bid.
The quotation section of the recap is where you record the quotes you receive from material vendors for items such as lighting, lighting control, switchgear, generators, cable trays and bus duct. Remember to solicit for quotations as early as you can since vendors need time to prepare quotations.
Also, I advise you get at least three quotations for each type of material because vendors may have different pricing. This also protects you if a vendor decides to not quote the project at the last moment. Finally, check the accuracy of the quotations. Are they including everything you thought they would? Vendor mistakes are not uncommon.
I learned this lesson the hard way. My fixture submittal for a project was rejected because the fixtures were required to have an extra-thick lens. The vendor refused to cover the cost because I had not provided the specification to him. This mistake cost me $3,600. Always send the relevant plan sheets and specifications out with each of your requests for a quote.
The subcontracts section is where you record quotations from companies that will work for you. These quotations include items such as trenching, high-voltage terminations, lightning protection and third-party testing.
Low-voltage work, such as fire alarm, security, data and communications can be either a quote (if you are making the installations) or a subcontractor (if subcontractors are making the installations). Again, solicit for multiple quotes from subcontractors as soon as you can. It is very important to review the scope they are including in their proposal because you will need to cover anything that is missing.
Many projects require that you rent equipment. Some common rentals include a storage container, scissor lift, forklift, office trailer, portable generator, hydraulic bender, backhoe, ditch witch, forklift and crane. If you are required to pay taxes on rentals in your location, include them in your recap. Ensure you also include transportation costs for rentals. For instance, storage containers are often quoted at approximately $250 per month, plus $50 for the first and last month.
Indirect labor costs
This category includes labor costs that support the installation of the electrical materials including supervision, project management and a nonworking foreman. Larger projects may have other on-site employees, such as an estimator, engineer or AutoCAD operator. These hours are not included in your estimate, so they should be added to the recap in this section or the overhead markup. Most small companies cover these costs in an overhead markup, which is discussed below.
Direct job costs
For electrical construction, direct job costs are those required to support the project’s construction. They commonly include permit, telephone, job site trailer utilities and expendable tools. Some companies also include a truck expense in this category.
In this section, all the costs listed above are added together to arrive at the raw, or prime, costs. This is the cost to finish the construction in the field.
However, it’s not what keeps the office open. That is what the overhead markup is for. This markup includes, but is not limited to, building rental or lease, insurances, office employee costs, business machines, office supplies, furniture and utilities. This markup is easy to calculate for the previous year, but it can be more difficult to calculate for the next year. If you have some large expenditures coming up, such as new vehicles, new hires or a move to a larger office, your overhead will increase. I suggest working with an accountant to make a determination for the overhead markup required to keep your doors open.
The profit markup covers at least three items. First, the owner’s compensation. Years ago, I was arguing with an employer for a lower profit markup for a project I wanted to win more than usual. He said, “If I cannot make more on this project than the yield of a treasury bond, I may as well close the doors.” I got the point. Profit can also cover increasing cash reserves, which are very important to a company’s financial health. The profit can also cover bonuses, which, speaking from personal experience, can make an employee’s year.
Header image by Shutterstock / Hyejin Kang.
About The Author
CARR has been in the electrical construction business since 1971. He started Carr Consulting Services—which provides electrical estimating and educational services—in 1994. Contact him at 805.523.1575 or [email protected], and read his blog at electricalestimator.wordpress.com.