This article in the series concludes the discussion of the differences between residential and commercial electrical estimating. 

Need to catch up on this series? Read part 1, part 2 and part 3 now.

At this point, we have finished counting and measuring (taking off) the electrical plans for our commercial project estimate. We have also finished breaking down the takeoff into its component parts and have listed those parts on a pricing sheet. Finally, we have added material prices and labor units as well as performing all the mathematical calculations to come up with totals for material dollars and labor hours. Now it is time for the recapitulation, or recap.

The recap

The recap is where all costs not calculated on the pricing sheets are added to the estimate to come up with a total sell price. When I was preparing estimates without a computer, we used a preprinted form for our recaps. As soon as I started using computer spreadsheets, I recreated the recap as a spreadsheet to easily perform the mathematical functions. In addition, I recreated the price sheet in the spreadsheet software.

The first step needed to complete the recap is to enter the total material dollars and labor hours on the form. There are about 10 rows for adding totals from pricing sheets. Next, an area is provided to convert labor hours to labor dollars. There are about a half-dozen rows for this function, so you can list rates for different levels of electricians, such as apprentice, journeyman and foreman. Hours are assigned to the different rates until the total hours for the project are assigned to the various types of electricians.

Next, there are sections to add costs associated with other sources, including vendors, subcontractors and rentals. The vendor section is where we add quotes for lighting, switchgear, generator and similar items. The subcontractor section is where we add quotes from companies that provide specialized material and labor, such as fire alarm and communications. The rental section is for items such as cranes, aerial lifts and storage containers.

Next is a section called direct costs, which is where you add in what does not pertain to the previous sections, including telephones, permits and temporary power. There are also two lines for indirect costs, such as supervision and project management. Finally, there is a line for miscellaneous materials such as wire nuts, small supports and soap.  

There is one other line for small, or expendable, tools. Small tools include saw blades and drill bits, ladders and other tools electricians are not expected to provide for themselves. The cost for small tools is always 2% of the labor dollars.

Then, all of the costs from the previous two paragraphs are added together to come up with the prime cost, which is the cost to complete the work in the field. Thereafter, we need to add the cost to keep the office open, which is called overhead. This markup covers everything related to the office, such as rent, employees who work in the office, vehicles, business machines, office supplies and cleaning services. 

If you are not familiar with what your overhead should be, an accountant can help you. Calculation of last year’s overhead is fairly easy. Future overhead calculations are more difficult, as increases in capital purchases and all other overhead costs need to be predicted. 

The final markup is profit, which is why most companies are in business. Profit covers the owner’s paycheck, cash reserves needed to make the company financially strong and, hopefully, profit sharing or bonuses. The profit markup will be decided by the owner of the company.

In the past, creating and finishing the price sheets and recap took about eight hours. I am certainly glad I now use a computer to make this process much more efficient.

The devil’s in the details

Why do we go through this detailed process for commercial estimating? Frankly, most of the standard methods for preparing a residential estimate are not up to the task of capturing all of the costs associated with the larger and more complex commercial projects. Of course, commercial work can include very small and simple projects that could be estimated with less detailed methods. 

However, most of the commercial work I have performed is better estimated with the line-item estimate methods I’ve written about before. Even a small bank branch can become very complex. For example, there could be multiple systems, scope hiding within the specifications and other details noted on multiple plan sheets to take off.

I learned these ways of working from classes and from my employers. They have resulted in successful and accurate estimates for more than 40 years. They take some time and practice to learn, but they will work for you as well. 

Next month’s article covers the ins and outs of estimating an industrial project.

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