Strategies abound for stabilizing and growing an electrical contracting business. One in particular has worked for me: specialize. Leverage existing skills, or learn new ones that make your company better than the competition.
One of the questions I ask when starting work with a new customer is: “What are you good at?” The answer is very important to me as an estimator because it reveals where I can be more competitive in my estimates. My customers should be looking for work that matches their skills. Unfortunately, they sometimes do not.
Back to school again
Let’s start with low-voltage work, which includes data, communications, fire alarm, security, nurse call, paging, etc. This kind of work is much harder to do now than when I first started estimating. Advances in technology have left many contractors behind. In response to system failures on many projects, owners started requiring proof of a contractor’s ability to successfully complete low-voltage systems before allowing them to do the work. To answer the need for training, several types of organizations started creating the programs needed to certify technicians for the installation of low-voltage systems. Many manufacturers of these systems provide short, no-charge training sessions for their equipment. However, most of the electrical specifications I see today require training by an organization such as NICET or BICSI, which provide extensive training for a fee.
To sub or not to sub
The primary reason you may want to invest in additional training for your personnel is to be more competitive. One way to do this is to avoid subcontractor markups. If you have to sub out the fire alarm work, the subcontractor could easily have an additional 20% or more markup on their work, which you would then need to mark up again. That double markup makes it harder for you to compete.
Full disclosure: My experience includes one employer who firmly believed in subbing out everything he could. It was his belief that subbing out work meant that you were passing on the risk of that work to the subcontractor. He felt that if the subcontractor went over his cost estimate, he was not responsible. However, most contracts an EC would sign makes them responsible for the work. If your subcontractor fails to complete the work, it is still your problem.
Labor specialty 1
Another strategy that has often worked for me is specializing in certain kinds of installations. On one project, I had a tremendous chance to be more competitive before the bid and another one after we won the project. The scope of this project included 14,400 feet of 4-inch galvanized rigid conduit (GRC) installed above the trusses of a manufacturing facility. The trusses varied from 50 to 80 inches above grade. As this was my first estimate for a new employer, I asked the boss about his company’s abilities in regards to GRC. His response was he had the best installers around and had two 4-inch hydraulic benders available for the project. Armed with this knowledge, I decided to cut my standard labor unit for GRC by a significant amount. My boss knew his crew well because they beat the reduced labor we had in the estimate.
Labor specialty 2
The same project as above included about 36,000 inches of 12 kilovolt cable with about 100 terminations. As my company did not do high-voltage work, we subbed it out. When it came time for the sub to do his work, he declined, saying he had a major error in his estimate. Once again, I talked to the boss. He asked if we could do the work ourselves. I had experience with high voltage and knew some people that had high-voltage installation certifications. Once again, to my surprise, they beat the price the subcontractor had given us. There must have been a lot of markup on his work.
Now that we had these specialties, we started bidding a lot more work that included them. Our success and profit rates on this work were very satisfactory.
Many labor guidelines advise you to add labor for work required to be done on an accelerated schedule. If the circumstances are right, this is another opportunity to be more competitive and win a project by saying you can complete it on time. My best example was a school infrastructure improvement project. The scope included miles of underground ductbanks going in three different directions from the communications room. My customer and I figured out that he could put a crew on each ductbank simultaneously, reroute a few conduits and finish on time. We were not the low bidder, but we were the only bidder who guaranteed we could meet the schedule. We added a big risk markup and still got the job.
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.