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There’s some really positive energy brewing in the construction industry, and I’m seeing a lot of good bid opportunities throughout the country. Though this is typical of the summer bid season, I’m hoping it’s not just a seasonal fad and is more a solid indicator the construction industry is springing back to life.
Summer also is the season for vacations, weddings, special events and the big Labor Day weekend. As you create your bid schedules, you must know what your estimating team can handle. The most important factors to establish are your estimator availability and capabilities.
You will need to ask questions: Who’s going on vacation? Who is available to estimate? What are their capabilities (junior, associate, senior)? How much can they estimate?
Once you know how many estimators you have for each week, convert them into time by applying 40 hours per week, per estimator. This will give you a weekly total of estimating time. Use this to create a weekly calendar showing all the available estimators and their available time. Be sure to allow for nonestimating time in each work week as well as bid days, which do not (and should not) typically include any actual takeoff time.
Estimating the volume
Once you have a solid grasp on your estimator resources and their available estimating time, you can move on to determining how many jobs you need to bid and how much estimating time they might require.
First, calculate how many jobs you need to bid. You can simply base this on your historical bid records, such as assuming you will win one or two out of every 10 projects you bid. Then apply some actual contract values into the equation.
Example: If your company needs (notice I didn’t say “wants”) to win $2 million in contracts and the average-size project you bid is $300K, then you will need to win at least six projects. Winning six projects means you will need to bid on 60 (one out of 10) or 30 (two out of 10). Of course, there will be a several smaller ones, which means you will have to bid on more jobs, and there may be a few larger $1 million-plus contracts, which means you won’t have to win so many. But let’s be optimistic and go with the six wins from 30 bids.
Put together a list showing 30 of the strongest bid opportunities you can find. Assess what the electrical contracts might be worth by using a percentage of the overall contract values. I like to use 20 percent for most new commercial projects. Of course, much depends on the various types of projects you are looking at, and you may need to adjust up or down for remodels or special projects.
Example: If the overall engineer’s budget is $3 million, the electrical contract might be 20 percent of that, approximately $600,000.
Now roughly estimate how much time each project might require to estimate, again using your past performance on projects of the same size.
Example: If the last few $600,000 projects took your team a week to estimate, you can use 40 hours as a safe basis point.
Apply this method to each of the projects you are looking at. Now, compare the estimated time for each project and or group of projects occurring simultaneously to your weekly available estimating time calendar to see if you have enough resources to handle them. You will likely find you don’t and will then have to begin eliminating projects.
Assuming each of the 30 bids collectively requires an average of 40 hours total estimating time including bid day (I’m being generous here), that’s 1,200 hours of estimator time. Now, divide this by a 40-hour, 100 percent productive week of estimating (which is really a 50-plus hour workweek). That’s 30 full weeks of full-time estimating. Divide this by the number of estimators that your company has available.
Example: If you have four full-time estimators, you will need 7.5 weeks to cover 1,200 hours of estimating. If you only have two estimators, you will need 15 weeks. If you don’t have 15 weeks, you will need to hire more estimators. It’s actually pretty simple math.
If you don’t have enough estimators on your team, your summer may be a real drag. I recommend establishing a solid relationship with some good outsource estimating companies. You should also do this with more than one company or independent estimators, as they too get overbooked and are often not available. Stay in contact with them and be aware of their availability. Additionally, you should establish what’s your budget for hiring outsourced estimators.
Looking for and qualifying the best bid opportunities should be a daily routine. However, simply finding them means nothing if you don’t know what your available estimating resources are. Being able to estimate how much volume you and your estimating team can produce will be critical for your company to achieve your summer bidding goals.
SHOOK is the president and chief estimator for his estimating company, TakeOff 16 Inc. He has worked in the electrical construction industry for more than 23 years. Reach him at 707.776.0800 and [email protected].