A Cautionary Price Update: Tips for using material pricing services

tradeservice.com
tradeservice.com
Published On
Nov 15, 2022

For most of my career, I have depended on material pricing services. I started using Trade Service Publication’s Biddle Book in 1976 when I was promoted to pricing clerk at Certified Wholesale Electric in Glendale, Calif. The Biddle Book was 4 feet wide on a metal frame. The pages were attached to the frame with (if I remember right) 5 ring binders about 1½ inches wide. Every week, I received price updates in the form of a large envelope full of replacement pages.

Past and present technology

I continued to use various versions of the Biddle Book when I started working with electrical contractors in a purchasing department and eventually as an estimator. Around 1982, my boss purchased the McCormick Electrical Estimating system, which included an Apple II computer. While the program saved time and made estimating easier, I still had a Biddle Book on my desk. After replacing the pages for the weekly update, I also had to input new prices to the estimating system manually.

Fast forward to 2022. Price updates have been automatically processed over the internet for a long time. No more giant books, paper updates or manual estimating system price updates. The pricing was very accurate—until the industry changed.

Material pricing started vacillating wildly around 1990 in response to massive fluctuations in oil prices. They were changing so fast the pricing services could not keep up. Wholesale houses changed their pricing to a cost-plus-markup model, which resulted in estimators needing to send every material list to a wholesale house for pricing. The pricing was often good for only a limited time, sometimes only until the end of the day.

Eventually, technology offered solutions to these problems. Some pricing services now have target pricing, theoretically based on the prices contractors actually pay. I say theoretically because most contractors can get better pricing than that offered as target. Some pricing services also have technology to connect an estimating system to a wholesale house to retrieve actual prices. Things seemed to be going well in relation to the accuracy of material pricing for electrical estimates, but I have run into some problems.

Be careful of the pricing unit

In “Right on the Money” (ELECTRICAL CONTRACTOR, March 2021), I wrote about material pricing and the errors I found related to pricing on hardware such as nuts, bolts and washers. The problem turned out to be a pricing unit change from the manufacturer. Instead of per each or per 100 items, the pricing changed to per box. The pricing service I used still interpreted the price as per each, and the unit change was not sent to my estimating system.

For instance, the price for 3/8-inch galvanized flat washers is $20 per box of 100. Since the pricing service passed on that price as per each, my estimating software interpreted the information as $20 for each washer. That’s a bit steep. The pricing service told me they are working on a solution, and tech support for my estimating software showed me how to adjust the material multiplier to match the box quantity. However, that solution would have taken many hours to input, and would only work until the manufacturer changed the box quantity again. Also, not all estimating software packages allow users to make these kinds of changes.

A year and a half later, the problem still exists. Last week, I got tired of needing to fix the pricing on hardware for every project and started looking for a solution. I eventually found another service that correctly transmitted the pricing for hardware to my estimating software. Switching pricing services took about 20 minutes from signing up to my first price update. It was easy. I only had to make one call to tech support to get an explanation about the differences between the two pricing services and how they process updates.

When it comes to material pricing, the most important fact is that no source of pricing is always accurate. You must check the material pricing on every estimate you produce. It does not matter if the pricing comes from a machine, an electronic update or a quote from a wholesale house. Everyone makes mistakes. I find mistakes in quotations on about every third project. Most often, the problems are on lighting or switchgear quotes and occasionally materials. It’s your estimate, and you are responsible for its accuracy. Bad pricing can help make or break a company.

About the Author

Stephen Carr

Estimating Columnist

Stephen 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 steve@electrical-estimating.com, and...

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