Recapitulation Practices: Methods to get bids low enough

Published On
Apr 15, 2022

Lately, I’ve had several interactions with new estimators struggling to get their bids low enough to win a contract. Reviewing their estimates, I often find that the recapitulation (recap) was completed incorrectly. Before going over recap’s features, let me qualify that the methods presented below are those I learned in estimating classes offered through the National Electrical Contractors Association, which are also used by almost every electrical contractor I have worked with in the last 40 years.

The first task required when using a recap is to transfer your material dollars and labor hours from the estimate to the recap. If you are using a computerized estimating system, this will happen automatically. It is then your responsibility to add numbers for quotations, subcontractors, rentals, direct and indirect job expenses, overhead and profit.

Labor

Let’s start with labor hours, which need to be converted to dollars per hour by multiplying the hours by a labor rate, such as $75 per hour. Many electricians coming from the residential and service industries put overhead and profit markups on the labor rate. This practice results in labor being marked up twice, because you would once again be adding overhead and profit at the end of the recap. The labor rate should include only the dollars per hour you pay an electrician (direct labor rate) plus the cost of benefits and fringes, also known as burden. These costs include, but are not limited to, federal and state taxes, worker’s compensation insurance, liability insurance, health insurance, sick leave, vacation, holiday pay, training and retirement funding.

Nonproductive labor, such as supervision and project management, is not added in this section. Burden costs run an average of 40% of the direct labor rate, but can vary depending on a company’s compensation practices. The burden percentage can also vary due to other factors. For instance, if you have had several accidents in the field, your worker’s compensation costs will be higher.

Also remember labor escalation. If you are estimating a project that will not be finished for a while, you will need to make allowances for increasing labor costs.

Material

Material dollars come from what you calculated in your estimate. Predicting material costs used to be easy when prices were stable. When I started estimating, material usually went up a small percentage the first of every year. Currently, the cost of material is rising weekly, which makes it very difficult to predict what your material is going to cost when you get to the point in the project when you need it. There are several strategies to help with this problem.

First, if you have enough cash, buy the materials immediately and store them in your warehouse (if you have one). Check your project’s contract, because it may allow you to be paid for material purchased and stored. I have seen one caveat for this practice—some specifications have freshness clauses for wire. The specification may say something such as, “All wire will be manufactured no more than one year before the date of installation.” This clause may prevent you from warehousing copper wire for a project.

Second, make a deal with your wholesale house. Often, if you write a purchase order for the entire job, they will hold the pricing at your originally quoted price. We called this a master purchase order. As you need material for the project, you release it for delivery at the price guaranteed by the purchase order.

There are other strategies, such as investing in markets. Some of my customers do this, but I do not have any experience with it, so I cannot offer advice.

Pricing for commodities, such as conduit, wire, boxes, wiring devices and hardware, can be obtained from material pricing services. I am familiar with three companies: Trade Service Publications, NetPricer and Epic Pricing Service. These services offer many features, including the ability to update your computer estimating database regularly. Generally, they offer a wholesale pricing column and a discounted pricing column, called average market price or target price. These columns have discounted pricing based on what you may pay at a wholesale house. Another great feature included by these services is the ability to connect your estimating software to your wholesale house at any time to obtain the exact pricing on that day. They are also a great research tool, as they include extensive information about electrical materials, including links to catalog pages for many items.

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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