I recently became aware of a significant problem with material pricing. Reviewing an estimate I prepared, I found that a few nuts and bolts made up more than 50% of the entire material cost for the project. These particular items were galvanized, which I only use when required by the specifications.
The first thing I did was take a close look at the information provided by my pricing services. I subscribe to TRA-SER SX from Trade Service, San Diego, and NetPricer from ElectricSmarts, Beaverton, Ore. The prices in my estimating database were exactly as indicated by the pricing services. My next step was to check the details of these items in the pricing services databases. Here is where I discovered the problem. The pricing was not per each item, it was per each package, and each package has 50 pieces. The change in the number of pieces was made by the manufacturer.
Most estimating software systems depend on the pricing service to determine if the prices are per each, 100 or 1,000. The software, in most cases, cannot interpret a price per 50 pieces. My software interpreted the price as per each piece, which gave me an extremely high, incorrect price. My software allows me to manually set the price divisor to 50. Most software does not allow users to adjust this information manually, as the users have no way to know when a package quantity is changed.
I contacted my pricing services and found they were aware of the problem but had not notified me. I contacted my software vendor, who was also aware of the problem. All three entities are working on a solution.
Although this problem was rather complex, it was a clear reminder of the necessity to review all pricing on every estimate. You are the last line of defense for making sure the pricing in your estimates is accurate. All sources for material are prone to errors, because manual and electronic pricing requires human input. Some of us make mistakes very rarely, which can lull you into a false sense of security. Do not let your guard down. You must check the pricing in every estimate, no matter the source.
I review the material pricing of every estimate before it is delivered. I use the estimating software’s summary feature, which creates a list of all the materials in the estimate and displays one line for each type and size of material. This report, whether prepared manually or by a software system, goes by several different names, such as the price sheet or pricing extension. The summary shows everything in your estimate, making it a great place to look for mistakes.
First, I look for items with no pricing. Next, I review the prices and totals for each type of material. I found the mistake mentioned above while reviewing prices and totals. During this review, I also look for large dollar amounts in the totals for each material type, so I can send them out for a quote. When you have large quantities, you can often get a better price than what you have in your database.
I also look for mistakes and typos in the summary. For instance, it is fairly easy to spot incorrect set screw EMT fittings when they are supposed to be compression. Another thing to look for is ridiculous quantities. It is very easy to make typos. A mistake I am guilty of is hitting a zero instead of a period on my keyboard’s number pad. That mistake can easily get you 10,000 of something instead of 1,000.
Finally, you must understand the prices you get from the various sources. TRA-SER SX provides a competitive pricing column called “average market pricing.” These prices are based on data obtained by Trade Service about what contractors are actually paying for materials. NetPricer provides a similar column it calls the “national market price.” In most cases, these prices can be beat by a quote from your wholesaler. Both services offer an electronic connection to your wholesale house where you can get the actual price you would pay today. This is the modern version of faxing your material list to a wholesale house for pricing.
I will say it again. It is your responsibility to confirm your materials pricing. Not doing this can cause you to lose the bid or lose money on the project if you win it.