There are two questions that estimators work to answer for every project; how much? and how long will it take? We’ve all heard that time is money so it should come as no surprise that winning and losing often comes down to estimating time. Over the last year I’ve had unique opportunities to help people in areas as diverse as software development and ornamental blacksmithing! I’ll be writing from a General Contracting perspective but keep in mind that the practices are applicable across disciplines.
The great frustration with estimating time is that despite heroic efforts to include everything, there never seems to be enough time. Trade specific knowledge is difficult to distill into workable numbers for an estimator let alone a manager. Interdependency across different trades creates delays and complexities that further obscure any concise perspective. The United States Navy was instrumental in developing the Critical Path Method (CPM) of scheduling. This was created to allow people without trade specific knowledge to create schedules that maximize efficiency.
To be fair, not every Navy idea has panned out…
Order of operations
Up to that point, the majority of projects progressed according to local customs and tradition. Generally speaking the trades proceeded more or less single file through the project. Since Trade A had to finish before Trade B could begin, every delay in production, delayed the entire project. By approaching the project as a group of related tasks, it was now possible to have certain tasks completed “out of sequence” which had the profound effect of not only reducing the project’s duration but also reducing the impact that individual delays had on the whole. A good example of this is having a door painted offsite before its installed. The painter can complete the task more efficiently and with more schedule flexibility.
There will always be a list of tasks that have relationships to other tasks such that the completion of one is a prerequisite for the other. Adding up the duration of these sequential tasks gives the shortest project duration. Laid out over time, these tasks are referred to the “Critical Path”. Any critical path task delay causes an equal project delay. To the estimator, the list of critical path tasks should be as short as possible.
For lots of folks estimating self-performed work, this is where they think they’ve covered everything important. So now they start ball-parking their production time for each item on the list, they slap a generous hourly rate on that and call it a budget. Here’s why they fail. First off it’s absolutely critical to understand that for most professionals, there is a lot of time spent doing something that isn’t pure production. I had a job where my phone rang upwards of 100 times a day. When someone’s interrupting you an average of once every 4.8 minutes, it doesn’t make sense to figure you can EVER get full production, but people do it all the time. Weekly meetings are an easy example. One to two hours banked on either side with preparation for the meeting, and digging through all the stuff that piled up during the meeting easily amounts to half a day’s lost production every week. All of which is beside the point that in most companies, you can’t finish one project before you must start the next. Both projects lose production as a result.
So people aren’t making full production, we’ll just tack on a multiplier and cover for that, problem solved right? Not even close! Just as it’s easy to see interruptions make project’s run long, it should also follow that better staffing, tools, techniques, planning and execution can speed things up.
Bigger’s better right?
However there’s an unfortunate tendency for companies to underestimate the time so they compensate by dumping money and resources into the job. With rare exception, the final tally isn’t profitable.
Think of it as a long distance race. Lots of spectators cheer the final sprint but the victory happened earlier in the race by setting a pace that wore down the competitors. Sprinting isn’t an endurance runners forte so they need to capitalize on their strengths with a solid plan. Construction projects aren’t much different. Work is more easily done right initially, than it is corrected at the last-minute. Flooding problem projects with material and manpower is a great way to consume resources and reduce productivity. It looks busy but if the project went sideways due to a lack of planning, or leadership, you can’t reasonably expect the same plan and leadership to improve. Personnel and politics aside, what’s needed is a rescue team with its own plan, resources, and leadership. Sad to say, it’s pitifully common to hear “We don’t have time to discuss a plan, just send people to get the job done!”
Most bids don’t include a project bail-out. Dumping manpower on-site rapidly consumes man-hours you don’t have. Poor oversight tends to push the bail-out towards the end of the project cycle, right when the remaining man-hours are dwindling. It’s really important to see the link between a good leadership and reasonable production. “Boring” jobs that happen without the dramatic rushes are often the result of good leadership. Heroic 11th hour efforts in the wee-hours are often traceable to shifts earlier in the project that didn’t make wise use of their time.
Losing out on what you could be doing
Opportunity Cost is a term economists use to describe the cost of an alternative that must be forgone in order to pursue a certain action. In monetary terms it’s easy to understand that we must often choose which thing to buy because we can’t afford them all. In terms of time we may only have enough time for one task meaning you complete one at the cost of completing another.
Let’s say a project will require specialized or custom tooling to make it efficient. The time invested in making that tooling is not being spent directly producing for the job which means that production rate is actually negative. If that specialized or custom tooling is made to work on more than one project, the investment is much more profitable. In general, the earlier the investment is made the more likely it is to pay off.
Constantly improve your tools
When I’m looking at my bid schedule trying to figure out how much time it’ll take to bid a job I make sure to include a bit of time for “tool development”. I consider any repetitive task to have potential for simplification. Whether it’s streamlining how I enter data into templates or building a better spreadsheet to track trends in my market, I’m always working on some tool to make my job easier. This is absolutely necessary because every year I’ve needed to bid more jobs in less time than the previous year. Without the better tools, I could never have done that.
If you look closely, you’ll note I’ve made a few tweaks to last years model…
So production rates need to be broken down according to pace, opportunity cost, and available resources. This allows a more exacting and granular methodology to estimating specific projects. Going through the exercise to define each task, it’s duration based on individual production rates, will provide some meaningful feedback about the strengths and weaknesses of your company. Take the total hours or days of production and add the lost time for predictable interruptions and tool development. This new total is likely much longer than you’re used to. Repeating the exercise with a significantly different project will show differences in projects that make your company more or less efficient. Very few estimators really look at work with an eye towards what will make them more competitive in these terms.
Putting rubber to the road
Theoretical production rates are only as good as their real-world validation. Make certain that you’re following up on projects to see how things are turning out. Be aware that feedback may be influenced by personalities, job peculiarities and so forth. Look for over-runs and short-falls as indicators of where adjustments must be made. Be careful not to start an audit “witch hunt” or you’ll quickly lose project manager cooperation.
Managers will have widely different perspectives on what constitutes “normal” production. Consider the source and be wary of emulating leaders who require regular project “rescue” with extensive overtime, double shifts, working weekends, and so forth. Be advised that people’s experience colors their expectations profoundly. For example, Managers with lots of experience doing interior remodel projects may be inclined to allow earth-workers to blow past their deadlines because they may see the interior portion in greater clarity than the site development. Many jobs are “stuck in the dirt” for far longer than they should be resulting in compressed schedules for all the other trades. Get the big yellow beepers out of the way on time or expect to pay for it later.
An estimator needs to bridge the gap between competing at market value and accounting for corporate or company culture. If your firm won’t “buy off” on your plan and faithfully execute it, your schedule amounts to a fictional account of what might have been. Estimating is the first step to a successful project. Make sure that your work is grounded in realistic expectations of what your firm will do. If you believe you’re losing bids because of outmoded thinking, it’s time to have a meeting with ownership to discuss it. Be patient, respectful, and listen, experience is hard-won wisdom. Don’t forget that you’re representing the skills these people bring to bear on the projects you bid. Change can be slow, inconsistent, and frustrating for all concerned. If this was easy, there’d be someone else doing it!
Beware of the blind Oracle
If you’re using software systems with default production rates, it will likely become necessary to adjust the final outcome according to the situation at hand. A word of caution; it’s very easy to make a mistake when you are adjusting an estimate.
For example let’s say you’re bidding the paint on a building using a software program and it’s come up with a total for all the painted surfaces. However there is an architectural feature which will require several color changes within a single small area. That feature constitutes 10% of the total square footage of painted area in your bid.
Looking at the feature you may decide it’s twice as many color transitions as a normal wall so it’ll take twice as long. 2 x 10% = 20%. Lots of people would multiply their software’s estimate by 1.2 and promptly lose that bid.
At least you looked good doing it!
Hitting the skids
This is wrong for several reasons. The labor and material to paint that feature as a “normal” surface was already included in the original software estimate. The software estimate is short approximately 10% on labor only. There shouldn’t be any impact on materials, job billable costs, or overhead. Using really general averages, about 50% of a bids’ root cost is labor or material. Job billable stuff and overhead clock in around 10% for a lot of jobs and profit’s somewhere around 5%.
That means that the outcome of a 10% labor-only addition renders a 4.3% bottom line bid increase. The mistake from earlier would have blown the bid by 15.7%! That’s nearly four times the adjustment that was needed.
Create a schedule to determine production rates
Thus far I’ve been addressing production rates from the perspective of a self-performing contractor. For the General Contractor that subcontracts all or most of the production the picture is less clear. For starters, the General Contractor typically creates the construction schedule based on client demands, and market competition. In many cases, the bidding subcontractors are expected to provide pricing without a schedule. Generally the anticipated start and end dates are provided, obviously this is not ideal. The R.S. Means Building Construction Cost Data is one resource to provide an estimator with production rates for trade specific work. I recommend building a rough CPM schedule and consulting with experienced Project Managers. Keep in mind that PM’s that are on time and on budget are better resources than PM’s that haven’t had many successful projects. Paralleling non-dependent tasks may be a break of tradition or local custom. It may also shave time enough to eke out a win. I found that I could often get bid deductions from subcontractors for a guarantee that they would only have two job site visits (mobilizations). I had to accept responsibility for ensuring that the PM honored my commitment to them. Wherever possible, it’s best to discuss this with the PM beforehand.
I encourage GC estimators to leave arrogance at the door and simply ask their bidding subcontractors what time they’ll need for unfamiliar scope items. Subcontractors are experts with valuable information to share but they need to be asked. The more challenging a project schedule is, the more certain you must be that you’re working with good information. One word to the wise: be responsive to subcontractors. They’re calling for direction; it’s your job to provide it. Estimators that dodge this obligation are effectively telling the subcontractors they aren’t trustworthy. Since estimating is about controlling risk, it follows that a subcontractor that doesn’t trust the GC will insure the risk of doing business with them by raising prices.
Don’t waste time
After all this careful calculating of production rates, I hope you’ve come to respect the investment entrepreneurs make in their local markets. Very few people in the construction industry can really spare the time to do favors, answer questions, and generally add something meaningful to the workplace around them. Busy work, or nonsensical requests shouldn’t be passed down the line simply because they were passed to you. Remember that you get more of whatever you encourage.
I once had a client who would send dozens of emails an hour asking increasingly inane questions. Every reply netted another question. I took a moment and called the client who asked with some surprise why I’d called. I politely said that seeing so many emails in such a short time led me to believe I needed to try harder for my client. By making the communication personal, I reinforced the connection between client questions and my labor. I suspect the client was a bit embarrassed by the attention but nevertheless left the call feeling respected and has since been more respectful of my time.
I’ve heard this approach called “aggressive hospitality” in the retail industry. At some point, it will be necessary to find a way to get back on task. Bidding often induces a frenzy of questions, alternates, and conferences. There’s a tipping point between helping your client and hurting your firm. It’s your responsibility as a professional to be effective in maintaining that balance. Good opportunities seldom come from bad relationships.
A lot of otherwise good relationships are made bad by dithering, capitulating, and indulging in flights of fancy. There’s nothing wrong with bringing focus to a client and/or design team’s concerns. Crossing bridges when you come to them helps keep the project on track and avoids delays. Many good-intentioned people brainstorm on things that could go wrong during meetings, you can use these opportunities to reinforce the necessity of executing a well laid plan so that you’re able to apply resources to actively solve real problems. You’re a professional that handles construction challenges, not a client support group, or a design-team cheerleader. Rising above the fray to “direct traffic” helps ensure that the Client, Design team, and the Build team have productive meetings that decide, delegate, and direct resources properly.
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© Anton Takken 2014 all rights reserved