Stuff nobody will tell you about estimating

I suspect every profession has a few hidden qualities you wouldn’t discover until you’d been at the job a while. Estimating has some interesting features that can really make or break your chances of success, provided there’s somebody to point them out to you.

Speed is your friend

On the surface, estimating seems to be about careful measurements, considered accounting, and an overwhelming obsession with minute detail. In practice, successful estimating is about time management. General Contractor (GC) estimators are responsible for getting the information out to their subcontractors (subs) as well as getting the subs questions answered by the design team. Every problem needs time to resolve so it’s really important to maintain rapid communications during the bid.

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It’s really tempting to silence your phone and ignore your email for a few hours to get something done. Which leads to the next item…

Leadership is more important than takeoffs

If your estimate relies on sub or vendor quotes, your first priority should always be to providing direction, insight, and encouragement to those bidders. Specifically, your efforts should be directed towards finding a unique and advantageous approach to the project. Ineffective estimators tend to assume that there’s something special about their company that will ensure that bidders will give them their best efforts. In a vacuum of leadership, subs will hedge towards protecting their own interests which never means low prices.

Perspective, then persistence

Hard work and persistence are admirable qualities that absolutely will not lead to success on their own. Lots of estimators assume that bidding and winning have a cause and effect relationship. It’s true that you can’t win if you don’t bid. However the reverse is not always true because there are insincere/unfunded clients with projects bidding that have no chance of being awarded. Sadly these clients consume the lion’s share of the slow market. While they can occur at any level of the market, these clients tend towards the bottom strata wherever they appear. They can be identified by their incomplete plans, short deadlines, multiple alternates, and resistance to answering questions. Everything is supposed to start right away despite the lack of permits, or even plans that would pass building department review. These clients range from uninformed neophytes, to jaded negotiators. What they have in common is the general belief that they don’t owe the low bidders a contract award in exchange for the free bids.

In the worst cases, the client will use the proposals to inform their negotiations for bid shopping. “Helping” an unethical client to award your competitor is a destructive use of your time. Morally flexible estimators might think it’s great to be the person such a client calls to “negotiate” with. Clients who bid shop are cheating all the companies who bid in good faith.   These negotiations open with two assumptions; the client is never fair to their contractor, and they think you aren’t smart enough to see that.

Any estimate that will not lead to contract is a waste of time. Better estimators don’t make better clients. Until such time as estimators can seek recompense for time wasted on feckless clients, we must protect our companies interests by declining to bid. In hard times, the estimator must be prepared to accept that this means precious few real opportunities will exist. This reality escapes those consumed with hope that behind every half-baked set of plans lies a great opportunity. The fact remains, when the good clients exit, the market declines. Down markets always have lots of terrible clients wasting everyone’s time with profitless jobs that rarely happen. It’s the only time they can attract bidders.

“Attention everyone, ship Desperation is now boarding..”

There is no market for bad news

Estimators looking to trade publications, and mass-media for relevant information on their market are bound to discover that there are precious few articles that will admit when things are bad in the present. Unless the article is written to influence an election, you can count on the article to refer to bad markets in the past tense framed in the perspective of steady improvement since then.

Periods of intense bidding with low backlog should indicate that contractors are starving for work and are chasing whatever is out to bid. Often, these times are couched in phrases like “Bidding picked up in the 4th quarter signaling potential growth this spring”.

Once spring rolls around and the summer rush work comes out to bid, these articles will say “Despite holiday season slow-downs, construction steadily climbs”.

This optimistic world-view is on display whenever you talk to other estimators. Go to a job walk and eventually you’ll hear someone ask; “You guy’s staying busy?”. With rare exception, the response is merely a list of the most impressive sounding projects that estimator won within the last nine months or so. Nobody likes a downer but it’s important to understand that what you’re hearing is not the entire truth. Estimators must learn to look beyond what’s said, and listen for what is missing.

If you’re struggling to land work, consider what you’re hearing from others. If the projects listed at a job walk are all finishing up, that’s a strong indicator that new victories aren’t newsworthy which may suggest that your problems are shared. Subs bidding to GCs should pursue bid results aggressively. GC’s are often more candid about the client, and the market after they’ve lost a bid. Estimators who speak truthfully and share what they see often benefit from information shared in kind. GC estimators are often listening intently to the nuance of what their subs are telling them. Don’t get too involved in trying to appear strong when you’re trying to find work.  Posturing sends the wrong message.

Decisions define us

Estimators exist because it’s not possible to simply “add everything up” like a cashier. Simply put, estimators must make decisions about what to do when things aren’t perfectly clear. The lack of information is a risk, making a decision on how to handle that risk means you’re accepting responsibility for the outcome of that decision. It’s easy to see that decisions based on the worst case scenario is the most likely to add money and time to your estimate. GCs who habitually sandbag their estimates are communicating their priorities. Competitive sub bids will go where they won’t be squandered.

While on the topic of unclear plans, it’s worth commenting on motivations. Missing, incomplete, or contradictory requirements may be a symptom of design team motivations. Estimators who’ve reviewed plans from a design-build project may notice that the plans have far fewer notes, and shorter specifications than projects developed for hard-bidding. Design professionals working on hard-bid projects are primarily concerned with their liability.

Design teams know that budget blowouts are a frequent outcome of bidding. Costly items are often sparsely mentioned on plans in the hopes they’ll be overlooked by the contractors. These buried notes are an owner-placating feature that the designer is trying to buy with the contractors money.

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Their decision to be predatory speaks volumes on their character. Exposing these traps through Request For Information (RFI’s) is how you can control risk without losing the job.

The advantage of ethics

Dishonesty is rampant in the construction industry. Incomplete plans labeled “100%”, or unrealistic schedules, are simple examples but this issue runs deeper. Information is withheld simply because it’s less risky to remain silent.

Bid results are traditionally provided upon request.  In practice, this typically means the GC estimator plays “keep away” with the information until it’s all but assured that the sub will never profit from it. Some GC’s are so focused on their own interests that it borders on cruelty. Providing bid results is seen as additional work that only benefits subs.

The deal offered to subs is to either award them a contract or furnish them with bid results in exchange for a free bid. GCs should promptly and publicly furnish this information to recompense subs for their bids. Better informed subs deliver better bids.

Acting ethically can present huge advantages beyond good-will. Trustworthy estimators benefit from stronger relationships with their vendors and subs. There’s less risk in working with honest people, lower risk means lower prices, which means you’re harder to beat and more profitable than your competitors.

It won’t do much good to pursue the bottom of the market with high-minded principles. However an established reputation for fair-dealing has a way of opening doors to quieter opportunities. The very best clients choose to work with honest contractors. There may be fewer opportunities compared to the hardscrabble market. However the work you’ll land is more successful, and reliably profitable than the high volume of profitless work out for public bidding.

Good estimators have pull

With all the information going back and forth, it’s easy to overlook a vital aspect of an estimators craft. GC estimators rely on subcontractor proposals to help define, describe, and value the scope of work. Attracting market attention is a function of a good opportunity, minimized risk, and profitability. Market leaders will avoid unprofitable, risky, or difficult projects. As an estimator it’s easy to think that the project’s intrinsic qualities aren’t under your control. To be sure, there are definite challenges in bidding ugly work.

The estimator must understand why they’re pursuing a project. Simply grinding out bids because a Request For Proposal (RFP) landed on your desk is what I call bid-milling. Bid-milling is the practice of chasing everything in the hopes that higher volume of bidding will create profitable wins.

It’s not a good look

This never works because each firm will be a market leader for specific opportunities. A contractor with a high volume of losses communicates that they’re not a real contender. The market-leading subs won’t waste a bid on GC’s who aren’t sincere about winning.

A GC estimator needs to understand that a mediocre project with a good client can be made into a profitable and low-risk opportunity through their leadership. GC’s who habitually work for good clients naturally attract market leaders. Contractors with a history of well-managed and reliably profitable projects are able to reduce the risk of less professional clients and their design teams. All of this starts with the estimators commitment to controlling risk.

Estimators who pursue good opportunities with accountable leadership, ethical dealing, and meaningful feedback are more successful than their competitors because they are the professionals, that everyone wants to work with.

I encourage you to consider those actions carefully. These simple actions are profoundly rare in professional estimating because most folks think their situation is different, therefore some aspect doesn’t apply to them.

Success in this craft requires clarity and intent above all else. There are no shortcuts with something this simple.

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© Anton Takken 2015 all rights reserved