Category Archives: Uncategorized

September 29, 2021

Strengthening your weakest link

“It isn’t the mountains ahead to climb that wear you out, it’s the pebble in your shoe” -Muhammed Ali

There are many aspects of estimating that lend themselves to a pattern, process, or routine. The focus on consistency is largely driven by an assumption that diligent repetition will cause success. In this context, it’s understandable that so many estimators seek to improve their process throughput. This perspective may conceal opportunities to make small changes with large benefits.

Survival manuals recommend picking a point in the distance and walking towards it. This is because minor differences in our bodies can result in one stride being longer than the other resulting in a tendency to walk in circles. This is especially common in situations where featureless expanses must be traversed. By focusing on a specific point, or feature, we can make minor corrections to arrive at our destination.

Many estimators will reach this point thinking about process-oriented solutions like error checks, and scope reviews.

Pro tip: Redundancy will not provide safety in numbers

Consider walking through a featureless expanse, focusing on your selected destination. There’s plenty of time to observe and think as you walk. You notice your progress drifting to one side, and correct course. Now you think about why you’re drifting. Before long, you start experimenting with changes in posture, or compensating efforts to stop drifting. This effort to equalize your stride will eventually reveal your weakest link. Continued effort will strengthen your weakest link.

It’s here that we can be surprised by how much harder it feels to strengthen the weakest link, than it felt to compensate for it. It often requires a greater effort to correct a limp, than to continue limping.

When time is of the essence and there’s much to be done, will you stop to fix your stride, or learn to limp faster?

A lot of smart people would say it depends on how much time you’ve got. This overlooks a very, obvious possibility.

What if there’s a pebble in your shoe?

“This idea struck Steve speechless, Dave is trying play it cool, Sam isn’t sure what we’re talking about”

Obviously, you’d take a moment to remove the pebble so you could be on your way unimpeded.

Astute readers might be expecting me to provide a list of “pebbles”. Unfortunately, that’s missing the larger point.

See once you find a “pebble”, you’ll know exactly what to do. The bigger problem, the true weakest link, is investing too much into process-oriented corrections, rather than looking for simple reasons why we drift from where we want to be.

This shift in perspective reveals a whole lot of “pebbles”. Once they’re gone, all the compensatory hitches in your stride become obvious. Every improvement you make reduces your work and increases your output.

I hope this idea helps you to achieve your goals.

For more articles like this click here

Leave a comment | posted in Uncategorized

January 20, 2021

Immortal Tasks; Is there a Silver Bullet?

By Anton Takken

We’ve all seen it before, a task that re-appears on the to-do list over and over again perpetually interfering with any effort to move on. It can be tough to see why this happens, which makes it especially hard to know what can be done to make it stop.

Immortal tasks are brainless, tangled, and sting everyone they touch

The first step with any problem is to identify the cause. In my experience, immortal tasks are caused by:

Poor planning
Miscommunication
Lack of follow-through
Debate based on speculation
Bypassing the chain of command
Difficult people

There is little more vital to success in construction management than perspective. Specifically, being able and willing to look beyond the current task at hand to see how it fits into the big picture.

In a bacon and eggs breakfast, what’s the difference between the Chicken and the Pig?

**The Chicken is involved, but the Pig is committed!**

The whole reason we use the term “Contractors” instead of “Builders” is because contracts legally and financially commits the firm to the project. As the responsible party, it’s critical for contractors to understand that their project may be imperiled by involved parties who have completely different priorities than their own. As a result, it’s very common for involved parties to introduce delays for the contractor. In order to be successful, the contractor must develop and communicate their plan accordingly. One of the surest signs of poor planning is when the first response to every problem is finger-pointing.

Incomplete information can raise more questions than answers which is especially frustrating when the information was slow in coming. Plan for every predictable problem by providing timely communication about what’s needed and when. In the absence of clear direction, communicate the contingency plan you’ll be taking so that all affected parties know what to expect.

Not having a contingency plan leads to situations where everyone is “doing their best” while patiently watching as the window of opportunity closes. Contractually speaking, when the risk of rework is less than the penalty for delay, the contingency plan should default to prudent and defensible action. Conversely, when the risk of proceeding in error is greater than the penalty for delay, the contingency plan should define the work that will stop, in terms of the critical path delivery of the overall project. Where reasonable and prudent, develop mitigation strategies such as out of sequence work, while being careful to coordinate unconventional deliveries with the inspection requirements of the Authorities having Jurisdiction.

Incompetent managers prefer to remain silent on the sidelines in hopes that they may claim successes or deny failures. Contractors working with or for these managers should understand that the “plan” is to let nature take it’s course on the project. If this approach worked, nobody would ever hire a manager.

Power struggles

Lets address an elephant in the room. Many contract relationships are adversarial by design. We may dress up the situation by calling it “checks and balances” but many owner representatives have an obvious conflict of interest. It doesn’t matter whether the Architect or the General Contractor, (GC) is the owners representative, the contract terms will create incentives opposed to the owners best interest.

Modern marketing would like to suggest that this is easily overcome by finding “the right firm”. Contractually speaking, it’s a far better approach for the client to make it profitable for the “wrong” people to do the right thing.

This speaks to one of the fundamental principles of power-struggles. People who are concerned about ethics and fairness often find themselves reluctant to reward avaricious motives. Just doing your job shouldn’t require extra incentive. As a result, the focus shifts from the proverbial carrot, to the stick. Construction contracts are predominately a list of obligations with corresponding consequences for compliance failure.

The focus on preventing malfeasance (not doing your job) often creates a very real incentive for misfeasance (doing your job in a harmful way). It has been my experience that misfeasance is at the root of most power struggles. A superficial observation of this practice will appear as though the misfeasant professional is merely defending the integrity of their work. This happens at all levels and all sides of this industry.

Here are a couple of examples;

Design professionals often rigorously enforce specifications that benefit favored product representatives. Curious people might ask how the representatives responsible for overpriced products reward that kind of loyalty.

It may not be wise to attract the Architects attention…

Estimators often find problems in the CD’s that have the potential to add cost. Some GC estimators conveniently overlook subcontractor bidders who bring these costly items to their attention. They do this in hopes of winning the contract before revealing the issue to justify a change order.

The misfeasant actor in either case exploits their client while proudly thumping their chest for “venerating the integrity of the plans and specifications”. If you’ve ever heard the expression “The process is the punishment”, you’ll see the role that process plays when it comes to abusing authority.

So how do we work around this mess?

I suggest starting with acceptance. The only thing you can change about human nature is how you feel about it. While it’s a tragic shame to see so many professionals guided by avarice, your duty is to get things accomplished. This whole mess was predictable, which means these problems are due to poor planning. All of which strongly suggests that the avaricious stuff always was the plan. Any contract which does not reward timeliness, transparency, and accountability, for all involved, effectively rewards avaricious behavior.

This leads us to the next snagging point which is miscommunication. In order to define what you say or write, we need to recognize how you will be heard. It’s critical to understand the tactics used in a power struggle. If everyone was just doing their job, there wouldn’t be any conflict to stall things out. You won’t “kill” the immortal task without addressing the root of the conflict.

What they’re really doing is protecting their interests which may be completely opposed to the best-interest of the project. If it serves that purpose to play dumb, or keep-away, you must recognize what is not being said. Ultimately, they want to know that their interests are secured before they’ll perform their duties. To that end, it’s important to maintain diplomacy. I have found it’s helpful to project a persona of kindly compliance who just so happens to communicate on-the-record with an unusual level of transparency.

This diplomatically communicates that their avaricious concerns will be secured, while establishing a precedent for full disclosure. Many professionals will recognize the connection between my disclosure and the potential for their exposure, which encourages cooperation.

Kind-hearted readers may object to this cynical view. After all, it’s entirely possible that sincere professionals are simply confused, or misunderstood. I’ve certainly encountered this in the working world, especially so when working with rookies.

Rookies are often hard-headed about soft skills.

The reason I presented my solution to the cynical view first, is because it works equally well with sincere people.

Following through

Entropy is the natural tendency of stored energy towards disorder in a closed system. In construction, estimators put all this energy into pre-construction efforts which get bound into contracts to build the project. If that was all it took to successfully build a project, nobody would ever hire a General Contractor. This coarse example serves to illustrate why follow-through is so important to actually getting things done.

I’ve won projects that required dozens of bids over the span of several years before the contract was awarded. That’s long enough that some of the firms involved will have new staff and no records of what was quoted. We see similar challenges on projects with lots of addenda before the deadline. It can be downright difficult to know what is, and is not, in the final project.

As an estimator, it’s often your job to guide everyone through these changes which can feel like an immortal task. One popular approach that aggressively doesn’t work is to simply dump all the available information into a file-sharing site and expect everyone to wade through it. The unspoken truth in these situations is that most of that information is obsolete, unnecessary, or redundant. It doesn’t take long for people to get nervous about what risks might be hiding in all that nonsense. If the presented information is arranged to conceal risks, people won’t trust you.

Proper follow-through builds on the communication principles for dealing with power struggles. Address their concerns in a manner that displays transparency. I’ve found it worthwhile in some situations to build a “follow the bouncing ball” narrative which directs the person through the relevant issues, arriving at the necessary outcome.

I prefer to use email for these communications to generate time-stamped evidence of what was sent. Don’t forget to use the email title to communicate effectively. A lot of tasks fail to make progress because the recipient refuses to answer communications in order to maintain plausible deny-ability. I’ll forward the original email with the title revised to include “second request”, “third request”, etc. Depending on who I’m dealing with, I may copy proportionately more higher-ups in the respondents firm with each follow-up request. Sometimes I temper this action with messages conveying my concern for the health of the unresponsive recipient.

Evasive people will often respond with some variation of “I’ve just been busy, I’ll call you soon”. If they call but fail to resolve the task, I memorialize the conversation and all the promises, in a summarizing email which I send immediately after the call. If they don’t call, I’ve found it helps to copy their bosses on an email where I ask for someone who’s got time to resolve my task.

Talking in circles

Hardworking people who cannot get a task completed day after day can get frustrated. It’s natural to ask yourself; “Why is this not getting done?”. After all, you know that’s the first questions your boss will have for you. Sometimes a task will involve multiple unseen players who must complete their portion in sequence, according to chain of command. This creates situations where the visible players are anxiously waiting for something to happen. As critical time passes, you’ll be called upon to provide progress updates. When hardworking people have nothing to go on, they might start picking at loose ends in hopes of finding a thread to unravel the snag. This is where people start debates based on speculation. I’ve worked with professionals who have an incredible ability to generate delays and confusion by pursuing fruitless arguments over things they did not understand. This is a good time to focus on solving problems you understand.

Research efforts to improve the coordination of design teams are ongoing.

Life on the chain gang

Contractually speaking, chain of command is set up to mitigate risk for all concerned. Any communications or agreements outside of the contractually defined processes have no legal bearing on the work. This is why GC’s rigidly enforce requirements that subcontractors do not communicate directly with the design team or client.

There can also be a chain of command at the individual firm level. Some firms create administrative blockades tiered to protect senior staff from trifling concerns. This approach is common in firms of all sizes.

Chain of command has a couple of shortcomings. Communication is slow, and the structure is prone to abuse by misfeasance. In my experience, quite a few immortal tasks are due to bad actors in the chain of command.

Before we get into how to handle this, lets look at how chain of command is likely to prevent tasks from getting completed. We need three things to contractually resolve an issue;

Permission/Direction: This is contractually binding instruction on a specific issue.
Responsibility: This is the risk of being held accountable for negative outcomes pertaining to the specific issue
Process: This is the perfunctory stuff which connects the specific issue in question with the contract terms.

When issues get “stuck” in the chain of command it’s generally because someone in a position of authority is withholding at least one of those three things without explaining why. This kind of problem is common in professional groups which lack the necessary leadership and accountability to perform. It bears mentioning that many firms intentionally put inexperienced, and unsupported people in gatekeeper positions. Some people are better students than others, so invest your teaching time wisely.

Running out the clock

Everything in construction is time sensitive, so any issue that won’t resolve will eventually threaten a project. People who can’t or won’t do their part within the chain of command, are often insulated from the pressures of your time constraints. Where possible, and with permission, it may be possible to communicate with the person holding things up directly. Although it may seem obvious to some, the success of this approach hangs upon strong social skills. The goal is to define what motivates their actions, without questioning their integrity, or competency. Be mindful of the limits of your knowledge, let them tell you what they think is going on. Show appreciation for their courtesy and their time, by asking how you can bring the issue to resolution. If you’re talking to a “junior buckaroo” gatekeeper, they will often allude to senior staff making decisions behind the scenes. Where appropriate, offer to help explain things to those senior staff.

If they transfer you over to the senior staff, be prepared for an earful of information. There are often really good reasons that an issue is difficult to resolve. That being said, remember to ask this professional to outline the steps to resolution. Where appropriate, ask what you can be doing to help. Don’t forget to ask for specific timelines. Be positive, helpful, and insistent that everything goes “on the record” so it’s done according to the contract. Remember that you wouldn’t have this problem if the team had effective leadership and accountability. It may prove helpful to memorialize the action plan from this discussion with an email entitled “Thank you for your help with (the specific issue) on the (name of project) job”. Where possible, prudent, and appropriate, copy that email to the relevant affected parties.

Be sure you understand that last part. Any viable action plan has the potential to cast an unflattering light on the individuals involved. It might be possible, and arguably appropriate, to work around an individual it would be imprudent to offend.

Remember that any solution you work out this way is contractually meaningless until that solution is communicated through chain of command, via a formal process. Wherever possible and prudent, incorporate the memorialized action plan into your paperwork for formal approval. This is especially helpful in situations where you suspect that unsupported junior staff will be processing the paperwork.

The bane of all productive activities

If an issue lingers on long enough, someone will call for a meeting. This is a popular approach to solving problems that is affected by the same lack of leadership and accountability that caused the problem. Getting the most out of these meetings starts with understanding what is likely to happen.

Companies with administrative blockades tiered to protect senior staff have two primary strategies. The first, and most common management strategy is to send in the rookie. This is likely the same person who can’t or won’t perform their duty because their superiors have left them unsupported. Expect them to emphasize process, without touching on the responsibility they’re trying to avoid by withholding permission or direction. Pay attention to any names you hear in case the rookie offers to “loop someone in” on this issue. This is invariably the senior support staff of the rookie that didn’t attend this meeting about the issue they wouldn’t address. Most of these meetings conclude with a commitment to wait and see what the hiding senior staff member comes back with.

The second most common strategy is for senior staff to arrive at the meeting claiming to be unprepared to make a decision. Be very careful here, especially if there is no reaction from team leadership. This is a common ruse to trap the unwary. I’ve encountered plenty of professionals who came to the table feigning cooperative ignorance, who revealed the depth of their knowledge later on. You’d better have your facts and figures at the ready, or they’ll trip you up. I’ve also encountered situations where a professional played dumb to protect their colleague(s) and/or cronies from exposure.

Matt has been playing dumb for so long, that nobody believes otherwise

Getting the most out of a meeting starts with mitigating wasteful behaviors. If you are setting up a meeting, you might ask all the senior staff to provide a brief overview of what they need to resolve the issue. Compile that into an agenda which is copied to all invitees. By developing a meaningful meeting agenda, you might accidentally solve the problem!

If an invitee won’t answer the email, they’ll probably avoid the meeting too. Anyone who can’t/won’t make a meaningful addition to the agenda is communicating something. Use their lack of response as an opportunity to request access to their superiors. Again, I find it’s helpful to couch this in terms of concern for the unresponsive person’s health. It’s truly remarkable how often people will find time to reply after I’ve asked their boss if they’re out sick.

If you are asked to join a meeting, you might suggest this process by volunteering the items you need to resolve the issue on your end. Be careful to “stay in your lane”, because weak and unaccountable leaders are often counting on someone else taking charge so they can claim success, or lay blame. If you don’t know who should handle some item you need resolution on, admit it. Hopefully things go well and you arrive at the resolution to your issue.

Be thankful for the difficult people in your life, for they teach you who not to be.

Construction is a field which attracts a unique blend of skills and personalities. It’s truly remarkable how the various combinations can come together to make an individual really good at their job. Still, it’s not for everyone, and some people take longer to make that discovery than others. Many people are in a difficult situation after they’ve invested heavily in higher education, to begin a career that’s nothing like the coursework they enjoyed. Others suffer from the Peter principle; “People in a hierarchy tend to rise to their level of incompetence”

These are just a few examples of how squandered human capital tends to create difficult people. I’d like to stress that “difficult” in this context, is simply referring to the relative complexity of getting an individual to either do their job, or stand aside so others can make progress.

I’ve had some success with the following strategy which works well with most people.

Respectfully set a precedent of positive productivity
Establish guidelines for success, and an escalation strategy for course correction
Define timelines for performance
Evaluate and follow through
Maintain records to develop a narrative which defends or promotes the necessary course of action.
Escalate as necessary

Hopefully these ideas will bring some of your immortal tasks to an end.

For more articles like this click here

Leave a comment | tags: Accountability, Risk, Solutions, Strategy | posted in Uncategorized

January 6, 2021

An estimators guide to design trends

By Anton Takken

We often think of trends in design as driven by an aesthetic or fashion. However design is a business, which means that market trends can have an effect on the outcome. Just as business can influence the trends, so too, can the trends influence business. From the estimators desk, it’s critical to spot the trends which lead to changing design practices. Adapting to these practices allows your business to stay abreast of all the challenges that new trends may bring.

Abby finds it difficult to maintain a trendy surfer accent while yelling.

Throughout my construction career there have always been innovations which promised to simplify or consolidate complex assemblies. In some cases, this took the form of factory-built replacements like pre-manufactured homes which tremendously reduced the work of constructing a house on site.

Trends impact design

Innovations that simplify or consolidate complex assemblies are most often manufactured solutions. Getting these innovations into a design-teams plans will typically require that the manufacturer provide the necessary design of their product.

In simple terms, a portion of the design is converted into a specified part. This part may be depicted in a manner that is visually similar to conventional assemblies, but without the detail and/or section drawings that one would expect. For example, custom made millwork will typically detail every joint in a cabinet door, however a premade cabinet assembly might only show the rough layout in plan view.

So how does this affect me?

The fine detail of the pre-made assembly is usually the manufacturer or sales representative’s responsibility to deliver, especially for custom applications. Here again, trends in business can translate to changes in design practices. For example, a design team may specify a single manufacturer in exchange for design-assist services. The drawings landing on your desk may have semi-detailed plans for the premade assemblies that were generated by the manufacturer or their representative. Cost-conscious clients may require their design teams to allow multiple manufacturers of premade assemblies. In this case, the plans may feature blocked off areas with key notes requiring final design from the relevant vendors.

Submitted without comment.

Estimators should be aware that “all in one” pre-made solutions tend to be very inconsistent. Determining “who does what” in terms of trade overlap can reveal very complicated relationships. The representative or vendor of the pre-made solution may only deal with the design teams. There may well be completely separate individuals who quote, design, fabricate, and install the pre-made solution. It bears mentioning that these firms are seldom “built” to facilitate the needs of an estimator. The sales agent working with the design team will often have access to information that the quotes department does not. Many such firms will insist on a process that is almost guaranteed to oppose conventional workflows.

For example, some firms will only quote work per internal directives. This is particularly common when the manufacturer has a contract with clients that build retail chains. In this case, the quote may look nothing like what you’re seeing on the plan. In other cases, there are firms that will only quote after they’ve completed their design. This is a particularly difficult requirement in situations where you are competitively bidding a conceptual design.

Trends impact designers

Thus far, I’ve focused on manufacturing innovations. Market trends can affect the design as well. Despite the many advances in computerized design, getting from concept to construction documents takes a lot of time. Design professionals tell me that this is because clients are seldom decisive, disciplined, and aligned to the realities of their situation. Competition drives prices down, so naturally, design firms look for ways to improve profitability in competitive markets. “Standards of care” or “Design level” are terms that relate to industry defined practices for design professionals. Greatly simplified, design professionals offer services priced by different performance levels. This allows a client to inexpensively hire a design team for a crude schematic design for example.

Some market trends have evolved to counterbalance hiring design teams at a lower standard of care by requiring additional services of the build-team. This can take many forms including a design-build contract, or a design-assist contract.

Responsibilities rolling downhill is a trend too!

In some situations, this counterbalancing is done by adding requirements to the specifications (specs). This can include tasks that would typically fall under due-diligence for the design team. Indeed there is a design trend where design and engineering consultants actually require subcontractors (subs) to hire their own independent engineering firms to verify that the proposed design is safe and appropriate for the existing conditions. Coordination tasks are also being pressed onto subs via requirements for shop drawings of assemblies that involve multiple trades.

This can create a lot of issues for the build-team, which affects their ability to price the work. For example, the specifications might require the electrical contractor to provide shop drawings of floor box layout with dimensions coordinating furniture, millwork, glazing, framing, structure, mechanical and plumbing. Typically, the electrical sub does not have any contractual authority over the other subs. The specification requirements for these shop drawings never include a rubric governing which systems have precedence in the event of a conflict.

Advancements in debate technology are still in the experimental stage.

Consistently lower standards of care have found their way into construction administration practices as well. Design teams still require submittals, shop drawings, and close-out documentation, however they eschew any responsibility for the information they review. Many such firms will stamp “Reviewed” or “No Exceptions taken” with requirements that the contractor verify that everything they submitted complies with the construction documents. Hand-in-hand with these requirements are specifications which state that conflicting requirements will resolve to the most stringent standard, as determined by the design team and the authority having jurisdiction.

Since this approach does not reveal mistakes, omissions, or clarifications in the submittals, we can expect two obvious outcomes. The first is that the wrong material will be installed, which has the potential to compromise design integrity unless the design team catches it during their inspections. The second, is that the contractors will recognize the trap laid for them by the design team. If there is no way to prove that you have met the specified criteria, there’s always a risk that the design team will require costly changes when time is short.

Submitted without comment (again)

This trend obviously increases the contractors risk. Savvy subs who find themselves in this situation may try to mitigate this risk by refusing to place a costly material order without Architect of record, or Engineer of record approval. Please seek qualified legal council where necessary, as many states have laws pertaining to professional obligations. It’s also worth knowing that contracts with a severability clause may feature clauses that cannot be legally enforced. This may be part of a strategy to bluff contract signers into accepting unfair/illegal conditions. Please seek qualified legal council before signing any contracts!

We’ll fix it with technology!

Some General Contractors (GC’s) attempt to supplement the lack of design coordination with Building Information Modeling (BIM) which is used for clash detection. Since most GC’s lack extensive knowledge of Mechanical, Electrical, and Plumbing, (MEP) trades, they prefer to require that subs in these trades generate their own BIM model of the project, which will then be used for clash detection. Here again, standards of care and detail levels play a vital role in defining what actually gets done. In the context of competitive bidding, BIM modeling requests are generally between vague and meaningless. These requests are vague because the GC has no idea how coordinated the plans actually are, so they don’t know how to quantify what it would take to resolve the issues. The only party who does actually know what needs to be fixed/coordinated is the original design team.

“Go ahead and ask them what’s missing, I’ll be right behind you..”

Be forewarned that the same market trends that make it necessary to sell lower standards of care, encourage design firms to eschew “premium” services that don’t sell. In the worst cases, the end result are plans of poor quality, which must be aggressively salvaged by a slapdash application of technology. Please seek qualified legal council where necessary, as many states have laws pertaining to professional obligations.

If you are trying to price BIM and clash detection services, I would start by separating the proposals. One price should be for a specified number of hours to develop a BIM model at a specified level of detail. This should stipulate the required documents, standards, and files before the process begins. The second price should be for a predefined number of hours to address clash issues. Make sure to stipulate the hourly rate for overages.

“We cannot solve our problems with the same thinking that we used when we created them” -Albert Einstein

Trying to coordinate a design using third party independent contractors in a process named “Clash Detection” has a few obvious pitfalls. GC’s and subs alike should understand that the resultant “BIM Team” works very differently than if the same firms contracted with one another to design the project.

Not all clashes are easily resolved. Some resolutions will materially change the cost, profitability, duration, utility, aesthetics, or performance of the end-product. It’s also important to understand that clients purchasing clash detection, do so assuming that this process will eliminate change orders. For these, and many more reasons, clash detection has the potential to consume a tremendous amount of time. Estimators should carefully manage their clients expectations.

Trends in bidding

Estimators working in markets with an influx of pre-made solutions should adapt to the lack of detail by exposing what they do, and do not, know, using the Request For Information (RFI) process. Bear in mind that in most cases, someone on the design team has been working with someone at the manufacturer. Asking for the contact information of the manufacturer’s representative is an excellent way to get access to the individual who knows the most about this project. Be advised that the representative may not be aware that the job is out to bid. Clients with national accounts for materials, vendors, and subcontractors, have a bizarre predilection for design teams who systematically withhold any mention of these contractual relationships. When asking about these accounts, provide any information you have, because many reticent design teams have no interest in communicating their client’s contractual relationships. Sometimes these relationships range from tricky, to downright risky.

For example, there’s one major firm with a national account for lighting fixtures which goes out of it’s way to conceal that this account arbitrarily excludes emergency egress fixtures such as exits, and frogeye lights. The client demands that electrical subcontractors buy all their lighting fixtures from the national account vendor. However, that vendor will not provide pricing for the exits or frogeye lights until after the contract award.

When they do, the national account vendor’s price for the egress fixtures are artificially high. The client refuses to accept financial responsibility for this outcome since they believe they made their requirements clear. Whether by coincidence or by design, that National Account relationship sets the contractor up for an ugly surprise. RFI’s about this subject put the issue on the record for all bidders to see. If/when the vendor refuses to quote the full package per the client’s direction, the contractor can forward the vendor’s response to the design team while asking for direction. If/when the design team runs out the clock on that RFI, exclude, qualify or quantify the costs for the issue(s) in question on your proposal.

The client set up a national account vendor to secure advantageous terms on pricing, performance, and quality control. The vendor may be technically selling their goods to the subcontractor, but they view the national account holder as their client. Estimators pricing work requiring these vendors, should anticipate a lower level of vendor performance as compared to market leaders.

You might say they’re hard-headed and crooked, but that’s just one point of view

In particularly competitive markets, there is a trend where the General Contractor (GC) is awarded based on a hard-bid of the schematic design (typically 10% complete). The awarded GC then conducts a competitive bid based on the design development set (typically 50% complete). This bid is often “open book” to the client which means they are presented with all the bid information. In many cases, the most complex and/or time-critical subcontractors are awarded. The GC then conducts a competitive bid on the Construction Document (typically 95% complete) set. This is ostensibly to award the remaining subcontractors, however the subs awarded on the 50% round are expected to revise their proposal and offer guidance on constructability, scheduling, and cost-control measures. Finally, there is the budget reconciliation round which is the permit set (typically 100% complete). This is where the client expects the GC to lead their subs in value engineering exercises. In extreme cases, the client will threaten to suspend, cancel, or re-bid the entire project unless their budgetary, design, and schedule demands are met. This practice only happens in especially competitive markets since nobody on the build-team is paid for their design-assist work.

For more articles like this click here

Leave a comment | tags: Incomplete plans, Negotiated Agreement, Risk, Solutions | posted in Uncategorized

September 17, 2020

Would you recommend estimating as a career?

By Anton Takken

I was recently asked if I would recommend estimating as a career. This being the first time anyone ever asked me this question, I was unprepared for how complicated it felt to answer. I find myself between two competing perspectives on this vocation. On the positive side, most people who major in Construction Management do not voluntarily pursue estimating. As a result, there is usually a tremendous amount of competition for Project Management positions, which in turn, limits the individual’s ability to move up the ranks.

Project Managers multiply like…well you get the idea!

The Good

Estimating in contrast, has very little competition. It’s very common for successful estimators to get rapidly promoted to senior positions. A quick survey of construction contracting will reveal that estimators are well represented at the ownership level. Estimators are in a unique position to witness market and industry trends. If they’re paying attention, they can see what’s going on both inside, and outside of their firm to make better decisions. Estimating is a wonderful way to network with professionals in your market. Bid deadlines can be very short, so coordinating everything and everyone requires a lot of direct communication. That direct communication provides lots of opportunities to stand out as an individual. Being perceived as a real contender attracts market leaders, which can make you a winning bidder. These are the proven connections between your integrity, your reputation, and your success.

Plus you’ll be surrounded by some good company!

The Bad

The construction industry has some serious challenges that will factor heavily into your daily life as an estimator. It’s entirely possible to be the lowest complete bidder and still lose the job. Major economic trends cascade through the industry upending everybody’s plans. It is very frustrating to see hard-won projects getting postponed or abandoned when your firm badly needs work. Oftentimes there will be lot of pressure to generate results when work is scarce. People tell me that they wouldn’t want a job that depends upon their day to day performance. I see it differently. Just about everyone’s job depends on their day to day performance. The same transparency that exposes all the bids I lost, will equally showcase all the jobs I won. I can see, and more importantly prove my value to my employer.

The Ugly

Desperation encourages a lot of bad behavior on all sides of this industry. I often remind people that it’s not the job you lose that puts you out of business, it’s the job you win. All of the very worst projects of my career had one thing in common; dishonesty. You will encounter a lot of people who will rationalize dishonest and unethical business practices as being somehow necessary. “The thing you gotta understand…” is the familiar preamble, cheating is the inevitable conclusion. It’s presented in terms of negotiation where the arrangement just so happens to require cheating the winning bidder out of their contract award. If they didn’t want to work with a firm, why did they accept the bid? As crazy as it might sound, I’ve had clients who claimed they had a lower bid than mine and asked me to beat it after the fact. When I declined their request (called their bluff), they went quiet for a while, then sent me a contract for my full bid amount. Some days, it can be very difficult not to take it all personally.

“Jim does his best to stand out from the crowd, but sometimes the job eats at you…”

So where do I start?

I could list off all the education and work experience stuff, but it won’t lead to success on it’s own. Estimating is a unique profession in that I meet very few who pursued it intentionally. The vast majority of beginning estimators go on to pursue other lines of work. It’s my belief that this career misalignment is largely due to two things; clarity of purpose, and perspective. When people don’t really understand what they’re supposed to achieve, they make poor decisions that prioritize process over production. This kind of thinking is how we end up with “bid mills” where firms push their estimators to recklessly bid everything in hopes that it will increase their odds of winning. It doesn’t work, it never worked, and it’s always been a very bad practice. The estimators purpose is to secure profitable work by managing risk. If you want to be an estimator, you’ll need to maintain clarity of purpose. Chasing everything to appear busy is confusing motion with progress. Aiming at the opportunities you can actually hit is where perspective comes in.

“Jared was all eyes and ears which is why he’s always running around”.

There’s a meaningful difference between perspective and opinion in this context. Perspective comes from the honest observation of what’s going on, driven by the curiosity to determine what actually matters to success. Since we know that our success is defined by securing profitable work, we can focus our attention on the variables that affect that outcome. A word of warning here, make sure that your focus is proportional to the indicative value of a given variable.

Here’s an example of what I mean. Let’s say you’re competing on near-identical projects like retail chain stores. If you find that you’re losing by 5%, it makes sense to find a way to trim 5% from your bid on the next one. However, if you make that cut (or more) on each successive bid, yet continue to lose by 5%, you should focus your attention onto other variables. Find out how it’s possible to “miss” with such precision. Are you working with the same people as the wining bidders? If so, there may be relationships you need to build up, or work around, to improve your odds of securing profitable work. If the work in question is outside of your efficiency of scale, your company will need to make structural changes to profitably secure that work.

“Give me a lever long enough, and a fulcrum on which to place it, and I shall move the world“

Archimedes

These are just some of the many reasons that estimators must have the perspective to know what is and is not, a viable opportunity to pursue. With clarity of purpose and the right perspective, you will be well equipped to recognize the risks and rewards of any given “best practice” in estimating. There are a lot of “solutions” that are worse than the original problems. I worked for a company that painstakingly measured every square inch of each paint color where painting was consistently worth less than 1% of the total project cost. When I started, this same company used crude, square foot costs for complex trades like structural steel and Electrical which were consistently worth 12% and 20% respectively of the total project cost. Over 30% of their project value was guesswork because the estimator never found time to learn how to quantify and estimate the more complex trades. The rationale was that the painters weren’t very good bidders, compared to skilled trades so they needed fine detail to verify the painters bids. While this was generally true, it ignored the relative risk versus reward. Any error in a skilled trade bid was probably worth more than the entire paint scope. Simply put, there was no reason to even measure the paint because we could plug in double the average paint contract value without materially affecting our odds of winning the overall bid. In fact, most of their jobs were won or lost on the basis of six critical trades.

Learn from your losses

Careful readers have likely noticed that there’s a lot of valuable information to be gained from losing a bid. Depending on the internal bureaucracy of a given firm, it can be difficult for an estimator to know how successful their wins really were. There’s a built-in delay on this feedback because you must wait for the project to conclude before the full story is revealed. Estimators working in booming economies may not lose enough jobs to keep their perspective honed. When things slow down (and they always do), these estimators are often blindsided by layoffs. Savvy estimators who know the market value of, and market leaders in hardscrabble work are in a much better position to weather a downturn. Wherever possible, seek the tutelage of a senior estimator who has weathered recessions. There is no greater test of an estimators skill than to consistently land profitable work in a recession.

Walk tall

Estimating is a humbling pursuit because it’s impossible to achieve your potential without experiencing some failure. There are however, many moments where you’ll know your worth with a clarity that is undeniable. That confidence adds to everything you touch, and inspires the good people you’ll work with.

There will be opportunities to help people who may help you in a time of need. In so doing, you can change your corner of the world for the better. If all of that encourages you to become an estimator, I hope to see you out there!

For more articles like this click here

1 Comment | tags: Estimating process, Perspective | posted in Uncategorized

February 21, 2020

Growing pains

By Anton Takken

Time is money, the customer is always right, estimates are free, every company wants and needs to grow. These expressions are so familiar that they sound like universal truths. Life has a way of being more complicated than we’d like it to be. I’ve definitely encountered rare situations where costly time was squandered, customers were wrong, and estimates cost a fortune.

Is growth always good?

To answer that question, I’ll ask another one. What puts more companies out of business, losing too many bids, or winning too many? This isn’t a trick question, and it doesn’t require any extensive market knowledge to answer. Consider the following. If a company doesn’t win any work, they’re not getting any income which means their overhead is consuming their capital until they’re insolvent. The overhead and the existing capital are known entities to the firm. This means that it’s possible to accurately define how long the company can remain in business without landing work. More significantly, it defines how the company can fail without owing anyone.

If a company wins more work than it can complete, it’s in a very dangerous situation. Contractually they’re obligated to complete the work and penalties for failure are severe. In real life, things don’t fail in a neat and orderly manner. One bad job has a way of taxing resources on all the others, systemically spreading the failure to everything the firm touches. A company that might ordinarily be able to weather one bad job is now facing the prospect of losses on all their projects at the same time. Taking on that one additional job might well doom the entire operation. The knock-on effects of this are severe. Clients and subcontractors are often left in serious financial jeopardy. It’s difficult to know the total downside risk, but it’s clearly much worse than having to close up shop for lack of work.

Risk versus reward

Businesses operate on risk versus reward relationships. Growing a successful business is often assumed to be a low-risk, high-reward proposition. After all, you’re just copying whatever worked to capture more of the market.

There are two assumptions underpinning this plan that have the potential to upend the whole risk to reward relationship. I’ll pull them out here.

“…copy whatever worked…”

and

“…more of the market…”

Let’s start with copying “whatever worked”. On the surface, it might seem like any entrepreneur or professional would have a solid handle on what they do, why it works, and how it can be copied. In my experience, this sort of corporate self-awareness is extremely rare. Quality control efforts tend to focus on detecting the signals and causes of failures. People just aren’t that curious about their successes. If something is working, there isn’t much incentive to push boundaries in search of weaknesses.

With their heads in the clouds, management keeps tripping on molehills

I worked for an entrepreneur who proudly told me that “big and clean” ground-up construction projects were the bread and butter of the company. A quick review of the accounting would show that “ugly and small” remodel projects constituted 85% of the annual revenue, and well over 95% of the annual profits. Simply put, the “ugly” remodels didn’t attract as much competition, so we could win with higher fees. Since they were smaller, we could do more of them per year with the same size workforce. This entrepreneur is by no means an isolated case. I regularly encounter professionals whose company “identity” has little resemblance to reality. Projecting the image of what they think they are into new markets rarely works out for them.

So, what’s the assumption with the “more of the market” part?

This is a two-part problem. First, if the firm doesn’t know what they’re good at, they’re unlikely to be aware of the market factors that influence their success. Very few companies are “good at everything” so there will only be a select few market segments that are viable to any specific firm. Those segments can have many factors that influence the quality, quantity, and frequency, of opportunities to seize upon. Simply put, there might not be “more” of the target market to pursue. This is especially true for niche contractors in depressed economies. Just before the last recession hit, there were lots of companies boasting about their growth into diversified client bases. After the recession hit, most of those firms had layoffs.

The venturi effect

Giovanni Venturi discovered the venturi effect which is visible with a simple experiment. Blow at a right angle to the opening of a straw placed in a glass of water. The venturi effect will cause pressure in the straw to drop, drawing the liquid up the straw.

During an economic boom, it’s not particularly hard to win bids. Companies quickly decide that they need to grow in order to capture more of the expanding market. So, they hire more people, buy more equipment, and generally take on more overhead. Now that they have this overhead, they need to win even more work to pay for it. The constant expansion creates a venturi-effect on overhead. Some readers have gotten this far and figure this is all normal growth.

The bids aren’t just placeholders in the process of converting opportunities into profit. Bids freeze the value of the project before it’s begun. Adding overhead to the company post-bid is effectively trading profitability for growth. During a boom, the revenue can be expanding so rapidly that it’s hard to tell that the individual job is actually getting less profitable. Eventually, many such firms reach a point where their very survival depends on growth because none of their jobs were won with sufficient overhead to pay their own way. Some readers might be asking themselves why the estimators at these firms didn’t react by raising the overhead in their bids.

While I’m sure that some of them do try, they’re often obliged to prioritize the more immediate problem of staying competitive enough to keep winning work. Estimators should understand that businesses in general, and managers in specific, tend to prefer a flawed but executable plan over an effective strategy that requires constant judgement.

Strategy versus planning

As individuals, it’s impressive how easily professionals can spot the unfortunate outcomes of rigidly following a plan. When personal accountability is threatened, many will claim “their hands are tied” by these selfsame plans. People respond to incentives. A “plan” sounds much less risky because people assume, they’ll be rewarded for following (or at least appearing to follow) the plan. A strategy that requires judgement means you might be solely responsible for anything that goes wrong, even if your reasoning was sound.

Longtime readers of this blog know that estimating isn’t about a plan or a process. Estimating is about controlling risk which requires good judgement. In my experience, the better your judgement, the less you have to fear in terms of accountability.

“Matt spends a lot of time looking for a place where his reflection matches his image.”

Where do you start?

Estimators need to understand the power of perception. Hard-charging entrepreneurs hire estimators to control risk, so they can focus on growth. When sports cars are advertised; the horsepower, the speed, the looks and the luxury are all prominently featured. Nobody’s talking about the brakes. Race car drivers know that better brakes slow the car in less time which means they can maintain higher speeds for a bit longer before they must brake for a turn. This means that they’re covering more distance in less time. As odd as it might sound, it’s entirely possible for a car with better brakes to win a twisty race against a car capable of higher top speeds.

Estimators looking to gain traction with leadership need to illustrate the effect of controlled risk. How does winning a given bid relate to securing a better position for the company in the future? Mindless assumptions should be challenged. I had a boss who wanted to “really impress” a municipal client with a very low hard-bid in hopes of securing no-compete contracts for future work. The city in question has charter rules expressly forbidding city contract award without a competitive bid.

Strategic thinking looks beyond the client-retention platitudes. In this example, there will always be competition, so the focus should be on maximizing profitability at the market-leading price point. In practice, we found that we were able to profitably win work in a handful of cities. Looking deeper, I was able to determine that a longstanding culture of bid-shopping among the local General Contractors (GC’s) in one city had created an incentive for the local subcontractors to work with out-of-town contractors. By being honest and forthright about everything including bid results, I was rewarded with better subcontractor pricing than my competitors.

Since repeat business depended upon winning bids, we had an incentive to reveal any design-driven chicanery that threatened to exceed the client’s budget. On one such project, there was a sole-specified vendor for window coverings that was three times the cost of their competition for a plain “white goods” product. From a strategic standpoint, the estimator has three options. They can bid per plans and specs hoping that everyone else does too. They can carry the cheaper product in their bid in hopes that it will be accepted by the Architect, and finally, they can expose the cost difference to the client on their bid form.

Options one and two depend heavily on the integrity of others for success. Option three risks angering the Architect by exposing their chicanery. When weighing the strategies, compare the relative risks. Any one of them might fail, thus losing you the job. Option two might still anger the architect when you submit on the “wrong” product. If the alternate material is rejected, option two could result in winning a job at a loss which is worse than not having a job at all.

Option three presents the least total risk and most potential reward. If the base bid is per plans and specifications, you’re not violating any trust or instructions. The alternate is voluntary and can be truthfully presented as an alternate equal. If presented as a way to achieve their design intent within the client’s budget, the Architect can accept your alternate and save face.

The “savings” presented can be whatever you choose to offer. Strategically, it’s smarter to allow yourself greater profitability to counterbalance the potential difficulty in getting an alternate approved. As an estimator speaking to leadership, this strategy is a win for the client and the contractor.

A journey of a thousand steps

Strategic growth is more difficult than it sounds. During the ebb and flow of larger market trends, it can feel as though a perfect strategy has no priority over your daily concerns. There will almost certainly be times where the best course of action is to simply press onward, making the best of what you have to work with.

Quick story. I started working for a company that chased hard-scrabble projects for low budget General Contractors (GC’s). Every client who put us on their bid list was treated like an unassailable gift from the heavens. Bidding was miserable because deadlines were short, bid shopping was rampant, and the work was virtually worthless. Things weren’t much better in the field where most of the jobs ran late, over budget, and suffered from chronic mismanagement.

Strategy was regarded as a nicety we never had time for. Since the jobs were small, I was constantly inundated with bids to keep everyone busy. Chasing larger projects with the same class of client didn’t improve my fortunes. By one year in, it was clear that our three “best” clients were a financial illusion. They hired us for more work than anyone else, but all of their work was so poorly managed that we lost productivity and profitability on everything else we had going at the same time.

I was deeply frustrated, and at an annual review, I presented a list of the top 100 GC’s in my area to my boss. I insisted that we make an earnest effort to get ourselves invited to bid on their work. Some put us on their “small projects” list which was a feeding frenzy of projects identical to the work we were trying to escape. Others only invited us to bid on work that was too far from our market. Eventually, we were invited to bid on a modest job with a major GC. It was a rousing success! Every single project since has been awesome. We met with their pre-construction managers where we learned that they were very selective about who they’ll invite to bid.

Mesas and Buttes

Mesas and Buttes are often confused. A Mesa is flat topped land mass where the width is greater than the height. In contrast, a Butte is a flat-topped land mass where the height is greater than the width.

Submitted without comment.

It’s pretty easy to spot market stratification in the construction industry. Some projects command higher prices than others, even when they are very similar. When we see “price point” markets, there’s a wide selection of mostly standardized offerings from similar providers. I once bid a job which had a tremendous number of bidders in each trade. Plotting the bid amounts on a continuum from smallest to largest, it was plainly obvious that the bids clustered around three separate values. Broadly speaking, the clustered bidders had strong similarities in terms of market share. Among peers in their cluster, all of the bidders were strong competitors.

Comparing individual bidders from one stratum to the other, it didn’t seem probable that they were looking at the same scope of work. For the most part, the bidders in a given stratum had similar economies of scale relative to the scope of work. At the cheapest stratum, the bidders were neither too big, nor too small, they were just right.

Bid invitations that are open to all comers will generally result in an award to the stratum that best matches the scope of work. We can visualize the market stratification as if there are populations living atop mesas of different heights. Everything is organized roughly the same on each mesa, but they’re too far apart to bridge the gap between them. Moving from one mesa to the other requires painful transformation because there are no resources at the valley floor. It’s dark down there, and there’s no one to guide you so only the determined, or desperate dare to try.

Markets can stratify in less obvious ways as well. Elite clientele may decide to solicit bids from only the most qualified general contractors, who in turn, will only solicit bids from the most qualified subcontractors (subs). In many cases, the business is conducted with such discretion that only the most observant of the mesa dwellers can tell that it happened at all.

Getting to this level is a formidable struggle, which is why there is less competition. We can visualize this kind of market stratification as a butte. The butte can be at the same height as a mesa, but the butte dwellers benefit from a completely different client base.

An island in the clouds

Chasing elite clients sounds like a foolproof plan, and honestly, there’s a lot to recommend it. However, there’s a big difference in the relationships that underpin every opportunity. Going back to my butte metaphor, it’s significant to realize that while the height might seem familiar, the boundaries are sheer cliffs. Any failure to perform, even the perception that you might fail to perform, may be all it takes to be kicked out. It’s critical to understand that these rules apply to virtually everyone on the butte. A GC with a sub that’s not performing, is an existential threat to their livelihood.

The greatest advantage of life on the butte is that you can’t exist here without doing construction management right. Half-baked, absentee Project Managers (PMs) doing their best to maintain plausible-deniability are not tolerated at all. This is a huge improvement for all concerned, including the GC, because the client is willing to pay the going rate for qualified leadership.

So what’s not to love?

Elite clients have different motives than commodity level consumers. Time and money may not be their primary concerns. For example, bank tellers require a lot of costly in-house and on the job training. Once a given teller has the necessary skills, they can easily work for a competitor. The bank was much more concerned about inconveniencing tellers, than time or money.

Elite clients know that they’re paying a premium, so they expect the build team to do whatever it takes to make the project successful. Design teams aren’t appraised by their construction documents (CD’s), or the efficacy of their management, but by their portfolio of built projects. The quality of the finished work may not reflect the quality of the original design. Astute readers will note how this “cuts both ways” for every professional involved.

There are many unique challenges to working for elite clients, but the biggest risk by far isn’t obvious to most people. When things are going well, life on the butte is pretty awesome. As a company, you can be doing less revenue for higher profit with less overhead, and manpower than you’re used to. When an elite market slows down, your company may face some really difficult adjustments in order to successfully pursue hard-bid work.

Estimators love to think that they’re constantly diversifying their client base in case of a turnaround. In reality, the butte work is always the highest priority. Coming down from that height and climbing back up the hard-bid mesa isn’t as easy as it sounds. Even if the estimating department is up for the challenge, the leadership and the workers all need to adjust to very different priorities.

For more articles like this click here

Leave a comment | tags: Accountability, Perspective, Risk | posted in Uncategorized