Tag Archives: Hard Bidding

December 22, 2016

Seven new estimating ideas to try

By Anton Takken

We’re all looking for an edge to win a bid or make a project more profitable.  Estimating is a profession with deep roots going back through history.  It stands to reason that many of our current problems were familiar to our ancestors.  As with all human endeavors, we’re trying to improve on old problems, and sometimes a “new” idea is really just a rediscovery of a forgotten gem.  With that in mind, I hope the following seven ideas are at least new to most contemporary estimators.

#1 Provide constructability review for fee instead of conceptual competition for free

Conceptual estimating provides financial feedback on incomplete designs.  Since the complete design-development process can take months or even years, it’s important for clients to have a way to maintain alignment between their design and their budget.  There are many situations where a conceptual estimate can help the client to make an informed design decision.  General Contractors (GC’s) have traditionally extended this professional courtesy to assist and encourage upcoming projects.

Some GC’s believe they can make themselves indispensable to a project by providing extensive conceptual estimating.   They hope to secure a contract award before the design is completed.  This is commonly known as “client capture” and it’s the reason some firms will spend a considerable amount of time on conceptual bidding.

Seven new estimating ideas to try

“Scott does a lot of conceptual estimating and it’s starting to show.”

Since neither the Architect nor the Client pays for these conceptual estimates, they are naturally enthusiastic about soliciting bids from GC’s.  In some markets, it has become common to solicit competitive conceptual estimates from several GC’s without any intention or obligation to work with the “winning” GC on the final project.  The request for proposal (RFP) on such projects  encourage GC’s to provide design solutions, while studiously avoiding any reference to contract award.

GC’s with more optimism than caution end up as unpaid design consultants.  Some truly callous Clients will  “refine by bid” which is where all the estimators best ideas from one round of bidding are incorporated into the plans before they’re put back out to bid with their competitors.  This process is repeated until the client is satisfied that they’ve got the cheapest contractors building the best ideas.    I encourage estimators to find less frustrating ways to help their competition!

Clients may be unwilling (or unable) to award a contract to a GC on the basis of the conceptual estimate.  Nevertheless, these clients need budgetary feedback on their designs.  An unspoken detail of complimentary budgeting services, is that you can’t hold anyone responsible for bad information.  Clients who solicit several bidders are hoping to work around this problem by putting their trust in a budgetary consensus.  This encourages bidders to game the uncertainty to their advantage.  The bidders goal shifts from providing insightful conceptual estimates worthy of contract award, to landing an invitation to the final round of bidding.

Since Architects act as gatekeepers to new project opportunities, the GC’s will favor the Architects interests wherever they can.  This means that GC’s aren’t as interested in finding budget-blowing design choices as they are in delivering a plausible-sounding number.  GC’s who mostly chase conceptual work won’t attract market-leading subcontractors (subs) who have real opportunities to pursue.  Firms that cannot attract market-leading subs must often cut corners to be competitive.   All of these conflicting motivations serve to move the outcome of a conceptual estimate further from its purpose.   Many clients end up blind-sided by a budget blowout on their final bid as a result.

Estimates are not free.  Competitive bidders submit their estimates in a good faith exchange for either contract award, or bid results which help them to win their next bid.  Competitive conceptual bidding with no obligation to award or even select a contractor is a terrible practice that’s harmful to all parties excepting the Architect.

GC’s should offer clients an alternative.  A constructability review would furnish the client with not only the conceptual estimate, but a comprehensive report on the constructability of the plans.  Furnishing the client with a list of outstanding budgetary issues provides a way to track changes and guide progress.   The fee for these services should be commensurate with the labor involved in meeting the client’s needs, including recompense to any subcontractor consultants involved.

#2 Include sample subcontracts with every invitation to bid

It’s impressive that with the incredible amount of information that’s being effortlessly transmitted via email, and bid-letting software that one crucial document is virtually never shared before the bid deadline; the subcontract.   Many GC’s provide the sample contract under Division 1: General Conditions in the project specifications.  However that sample contract is only between the Client and the GC.  Most GC’s include subcontract terms that are much more stringent than those in the General Contract.  The most common are the “pay when paid” provisions which allow a GC to deny or delay payment to a sub because the client hasn’t paid them.  Some GC’s restrict the allowable percentages of overhead and profit on change orders on subcontractor’s change orders as well.  Other GC’s require every subcontractor to provide several hours of daily cleanup.  These are just a few of the many contractual requirements that Subs are expected to agree to after they’ve bid the job.  GC’s factor the general contract terms into their estimates as part of the project risk.  Providing a sample subcontract with every invitation to bid (ITB) shows the subs what the GC is expecting of them.  This avoids unnecessary arguments and negotiations for the Project Manager trying to get the project started.

Seven new estimating ideas to try

“Here we see a project manager fixing problems with the estimate… “

#3 Provide bidder responsibility matrix to delegate trade overlaps and identify sole-sourced vendors

Building on the concept of telling Bidders what you want from them, it’s a good idea to provide a bidder responsibility matrix.  There are tons of situations where several trades will overlap, yet nobody knows which trade the GC expects to do the work.  Rather than leaving these things to chance, it’s far better to actually provide direction so there won’t be any bid-day surprises.

Sole-sourced vendors are companies that must be hired for the project.  Sometimes they sell an exclusive material, other times there are proprietary systems that require specialist training.  The most common sole-sourced vendors will pertain to systems like; Security, Access control, HVAC Control, Fire Alarm, Elevators, Point of Sale (POS) systems, and Telecom.  Many of these vendors are “ghost trades” who only operate in a sub-tier-sub relationship.  If the affected trades don’t know who to call, they’ll just exclude the work entirely.   It’s absolutely incredible how much time gets wasted by all the subs trying to figure out who these sole-sourced vendors are.  GC estimators that provide leadership and information will quickly earn the loyalty of their subs.

#4 Provide “sellable” target budgets for individual trade solicitations on design-build estimates

GC’s who pursue competitive design-build bids rely on subcontractors to fill in a great deal of information.  These projects typically provide a narrative along with a rudimentary sketch of the work.  Lacking a target budget, the subcontractors have no context to interpret the design intent of the project narrative.  As a result, a lot of work is wasted in developing proposals that don’t meet the client’s needs.  Getting the subs dialed in to the GC’s expectations gives the whole team a cohesive plan of action.  Providing leadership and perspective is vital to successful bidding in a competitive market.

It’s worth pointing out that GC’s who have a Project Manager (PM) “bidding their own work” should make sure they adhere to estimating best practices .  Lots of PM’s “estimate” by collecting subcontractor bids and tallying the total of the lowest bids in each trade.  These PM’s have no idea what things should cost because they’re not actually estimating their projects.  GC estimators looking for an edge against their competitors can set themselves apart from the “bid collectors” by proving they are the firm that knows what a winning number should be.

In tight markets, this knowledge can undermine the hack GC bidders by giving the sub market a way to know when a GC hasn’t shared all the project requirements.  Transparency leads to trust and trust leads to cooperation .  The subcontractor market’s frustration with bidding practices that obscure, delay, and misrepresent what’s really going on shouldn’t be underestimated.  Being timely, honest, and forthright with important information will provide a sustained competitive advantage in most markets.

#5 Improve in-house estimating by hosting “lunch and learn” sessions with a market-leading subcontractor

Good leadership is difficult without good information.  Market-leading subcontractors can be a great source of trade-specific information for a GC estimator.  Understanding what drives the costs in complex system can open up options that would be overlooked.  GC estimators should strive to improve their knowledge by inviting a market-leading sub to a lunch hour session where they can present on some specific area of their trade and answer estimators questions.  These meetings can explore new materials, techniques, and technologies that estimators could potentially use for value engineering exercises.  Don’t forget that subs have extensive market knowledge about Architects, clients and competitors.

Reciprocity is a vital component of fair-dealing so GC estimators should share whatever they can that would help the sub to win more work.  Feedback on how proposals are scoped on bid-day can greatly improve a sub’s understanding of how their bids look through the GC’s eyes.  Poorly written proposals may end up on the “war room” floor when time is short, and the prices are close.   GC’s may lose the bid by these small differences so it’s very important for subs to have well-written proposals.

#6 Provide a team strategy that goes beyond simple pursuit.

The very nature of competitive bidding means that the majority of bidders will lose.  Many professionals assume that bidding is like a lottery, where your odds may improve in proportion to the amount you participate.  Their favorite slogan is “you can’t win if you don’t bid“.  If clients merely picked the winning GC out of a hat, this reasoning would have merit.  The reality is that the market-leading price for the proposed work isn’t generated by random chance.  Market leaders will consistently deliver higher value at lower cost than their competitors.  It therefore follows that any GC capable of attracting the best subs on the market will have a profound advantage in quality, pricing and profitability over their competitors.  When these firms pursue an opportunity, it’s incredibly hard to beat them without an excellent plan

Eagles and moths share the gift of flight, but moths squander their gift by banging against windows.

GC estimators should sincerely develop a strategy that plays to not only the GC’s strengths, but to their best subs’ strengths.  Winning  a bid has more to do with targeting the right opportunity than anything else.  Blindly pursuing every opportunity leads to consistent losing.  This tells market-leading subs that the GC is a participant rather than a contender.  GC’s that can’t attract market-leading subs won’t be competitive on dearly needed projects without sacrificing profitability.  Eventually this spirals to the point where every bid is a last-minute, underfunded, and poorly managed effort to keep the doors open.  The ever-present urgency to pursue every project is the most visible indicator that an estimator is adrift.

Seven new estimating ideas to tryEven the best teams get tired of running around

Estimating is a deadline-driven enterprise, and everyone participating knows this.  Invitations to bid that offer nothing but a strategy of pursuit aren’t capitalizing on the opportunity to communicate a viable strategy to win a profitable job.

ITB’s with statements like ;”we’re really going after this job” are presenting  their enthusiasm for the pursuit as a reason for subs to team up with them.  When these ITB’s are followed up with interns or secretaries nagging subs to bid, the tone shifts from enthusiasm to desperation.  Excellent GC’s don’t nag subs for bids.

GC’s who carefully select project opportunities based on their best allies in the subcontractor market aren’t doing themselves any favors by writing an ITB that implies the GC is desperate for company on their mindless pursuit.    If the GC’s best subs are market leaders, nothing is gained by soliciting every company in the book (or the database).  ITB’s can and should indicate when subs are short-listed for a targeted opportunity.  If it’s a great opportunity because the GC’s got a great team of subs, then the GC should clearly commit to their team. 

It’s worth mentioning that scoundrels who think “blind copy” gives them the power to misrepresent their commitments are mistaken.  Dishonesty is revealed in the supply chain just before the subs bids are due.  This is because the sales reps at distributors who sell to all the subs in a given trade have a vested interest in helping their customers to win.  Since everyone has the same deadline, the vendors can see who’s requested pricing.  Subs may have a lot of opportunities vying for their attention.  Sinking a few weeks of effort into bidding on one project may require turning down a lot of great opportunities.  Competitive bidding operates on principles of good-faith.  Once a sub knows the GC is willing to lie or cheat, there’s no reason to believe in fair competition.  Honest subs will choose to either withdraw from bidding or intentionally lose the bid so they can escape dealing with the dishonest GC.

In the decade that I’ve been an estimator, every profitless, contentious, mismanaged, and unpaid project started with some form of dishonesty.  It’s never the bid you lose that puts your business under, it’s the terrible job you won.

#7 Replace boilerplate bureaucracy with clarity of purpose

Modern construction is very litigious which is why companies call themselves “General Contractors” instead of “Builders”.   This is why GC estimators often think in terms of contractual liability.  Estimating is about controlling risk so it follows that many estimators would seek to reduce their risk by using standardized forms covered in catch-all provisions, clarifications, and exclusions.  This “boilerplate” can get so extensive that very little on the form is actually pertinent to the project at hand.

I’ve encountered proposals that were so riddled with boilerplate that they barely outlined the work to be done for the proposed amount.  Some GC estimators try to circumvent this practice by requiring their subs to use a “bid template” to standardize the format for the bid.  This is predictably unpopular with the subs because the GC’s formatting  limits the risky exclusions, clarifications, and notes.

Both of these examples illustrate how boilerplate bureaucracy swaps risk for cooperation.  The best cooperation is achieved when the risk is assigned to the parties who can best control the factors driving the risk.  Subcontractor proposals with boilerplate meant to replace a contract are false economy.  The GC’s ITB is a solicitation to bid on work under the terms of the GC’s subcontract.  While the GC’s get to set the terms of the contract, the subs are independent firms who must strike a balance between protecting their interests, and offering a useful proposal to the GC.  If the subs knew what the GC’s subcontract would require, they would have less risk to control.

Subs who don’t include the complete scope of work for their trade are generating liabilities for the GC.  The GC’s patience with those liabilities grows in proportion to their ability to find someone else to address them.  The more skilled the trade, the fewer options there will be.  This is why some “concrete” firms can get away with excluding rebar and/or concrete.  In contrast,  Electrical contractors are expected to include all wiring for the building, even when that requires a sub-tier contract for proprietary systems such as Fire Alarm, Communications, Building Management Systems, or Point Of Sale (POS).

Inexperienced GC estimator’s sometimes try to counterbalance their lack of knowledge with additional bureaucracy.  This translates to numerous and tedious bid revisions that steadily move away from a collaborative effort to win a job.  These revisions generate additional risk to the subs because risk-averse GC estimators are prone to losing bids.

Clarity of purpose is what’s needed here.  The GC estimator must understand it’s their purpose to profitably win work by controlling risk.  This is best accomplished by working collaboratively with market-leading subcontractors.  Demanding protection from all risk isn’t estimating, it’s one-sided policy that leads to profitless work.

Seven new estimating ideas to try

“I don’t know… something about light and heat, I handed it off to the estimator…”

In competitive bidding, profit may be considered to be a function of risk versus reward.  Making projects rewarding for subs increases the GC’s ability to attract top talent.  It therefore follows that reducing the risk for bidding subs will correspondingly increase the GC’s profitability.

It’s here that an engaged GC estimator can provide committed leadership to direct the best course of action.  The most common problems will pertain to what gets included, or excluded from the scope of work.  The design teams believes their primary function is to provide design intent, which the General Contractor  uses to develop a cohesive scope of work.  Design teams can successfully argue that even incomplete plans, convey the design intent.  As a result, the GC may find they’re facing a choice between losing the bid by including something or winning the bid by excluding something the design team expects you to have.

Many GC estimators are reluctant to carry subcontractor exclusions into the proposals they send to their clients. This creates a situation where the GC estimator must force their subs to remove the exclusions (pushing the risk onto the subs), or take the risk that they can be negotiated during the contract buyout (pushing the risk onto the build team).  Risk is always expensive, but problems get more difficult when there’s less time to solve them.

When a specific risk is dependent on the actions of the client or their design-team, it’s wise to clarify what’s included in the proposal based on your understanding of the design intent.  Giving the client insight into how you’ve managed the uncertainty clarifies your position in terms they can understand.  On bid day clients may interpret exclusions presented without context as inconsequential.  Yet when these selfsame issues cause a change order later on, they’ll feel cheated.  Empower the client to make informed choices by connecting their choices to project outcomes.

I hope these ideas push estimators to think beyond statistics, measurements and spreadsheets.  It’s easy to become confident in a process that has become complacent through repetition.  Estimators looking for an edge can set themselves apart by exceeding the standards of their competitors.  As Thomas Edison once said ; ” Opportunity is missed by most people because it’s dressed in overalls and looks like work“.

 

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© Anton Takken 2016 all rights reserved

 

 

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October 11, 2016

The cost to quality fallacy

By Anton Takken

The other day I was reading a forum on estimating where the majority of the posts repeated some fundamentally flawed concepts.  The most common are variations of “Low price means bad quality”.  This concept gets applied to everything from material substitutions to subcontractor selection because everyone’s worried about the risk of making the wrong choice.

Photo by Geir Tonnessen

Photo by Geir Tonnessen

A lot of time is spent on minor differences that obscure bigger problems

When all choices are based on risk-aversion, there’s little reason to believe the outcomes will deliver quality, value, strategy or ingenuity.  I think this concept leads to a mindset that perceives any low bid as a veritable trap to the unwary.   If unchecked, the role of an estimator can devolve into little more than subcontractor selection.  On the surface, it may seem like the General Contractor (GC) does little more than hire subcontractors (subs) to actually perform the work.  If this were actually the case, clients would simply hire subs directly and dispense with the cost of hiring a GC altogether.

The GC’s role is to be responsible for the entire project which constitutes a great deal of risk.  GC’s mitigate some of the risk by dividing the project scope among subcontractors.  The remainder of the risk is mitigated by expert leadership, communication, negotiation, scheduling, accounting, and management which all fall under the heading of “Construction Management”.  All of which is to say that successful Construction Management is a whole lot more than just picking the right subs.

The fixation on avoiding low-priced work for fear it’s a trap is deeply ingrained in many construction professionals.   We often hear stories about how a sub bid low to secure the job, then pursued exorbitant change orders to restore their profitability.  The implication is that a sub was able to not only bluff their way into a contract award, but they were able to get paid change order rates for work that should have been in their original bid.

When we ask how it’s possible that a GC would write a subcontract that didn’t include the necessary scope of work for that sub, it becomes obvious that the GC relies on their bidders to define the project scope for them.  Put simply, if the GC isn’t actually estimating the project, they’re not able to tell whether the subs proposals include all that they should.

One obvious sign that this is happening is when a GC estimator demands breakout prices of their bidders so they might “prove” whether the sub knows what they’re doing.  These demands are like asking the sub to furnish the ammunition so their own proposal can be shot down.

Lets imagine we were in a restaurant looking over the menu.  If an item seems under priced, we wouldn’t demand a cost breakdown for all the ingredients of the dish because we have no idea what those breakdowns should be.

Photo by Moyan Brenn

Photo by Moyan Brenn

Demanding breakouts to save money, is like collecting watches to save time.

What we do know is what we’re hoping to get.  That’s why asking about the portion sizes, or the freshness of the ingredients will go much further towards making an informed decision.

GC estimator’s should know the project scope they’re seeking to subcontract before the bid.  Moreover, GC estimator’s should know the going rate for the work they’re intending to subcontract so they have a frame of reference to compare the bids against.  There’s no guarantee that they will receive enough bids to draw statistical certainty of anything on bid day.  Bluffing and bullying are poor substitutes for estimating fundamentals.

The importance of context

Bid day can be very stressful, with little time available to give full consideration to every proposal.  It naturally follows that the estimator must prioritize on those proposals which have the potential to reduce their risk, or increase their odds of winning the contract.

Most GC’s consider proposals from trusted subs to be reduced risk.  In some cases, the GC’s limit their bid lists to only trusted subs which naturally reduces competition.  These GC’s are trading their ability to win contracts, for reduced risk in hiring subs.

The most expensive, and least valuable work occurs wherever competition is discouraged or prevented.   GC estimator’s with bid lists that never change may go their entire career without ever seeing a market-leading subs proposal.  It’s therefore natural that those few who receive a market-leading sub proposal immediately say it’s scary low.

Is it them, or is it me?

Mistakes happen and it’s incumbent on the GC estimator to watch for signs that something’s amiss with a bid.  Once again, best practices in estimating are the ideal means to determine what you’re looking at.  GC estimators should build their estimates so that they can quickly output a checklist of inclusions, alternates, unit prices, etc. to send to a sub for scope review.  If everything checks out but the price is still worryingly low, the GC estimator can share their in-house pricing to see how their estimate compares to the bidder’s.  This alleviates any ethical issues pertaining to comparisons against their competition.  By volunteering the GC estimators understanding of the costs, the sub can show the GC where their estimate differed and why, without feeling as though they will be disqualified.  Presenting a  focus  on retaining a winning edge with a valued colleague is more likely to deliver good information.  .

But what about overpriced change orders?

There is hardly a more contentious issue in construction than the high price of change orders.  While there are a great many factors involved, the cost to quality fallacy plays a huge role in the animosity surrounding them.  Earlier I wrote that the most expensive and least valuable work occurs wherever competition is discouraged or prevented.  Obviously when applied to a project that’s under contract, there’s no competition to keep the price of additional work down.  We might take that to mean that the contractor is overcharging, and in some cases, they are.

We must consider the root of the additional work as well.  Changes to the project scope often come from the design team after the bid.  The terms of contract award are set out in the Request For Proposal (RFP) at the announcement of the bid.  The bidders are expected to include all scope defined in the Construction Documents (CD’s) at the time of the bid deadline.  Design teams can, and do, make significant changes to the CD’s via Addendum, RFI, or Bid directives before the deadline so those items will be competitively priced.  Anything that’s omitted in the design after the deadline, is a liability for the client.

In most cases anything that’s changed or added after the project has started must be accomplished in the remaining time of the original contract.  Changes that require completed work to be removed and replaced may result in a situation where production rates must be doubled, tripled, or quadrupled in order to maintain the completion schedule.  Materials and equipment may require expedited shipping to facilitate the changes within compressed schedules.

Experienced contractors know that pricing requests for change orders often lead to protracted delays while the Owner, Architect, and Contractor (OAC) discuss options, bicker over prices, etc.  I’ve encountered situations where 8 hours worth of change order work became 80+ hours of pricing exercises.  Meanwhile the window of opportunity to efficiently perform the change order work was closing fast.

Photo by simczuk

Photo by simczuk

Artistic rendering of a project with a change order dispute

When a contractor loses a bid, they’re free to pursue other opportunities with no further obligation to the client.  Change order price disputes can become a significant burden for contractors who are unable to efficiently proceed without a decision.

The fixation on the cost to quality fallacy leads many clients and design professionals to overlook the root causes of their situation.   Clients who commit to timely decision-making will reduce the contractors risk.  If the change order is too expensive, clients can request a Value Engineering (VE) solution that meets their budget for the necessary work.

Clients should expect timely and accurate estimates for changes from their owner’s rep to provide meaningful comparison to the contractors prices.  It’s not enough to merely complain about overpriced change orders.  Owner’s representatives should provide a means-tested estimate of the additional scope of work, in order to protect their clients interests.   Sharing this information with the contractors gives them a better understanding of the client’s position, and it provides the target price for change order approval.

The highest art in being the lowest bidder

While we’re on the topic of fallacies relating cost to value, it’s absolutely vital to get some clarity on our purpose as estimators.  Estimators exist to secure profitable work.  We achieve this aim by controlling risk in all its forms.  Pretending that absolutely every estimating risk is a function of forgetting to add something, or hiring the wrong sub is not only wrong, it’s antithetical to our profession.

There are dire consequences for any company that can’t land a contract for profitable work.  The purpose of estimating is not to obviate the need for construction management.  Again, if this were truly possible,  clients wouldn’t hire GC’s at all.

It’s therefore a delicate balancing-act to deliver a market-leading price for work the firm can profitably complete.  The necessary skills, knowledge, relationships, resources, and fortitude to be the lowest bidder can hardly be overstated.   As an industry, we need to move past this fallacy as it reflects poorly on all of us.  As estimators our entire profession exists to harness the competitive market to deliver quality construction projects.

The best deal

Often the best deal has an inverse relationship between cost and quality.  The best deal (for the buyer) is achieved wherever we can get the highest quality at the lowest price.  To the buyer, the value of the money spent, is less than the value of the quality achieved.  They are getting more  value for their money.

I’ve heard a lot of GC estimators making excuses for losing a bid.  One of the most common is to claim they are “best value” because they’re delivering a higher level of quality or performance than their competitors.

It’s entirely possible that one contractor may in fact deliver a more professional project because they  are operating at a higher level than another.  This is especially common in “cattle call” or “open” RFPs which accepts bids from any GC willing to submit a proposal on the job.

The extent to which this happens is directly proportional to how selective the individual GC’s are about the jobs they pursue.  A continuously successful business requires a balance where both sides are getting a good deal.

Contractors that are optimized to perform a specific type of work will find they are market leaders capable of offering higher quality, at higher profitability,  and lower prices than their less-optimal competition.  Aligning the company to the right opportunities is the most important part of winning profitable work.

The high price of a bad deal

Bottom of the market work is always plentiful.  Experienced estimators will see that underfunded clients and unprofessional design teams are constant companions.  Higher risk, lower profitability, and more competition all align to make these jobs a bad deal for the majority of contractors.

There are jobs that are a bad deal at virtually any price because the risks to the contractor are so severe.  Incomplete plans, indecisive clients, difficult phasing requirements,  site logistics, etc. can all hurt productivity.  In some extreme cases, the GC can be penalized for delays they had no way to work around.   When the project presents a bad deal, the cost isn’t driven by the required quality, it’s driven by the risk.

There are incompetent design teams with specifications explicitly written to defend against change orders from their shoddy plans.  These firms find regular employment with the clients most likely to demand a bad deal of their contractors.  The focus on blocking change orders becomes a higher priority  than accurately contracting the complete scope of work.  If greater effort was applied to the latter, the former wouldn’t be an issue.  Lax professional standards generate systemic risk and higher costs for everyone involved.

Attempting to gauge quality by its cost alone will do nothing to reveal the features that matter most.  The cost to quality fallacy has no place in the estimators playbook because it’s only useful for making excuses.

 

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© Anton Takken 2016 all rights reserved

 

 

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December 18, 2015

Stress and boredom

By Anton Takken

Life as a construction estimator involves a lot of ebb and flow. Building estimates, doing quantity take offs (QTO’s) and tabulating results can range from steady progress, to boring slogs through minutia. Sharply contrasted are bid days which can move at a fevered pace studded with snap decisions that will make or break all the work that’s gone before.

There’s a hidden nuance to this pattern; boredom is its own kind of stress. Tedious or repetitive measurements are prone to error because it’s difficult to recognize subtle differences when everything looks the same. Conscientious estimators know that boredom can lead to mistakes. It can be very frustrating because checking for mistakes often means going through the same boring material. Each review loses its potency until you’re so familiar with the material that you’ve lost perspective.

Stress and boredom

Even estimators who aren’t worried about making mistakes can find boredom stressful. Tedious and repetitive tasks are the “grunt work” of estimating. In firms with a dedicated estimating department, the hierarchy often dictates who does what. Since General Contractors (GCs) employ fewer estimators than Project Managers, Project Engineers, and Superintendents, the estimator advancement potential at any given firm is typically tied to vacancies or company growth. This can lead to situations where seniority is a greater factor in advancement than skill, ability, or performance. For the perpetual “junior” or “assistant” estimator, this can mean years of doing the grunt work without much opportunity to advance your skills. Human Resource professionals refer to this condition as “underutilization” and it’s been shown to harm morale, and reduce productivity.

Stress is often discussed in exclusively negative terms which can serve to conceal the real picture of what’s going on. For example, bid day can be described as a hectic experience with plenty of hazards to negotiate. Bid day might also be described as the culmination of weeks of labor where all the parts come together according to plan, ending in a well-deserved victory. Lots of folks are so used to thinking of estimating as a brief process in a larger chain of events that it becomes reasonable or them to think that generating a price is like turning a crank. Smooth and uneventful bidding reinforces this perception while concealing the work it took to get there.

Being part of a well-organized and highly motivated team of professionals can be exhilarating. Spending the day in constant motion makes it seem like time is flying past. However it’s often difficult to “let go” of everything in your free time. As an estimator I’ve lost more sleep thinking about mundane jobs than I’d like to admit.

Stress and boredom

Smoothing the peaks and filling the valleys

From an outsiders perspective, it might be difficult to see what estimators are getting so worked-up over. To most folks, estimating is a combination of ringing up a total like a cashier, and running an audit of the plans. The reality is that estimating is about controlling risk. There are many forms of risk to contend with, but uncertainty is the one that attracts the most estimator attention. QTO’s go a long way towards becoming certain of what’s required. The natural extension of this thinking is that greater detail leads to higher certainty. The problem is that time is always limited, and there are risks beyond what’s depicted in the drawings that must be accounted for. Minutia nourishes limited perspectives while starving big-picture thinking. Estimators need to understand the driving forces of a project in meaningful and actionable terms. GC estimators should build their estimates to furnish pertinent information for comparing and scoping subcontractor bids. For example, it’s not as important to know component level pricing (screws, nails, etc) as it is to know assembly level (meeting room carpet, air handling unit, etc.) pricing.

There’s a balancing point to be struck on relative detail. You’ll always feel better with a bit more information, but you can achieve a lot with a bit more time early on. When it comes to the really tedious QTO stuff, it’s worth taking the time to consider how useful that information will be. It damages a lot of ego’s to point out that perfect QTO’s of low-value and high tedium items have little bearing on successful bidding. Time sunk into tedious tasks early in the bid cycle robs you of time to develop strategies, answer questions, and direct resources to make the entire estimate successful.

Rather than strictly recording quantities for later comparison, your time might go towards communicating intentions which leaves less potential for discrepancy on bid day. Estimators looking to control risk should remember that losing the job through misplaced priorities is a very real possibility. Perfect spreadsheets are little consolation for lost opportunities.

Routine tasks

Some routine tasks lend themselves to interruption or working in stages, like QTO’s for example. There are some tasks that must be completed entirely or you’ll lose time constantly attending to remaining items that won’t wait.  The Invitation to bid (ITB) is a simple document that conveys the who, what, when, where, and why of the project to the invited subcontractors. Incomplete ITB’s are distressingly common, especially among GC’s who are using a bid-letting software/service. Documents that generate more questions than answers ensure that the estimator will be constantly interrupted by bidders looking for necessary information. Creating an ITB that gives bidders everything they need will take longer to assemble, but it leaves much less for follow-up. Being able to move on from a routine task not only reduces your stress, it’s a vital stage of a successful bid.

It bears mentioning that time spent on bidder convenience is often an investment in reliable turnout. One obvious and constantly overlooked element is the how the Construction Documents (CDs) are configured. It’s a waste of a subs time to download an enormous drawing file just to access a single page. The old argument that giving subs the entire set guarantees they’ll catch the buried architectural note, is hollow because it’s the GC estimators job to find all the “gotcha” nonsense, and communicate it to the subs. Label the individual sheets with accurate and understandable terms. Whenever possible, group the sheets by discipline (Civil, Structural, Architectural, Interior Design, Mechanical, Electrical, Plumbing, etc.) to speed bidders to the files they actually need. Be advised that delegating this task to the office receptionist, or summer intern is a risky move because they rarely understand the pivotal importance of naming things properly.

Stress and boredom

Office designers are finally addressing interns in the workplace

Estimators should develop the habit of organizing their work to maximize expediency, reliability, and professionalism because it’s very likely they’ll need answers in a hurry.

While we’re on the topic of file storage, it’s a good practice to maintain saved copies on more than one machine. For example if the company server goes down, you might need to progress on your standalone computer. Having older iterations on file allows you to “fall back” if your most current version gets corrupted. Plus, it can be handy to have time stamped “save points” to plot your progress through your work afterwards. Don’t forget to maintain this practice on bid-day. It might save your bid should the “war room” computer falter at a vital moment.

Perspective on pressure

About the only thing worse than a tedious takeoff, is knowing that you’re running out of time to get it done. Procrastination and poor planning leads to a lot of unnecessary overtime. We hear about how working well under pressure is a vital quality in an estimator, but there’s little curiosity about the source of the pressure. Estimators need to get their heads up and pay attention to the scope of their own operation. How long does it really take you to get the QTO done for this or that? Working backwards from the deadline, how does the sum of your estimated durations line up with reality?

Fighting the clock

It’s ironic that stressed-out estimators are often unwilling to apply their craft to their own schedule. Create a schedule, then track your time against it so you’ll see when and where you’ll need corrections. Every successive schedule will become more and more accurate. Identify where most of your time is spent, and take stock of what that means. If you’re constantly answering bidder questions, you might consider publishing a bid-directive that proactively answers group questions.

Slow grind

If you’re mired in QTO, it might be time to look into better software, hardware, training, or templates. Looking back at your performance, you should see an increase in QTO speed without any loss in accuracy. If you’re not improving with experience, you’ll almost certainly stagnate or stress out. It’s not discussed much, but lots of GC’s do painstaking estimates on things like paint, but square foot cost items like Mechanical, Electrical, and Plumbing (MEP) simply because they don’t know enough about those trades. The MEP trades are among the most expensive subs on a typical project. These estimators would be better served by square foot costing the paint, and spending the time learning what drives MEP pricing.

Quick-hitter quicksand

If you’re constantly transmitting RFI’s, Addenda, and bid-directives for quick-hitter bids, you might find relief in a higher level of client. Insincere, underfunded, and unprofessional clients rarely attract top-level design teams. It’s a LOT more work to bid an incomplete design for an underfunded client and you’ll have little to nothing to show for it. Marketing folks are loath to admit that low barrier to entry clients are the most likely to waste an estimators time. Tire-kickers aren’t clients, pretending otherwise is busy work theater and you’ll be the star of the show! Conceptual pricing techniques shouldn’t drift into design-build territory.

Stress and boredom

Bob’s not sure why he never wins, but he’s having fun and that’s the important part.

There’s a lot of fast ways to render a courtesy bid without wasting your companies (or your subs) resources. Good record keeping builds a vital reference resource for these tasks.

Redundant department of redundancy

Some GCs strongly believe that good sub turnout on bid day is directly tied to “working the phones”. Nagging subcontractors to bid is an incredible time-sink that’s based on a fundamentally flawed perspective of how bidder relationships should work. Estimators often call a project an “opportunity” because a competitive bid offers professionals a chance to win a contract by doing their best as part of a team. If the GC or the project lack sufficient luster to attract market leading subcontractor attention, it’s spectacularly unlikely that any amount of nagging will change that. Building “pull” with subcontractors is a function of establishing a valued relationship with the market. Winning bids obviously gets the market’s attention, but so too, does transparency, honesty, and leadership. There’s a lot a GC estimator can do to bid an “ugly” project successfully. Nagging is never the answer. Voluntary, accurate, and timely bid results are the single most effective means for building pull in your market.

Furious futility

Some GC’s respond to lost bids by increasing the volume of bidding in the hopes that volume will lead to victories. Grinding out bids as quickly as possible means that there’s never time for strategy, skill, or teamwork. There’s never a shortage of low-end clients looking for quick-hitter bids. Sadly, the majority will be fruitless because insincere clients and urgent bid requests are constant companions.

If you’re tracking your estimates, you’ll be able to assess projects in terms of how successful you expect to be. Lots of companies think they’re excellent at everything, but the reality is that most companies are only market leaders in specific areas. Estimators should keep in mind that the project management side of their firm may adore a client or design team that’s generated profitable change orders. Being profitable on the basis of what might happen is better known as gambling. Estimators should be looking for work that will be profitable at the bid amount. GC estimators should learn to look at their market potential in terms of their subcontractor base. If the GC can’t attract market leading subs for the work in question, they’re going to lose to a contractor who can. Picking work that aligns with your best subs abilities is critical to success. Most GC’s see this entirely backwards. They pick projects that look profitable, easy, or fun to manage. If they chose work that aligned with their market leading subs, there would be less difficulty, and more profitability, regardless of how fun, pretty, or prestigious the project appears to be.

Blind faith in the process             

Estimators need to maintain a sense of purpose. You’re there to profitably win work by controlling risk. While we spend a lot of our time building estimates, it’s vitally important to maintain perspective on the market, competitors, and clients. There’s entirely too much blind faith placed on QTO’s, spreadsheets, and bureaucracy. Estimators need to see what’s really going on and they need to respond accordingly. Contracts are awarded to the best market value, if you don’t know what that is, you’ll struggle to profitably compete.

Perspective is an investment

The key to building a meaningful perspective is to faithfully record what’s happened on past bids. Bid results are often treated as a vestigial appendage of the estimators craft. “Yeah, yeah, we lost but we’ll do better next time…” neatly sums up the attitudes of many estimators. The bid cost real time and real money to produce. It’s truly remarkable how little effort goes into defining how a job was lost, compared to the work put into bidding. With a more accurate picture of what happened on a loss, the next bids benefit from refined judgment. REALLY simple things like getting a winning competitors sub on your bid list can make all the difference. There’s an interesting element to post-bid investigations that’s constantly overlooked. You get more information from your allies, when you share more information with your allies. Once an estimator has lost their bid, they’ve got plenty of useful information to exchange that can materially change their position on the next bid.

Stress and boredom

Earlier I brought up career stagnation in estimating and it’s here that I hope to offer some help to the folks trapped on the lower rungs. Most GC’s aren’t particularly scientific about tracking their bids, their subs, or their markets. By and large, they trade on their established contacts in their market which brings them varying degrees of success according to luck, market conditions, and subcontractor quality. If you’re doing the grunt work without seeing much opportunity for advancement, I encourage you to build your own tracking systems to help define for yourself what is and isn’t working. Be advised that your daily tasks are higher priorities to your superiors so it may be necessary to invest your personal time.

Be cautious about relying on small data sets, or those with wide-ranging values that will skew results. In time you’ll develop perspective on your clients, your market, and your subs. If you decide to offer suggestions on how things might change, you’ll have facts and figures to lend credence to your perspective. Advancement is never guaranteed, but you’re wiser for the effort and you’ll learn what to look for wherever you go. It’s worth pointing out that we’ve all learned from those who went before us. Do your part to improve our craft by sharing what you’ve learned. I’ve found that a policy of forthright honesty has been a profound and enduring advantage against my competitors.

Policy driven pinch points

The bid-day blitz can be a terrifically stressful experience for a GC estimator. Bids come rushing in at the last moment and everything must be done at high speed if you’re to make the deadline. Last minute sub proposals aren’t happening by accident. It’s a calculated effort to limit or obstruct bid-shopping by starving the estimators of time to act. Getting right to the root of the problem, last-minute bids are a sign that the market views corruption as a serious threat. The lack of trust may be anywhere in the supply chain. Corruption thrives in secrecy and wherever it’s possible to curtail competition.

Accountable transparency is the only effective way to counter corruption. It’s predictably unpopular because it requires a strong moral compulsion to act when it won’t help you directly or immediately. Lots of people opt to remain silent which prevents the honest majority from working together.

Stress and boredom

Estimators need to understand that they can’t win work alone. Company policies that work against transparency, accountability, profitability, and good judgment should be questioned and if necessary, changed. Estimators need to be able to show the market that they are ethical professionals if they’re to be market leaders.   It’s worth saying that accountability means facing repercussions for mistakes. Estimators should take heart in knowing that while accountable transparency will reveal their honest mistakes, it won’t conceal their honest intentions.

To recap, much of an estimators daily stress comes from incomplete tasks, dysfunctional relationships, and misplaced priorities. With greater perspective, we can find avenues to re-direct our energies towards successful outcomes. Boredom is an insidious source of stress with roots in minutia. We must make the connection between utility and effort before we commit our valuable resources to proving things we already know. Growing our base of knowledge and sharpening our decision-making skills should be constant pursuits. Finally, we should all do our part to improve our craft by acting ethically, sharing what we’ve learned, and facilitating advancement in our ranks.

 

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© Anton Takken 2015 all rights reserved

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November 30, 2015

Reliable Estimating Part 2 Building momentum!

By Anton Takken

The plans are on the street, now what?

Once the Invitation to bid (ITB) is drafted, and sent to every subcontractor on your bid list, you’re free to pursue the other work that piled up. The more your internal systems are built to output an accurate ITB and an optimal bid-list, the more these tasks will depend on a thorough review of the Construction Documents (CD’s). By having an ITB template that requires answers to the most common bidder questions, you’ll be able to focus your review of the Request For Proposal (RFP) and Construction Documents (CDs). Be advised that defining which trades you need to invite isn’t necessarily a quick process.

Reliable Estimating Part 2 Building momentum!

“Sure you’re doing six things at once, but could you go a bit faster?”

A specialty trade or a really small scope of work may be required via a single note in the drawings. It may be a better choice to get the ITB out to the obvious trades, than to hold everything until you’ve scoured the plans for a buried specialty vendor.

An absolutely pivotal concept of reliable estimating is knowing that time is more valuable earlier than later.

You get more out of the early minute than the final hour.

Learning you need to fix a “hole” in your estimate one hour to deadline means you’ve got 60 minutes to get a viable bid together. Until that problem is solved, the idea of winning takes a back seat to the risk of submitting an incomplete bid!   In comparison, an estimator who found just 20 minutes three weeks earlier could have addressed all the issues completely.

I’ve been in the war room in the final hour when we discovered that nobody had invited an entire trade of subcontractors! Until we found a sub with a complete bid, we had only our historical pricing to go on. If we bid and won using our historical pricing, we took a risk that subcontractor proposals would be substantially higher than what we carried. Given the great value of that scope of work, our exposure threatened the success of entire job.   We were in such a hurry with the bid letting software that a single trade was left out.

Reliable Estimating Part 2 Building momentum!

Even with the satellite, Dave couldn’t make the connection…

Nobody found time to verify the invite list in the intervening weeks. Don’t let it happen to you.

Series of sweeps

It’s really simplistic to assume that estimating is a function of counting, pricing, and totaling. The efforts that make the difference between winning and losing are rarely attributed to punctilious spreadsheets. Broadly speaking, a GC estimator needs to conduct a series of sequential sweeps through the CD’s looking for four basic criteria.

Sub sweep

Getting the ITB on the street required the first sweep of the CD’s to determine who needs to be invited, and what information they’ll need to get started.

Scope sweep

This is where the estimator gets a handle on what’s supposed to happen in the project. Estimators must pay particular attention to where scopes of work overlap between design consultants. Architects are famous for not telling their engineering consultants about an alternate request, and engineering consultants are famous for not sharing requirements that should be included in another consultants documents. For example, an electrically operated smoke damper which is shown on the mechanical plans, but not on the electrical. Estimators must review plans looking for where trades will overlap on scope. If the plans aren’t clear on who does what, it’s the estimators job to provide direction to all concerned. Leaving this to chance on bid-day ends up with double-ups or holes. The scope sweep should enable the estimator to roughly define how much work there is for each trade. Any trade with an especially small scope of work should be noted for a mandatory follow-up with a trusted sub. The same goes for sub-tier subs like Fire Alarm, Pavement striping, HVAC Controls, Coring/Drilling, Imaging, etc. I call these “ghost trades” because they’re never clearly visible, but they’ll haunt your bid if you ignore them!

Error Sweep

After two sweeps of the plans, the odds are good that you’ve already come up with some questions for the design team. The goal isn’t to pick the plans apart, so much as it is to resolve issues that are likely to impact the bid. CD’s often fall short of defining vital project information like site logistics, alternates and phasing. Getting these questions into Request For Information (RFI) format early in the process gives the design team more time to answer which may in turn allow you more time to communicate the answer to your bidders.

Strategy Sweep

There are lots of GC estimators out there whose entire strategy is to simply rely on subcontractor bids to deliver their victories. This flawed approach hinges on two fallacies. The first fallacy is that there’s something magical about their company that makes subs want to give them better prices.

Reliable Estimating Part 2 Building momentum!

You can howl, but then you’re singing along!

The second fallacy is that all subs are bidding all jobs at all times. By inviting everyone, they feel sure that the market leaders will send them a bid. This “strategy” is successful only when there’s no real competition.

Estimating is about controlling risk. If it were possible to simply add everything up and arrive at an accurate price the industry would use cashiers instead of estimators. Risk and how it’s controlled is how a plan becomes an opportunity. A lot of estimators get hung up on risk as a one-sided concept. I hear a lot of GC estimators looking to press project risk onto their subcontractors. Poorly defined scope, misleading diagrams, or counter-intuitive specifications are all treated like it’s the subcontractors problem. These GC’s fail to understand that the uncontrolled risk raises subcontractor prices, making the GC noncompetitive. It’s of pivotal importance for a GC estimator to understand that winning bids is a function of reducing risk for everyone.

Taking responsibility for sorting this out is how a GC estimator can set themselves apart from the field and thereby attract the market leaders. It’s pivotally important to understand that this is a proactive measure administered fairly to all involved parties. Bid directives are an effective means to mass-communicate a plan of action but they can be easily shared with your competitors. I recommend using bid directives to provide clear and accountable leadership that your competitors would shirk. Strategies should be treated as confidential information, and communicated accordingly.

Very few jobs will present an opportunity for a single overarching strategy to secure a victory. That being said, if you can’t find any advantage, you won’t likely land a job. Very often the greatest advantage a GC will have is due to an existing relationship with market leading subs. In that case, picking work that’s best suited to the top performers becomes the GC’s strategy for success.

Measuring time!

Finally, we’ve reached the point where most folks believe the real estimating begins; the quantity take off (QTO). I’ve written about software technology for estimating before. There have been notable advancements in how estimators tasks are completed, like computerized QTO. For example, it’s now possible to measure, count, and color the plans without the printed plans, scale, paper, calculators and pencils. While that’s a huge advancement, most of these proprietary programs lack the logical “polish” of standard business programs. These programs offer an exponential increase in the speed of QTO’s provided the estimators learn their idiosyncrasies.

Whether you’re using a digital system or manual takeoffs, there are some aspects of reliable estimating that never change.

“One pass” takeoff

After all the effort to define which Construction Specifications Institute (CSI) Masterformat divisions pertain to your project, it’s tempting to conduct the QTO in “CSI order”. Lots of estimators will begin their takeoffs with Division 2 Sitework and skim through the plans looking for anything that pertains to that division. Unfortunately there are often solitary notes pertaining to a small scope of work that’s unique from everything else shown on the page. This means that the estimator skimming for a specific CSI division will ignore that solitary note figuring that they’ll get it when they sweep for that division. When the note is on a particularly unlikely sheet, it’s often forgotten. Later, when their Project Manager comes down the hall complaining about how they missed something, that note will be very familiar.

I advocate what I call the “one pass” takeoff. I make sure that absolutely everything depicted, noted, or specified on the page be taken off before I go to the next page. If you’re doing manual takeoffs, this means you’ll have to start a CSI division sheet for each division as they present themselves. It’s a lot of shuffling to record your measurements, and the sheets tend to look less tidy from the many edits. This is still worth the effort since it not only catches the one-note traps, I’ve found it’s actually faster than repeated skimming.

Knowing where to stop is as important as knowing when to stop

Unless the job is fairly small, chances are good that your QTO’s will be interrupted or at least spread across several days. Estimators should understand that co-workers have no comprehension of how much focus it takes to complete some takeoffs.

Reliable Estimating Part 2 Building momentum!

I’m…gonna need a moment here…

Something as simple as the height of a concrete stem-wall may require calculations based on information scattered across several sheets. It’s therefore good practice to write (or type) notes on the plans providing the necessary information where it would actually do you some good. General items like area and perimeter measurements for each room can prove incredibly helpful since a myriad of takeoffs are based on these two pieces of information. By leaving a record of basic measurements, you’re able to pick up where you left off with minimal wind-up.

I would also recommend that your day’s work be paused at a meaningful and reliable point. Stopping mid-way through a sheet is sure to keep you up worrying about what you missed. Choose to either stop early or work late in order to leave yourself a clear conscience.

Before you begin an intense take-off, consider your schedule and the day’s obligations. It’s unwise to get a half-baked start on something complicated right before a meeting. One of the advantages of the one-pass takeoff method is that you don’t have to do the sheets in order. If you’ve got a limited amount of time before an appointment, pick a sheet you can complete. Estimators must accurately track and predict how long each element of a QTO will take. The fastest QTO’s are the ones that aren’t interrupted, however estimating is about more than take offs. Getting interrupted at an inopportune time is part of the job.

Three round review

Checking for errors is the best way to catch them but how you go about it can greatly increase your reliability. Huge data sets and tiny differences can stymie even the most dedicated review. The key to catching errors is to structure your workflow around meaningful review points. The simplest problems are most easily caught earlier in the process. Breaking the QTO down, this begins at the page level. Before moving to the next page in the plans, the estimator should review everything they took off on that sheet. The minute detail is fresh in your memory, and transposition errors are more easily spotted. The vast majority of errors are caught at this level.

The next round of review is when tallying a division as a GC, or a major component as a sub. The errors found at this level tend to be more dramatic because you’re moving the contributions of several plan sheets. A flooring subcontractor might take a moment after tallying the carpet and the tile measurements to see if the relative difference they’re seeing aligns with what they’d expect. These order of magnitude comparisons can tell you if you’re missing an individual room or an entire floor.

The third round of review is after the QTO’s have been entered into the estimate. Does the estimated cost outcome align with the division level review? By using the earlier reviews as benchmarks to compare against, the subsequent reviews become more reliable.

Reliable Estimating Part 2 Building momentum!

You could say the process leaves a mark on you…

I would strongly caution an estimator against more frequent reviews of their work because reviews without benchmarks are little more than skimming plans looking for stuff to add. After a person has looked at the same information a few hundred times, their ability to recognize new information diminishes. You have to be able to trust your work by testing it at intervals that allow you to know if you’re right or wrong.

Taking notes

An awful lot of estimating comes down to judgment when dealing with uncertainty. It’s not fair, but an estimators judgment is often criticized after the uncertainty is removed. People don’t care that you had a good reason for your decision, they only care about the outcome of your decision. It’s therefore absolutely critical to develop the habit of clarifying, stipulating, and excluding anything that requires judgment on the proposal. Effective proposals define with minute clarity what is driving the uncertainty. For that, you’ll need to take notes of where you found the problem. Keep in mind that as an estimator, your work is laying the foundation for the Project Manager’s efforts. Everyone needs to know where the tricky bits are located. Plus if you’re expected to present your estimates for review at your company, it’s good to be able to provide references for all the hard decisions you made.

Schedule slip

As mentioned earlier, interruptions at inopportune times are part of the job. I’ve had multi-million dollar estimates interrupted at the last moment over questions on a $50.00 change order! Estimating is about controlling risk even within the estimating process. Plainly speaking, an estimator must not only predict how long a QTO will take on a piecemeal basis, they must also be capable of plotting a path to recovery when they’ve been derailed. It’s at this point that many, many, “old-school” estimators just plan on spending the night. I believe that most estimators could substantially improve their quality of life by committing themselves to solving schedule problems with overtime as a means of last-resort.

Schedule recovery may involve many approaches ranging from additional workers, to less detailed takeoffs. Estimators should consider the value and the risk associated with each scope of work they’re taking off. A perfect paint takeoff can take a considerable amount of time, yet the paint scope is relatively inexpensive when compared to plumbing. Since the paint scope is relatively inexpensive, the relative risk of an imperfect takeoff is quite low unless you can’t attract more than one painting bid. Estimators should always prioritize on high value, and high risk scopes of work. As a GC estimator, knowing which direction to go between similar bids on bid-day is why you’re doing the takeoff. Continuing with the paint example, a pressed-for-time estimator might shift to a square foot cost for the paint scope followed by a list of scope inclusions that painters might miss. Providing sufficient information to scope sub bids is FAR more important than knowing the precise square footage of Paint color 1.

Lots of GC’s have a team of people working on an estimate. If you’re heading up the effort you will need to think on your feet when people call in sick, show up late, or otherwise drop the ball. Project Engineers are frequently “loaned out” to help in estimating, however they are rarely relieved of their normal responsibilities. Many will prioritize their ongoing projects at the cost of your time-sensitive estimate simply because they don’t work for the estimator. Lead estimators must provide and enforce deadlines for every task. Never give a helper sufficient time to squander your recovery. It’s better to check on them too much, than to find they’ve dug you a deeper hole.

Estimators who are working with interns, Project Engineers, etc. should make a special effort to simplify and compartmentalize the tasks they are delegating. Estimators are used to thinking in terms of length, area, and volume measurements, however these terms can quickly overwhelm someone who’s facing their first takeoff. Estimators should understand that “standard” units for takeoffs are arbitrary to a newcomer. For example carpet is measured by the square yard, yet ceramic tile is measure by the square foot. Taking the time to explain that there are nine square feet per square yard can make the difference between a useful takeoff and a mess that nobody understands.

And for goodness sake, if you’re having people do this work without a digitizer, or on-screen takeoff system, then at least give them a courtesy lesson on how to measure areas that aren’t squares or rectangles! While we’re at it, teach them to use decimal feet in lieu of inches! For some reason, this rather obvious point is overlooked in most construction education.

Addenda of mass distraction

Many architects will respond to bidder questions via an addendum before the deadline. Projects and professionalism will vary which means that GC estimators will have anywhere from over a week to only a few hours to incorporate changes made via the addendum. This practice is easily the single most stressful aspect of professional construction estimating because unclear, misleading, and outright contradictory information is often presented without sufficient time to get clarification. Estimators should note that shoddy plans, municipal or “public work” clients, and last-minute addenda are constant companions.

Reliable Estimating Part 2 Building momentum!

The architect finds last minute changes to be the most fashionable…

The absolute #1 priority is to get that information disseminated to the bidders as soon as possible. The second priority is to provide the necessary leadership and communication to ensure your bid-team isn’t derailed by the Addendum.

As a start, every Addendum should be scoured for changes to the deadline, proposal format, etc. Everything that goes to the bid-team should have the most current deadline printed where it’s easily seen. Wherever possible, notify bidders when an Addendum has little or no impact on their scope. If the Addendum ONLY affects the GC’s, don’t bother the subs with needless panic-inducing addenda.

If your Request For Information (RFI) was answered in the Addendum, you might reference whether the Architect response is consistent with your earlier bid-directives. The better your direction, the lower the risk your subs will face. Lower risk leads to lower prices, this is where the truly professional estimator earns their keep. If you do your best to get in front of issues, you may be rewarded with an addendum that confirms all of your bid-directives which means your subs are the only ones who don’t have last-minute changes.

Preparing for the blitz

Bid day is a real test of your skills, knowledge, tools, endurance, and patience. The better part of victory is preparation. Heading into bid-day you’ll need several critical elements in place. First and foremost, you’ll need your estimate “built” which is to say that your QTO has been imported or entered into your template form and prepared to accept subcontractor proposals. You should have a reasonable estimate of every trades worth, and a decent idea of what the final cost will be. Second, you’ll need your bid packet, which is all the completed forms identified in the Request For Proposal (RFP). Generally, this is the proposal itself, a CSI breakdown, a construction schedule, bond, etc. Everything should be as ready as possible for the bid-runner to deliver.

Third, you’ll need the “bid tab” or “scope sheets”. These are the scope of work as broken down in the estimate in anticipation of how the subs will bid. The scope of work is generally listed in rows, and a series of columns are made for subcontractor comparison. As the subcontractor proposal is compared against each row, the item is either checked as included, marked for follow-up, or an allowance is inserted. Once all the columns are filled for a given sub, their tally is calculated at the bottom and the subs are ranked by price lowest to highest for entry into the estimate.

I should mention that every Alternate that affects the given scope of work should be built into the scope sheet. Poorly defined Alternates can wreak havoc on bid-day. It’s important to know what to expect.

Estimators with plenty of time often export their bid-tab as a checklist which they have their subs fill out, endorse and return. This helps to prevent the “gotcha” nonsense that comes with indecipherable inclusions, exclusions, and clarifications on subcontractor forms.

Projects with special requirements for Minority Business Enterprise (MBE) participation should be tracked in real-time in the estimate. Allowing for “what-if” strategy is a crucial tool to making timely decisions. Very rarely will MBE companies be the lowest bidders, so it becomes a balancing act to meet participation goals, without undue cost.

As you head into the final hour, all of your hard work preceding the bid will be paying off. Be sure to “close the loop” with everything you’ve learned on this estimate by tying your estimate tracking to your bid results. An awful lot of an estimators daily struggle comes down to reconciling the big picture against today’s efforts.

Reliable Estimating Part 2 Building momentum!

Winning profitable work is the estimators constant goal.  Very little has more influence on your ability to win than choosing the right opportunities. Everything is an opportunity to people lacking perspective. Estimators must take it upon themselves to provide not only estimates for projects they’ve bid, but perspective on the market in which they compete. It’s vitally important to show your work in much the same way as an estimate validates the proposal amount.

Reliable estimating practices not only improve bidding, they enable decision-making.

 

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© Anton Takken 2015 all rights reserved

 

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August 26, 2014

Why are we bidding this anyway?

By Anton Takken

Hard lessons on hard-bidding for the hard-headed.

Most estimators are working for someone else.  For simplicity’s sake I’ll refer to that person as the boss.  The boss often weighs in on pre-construction decisions to include what makes the bid list, what margins to carry, and what jobs they don’t want.  It’s their company and they call the shots.

As an estimator, you’re looking for low risk, high profit, easy wins to keep the company working.  That seems like something the boss would be after as well.  A lot of estimators end up wondering to themselves why it doesn’t always seem like it.

Everybody’s coming from somewhere

Entrepreneurs are remarkable people who see opportunity in adversity and often move in opposition to safe, secure, and easy ideas.  These traits help define why they’re successful and also explains why they’re often not…  The point here is that the opposition to an estimator’s priorities is a natural one.  They hired you to provide the counterpoint to their perspective, not that it’s a guarantee you’ll change their direction.

Why are we bidding this anyway?

Sure boss, I see exactly where you’re going with this…

What is the mission?

Despite repeated failures, the boss is pushing for yet another bid just like those before it.  Nothing’s changed and the outlook is bleak, why won’t the boss see the obvious?  Sometimes the answer is frustrating: the boss doesn’t have the same definition of success as you do.  Some bosses don’t view estimating as pre-construction so much as an amalgam of marketing, posturing, testing, and placating.  The endless marketing pitches about “building relationships” dissolve into playing head-games with the market.

Here are a couple of examples to illustrate how this can happen.

Imagine if you’d spent half a year getting on to a new clients bid list. You can hardly turn down the first invite when the job turns out to be a stinker. 

Going another direction, imagine you have a valued client who’s added a disreputable competitor to their bid list.  A good client will only need a few bad experiences before they reject disreputable firms.  Depending on how frequently they bid projects, you may have to lose several jobs before the client has learned their lesson.

What if your current market sector is shrinking?  A boss would need to find new sources of work which means trying out new things.  Not all sources of work will have the same profit margins so they might need to test the waters in several markets to see if regional differences change anything.  In effect they’re generating bid results.

Conversely, what if your market is expanding?  Does it make sense to chase work in new areas with local staff, or should a satellite office be opened?  Is there an existing subcontractor base capable of supporting the venture?

Planning for success      

Few companies have a corporate culture where the long-term planning is accurately and convincingly presented to the estimating staff.  A boss who views bidding as “turning the crank” on the estimating machine is unlikely to harbor much sympathy for anyone asking why they’re bidding bad jobs.  As an estimator you may not have much latitude on the decision-making but that’s not a reason to give up trying to improve the situation.  Bid results when presented properly can reveal constructive options that the boss may have overlooked.  Some estimators feel as though they must reflexively apologize for every lost bid. This fosters the notion that every bid was really an opportunity.  It should be obvious that many factors influence the likelihood of a profitable win. Unless all the jobs are literally the same, the odds must be different.  Learning to define, to accurately define what influences winning should be the cornerstone of your craft and the basis of your counsel. Be advised that excuses are not a substitute for knowledge or fact.  Some losses will be your fault and some wins will be too.  Credibility builds on honesty.

Getting to the wheelhouse

If you don’t have an impartial and informed insight, you can’t reasonably expect corporate planning to be shared with you.  Respect is often earned through consistently knowing what you’re talking about. Depending on the individuals involved, you might be able to help steer towards better opportunities once you understand where the boss wants to end up.  Understand that the people in charge may be reluctant to divulge their plan, especially when they lack one!  Go with caution.

Why are we bidding this anyway?

“What you’ve gotta do is make sure everyone’s on the same level, then you’re home free.”

Learning by erosion

It’s a fact of life that some bosses are better than others.  Despite our dearest hopes to the contrary, sometimes life brings unqualified people to leadership positions.  The boss may have irrational, uninformed, emotional, and philosophical reasons to do something stupid and most of the time, it’s their right.  Estimators dealing with this frustration should take heart.  Incredibly hard-headed bosses can learn by erosion.  The Grand Canyon wasn’t carved in a day.  Erosion is slow but it’s sure.  To be effective, it’s important to understand that you’re seeking to avoid “I told you so” moments where you become the lightning rod for their frustration.  The goal should be to give a high level analysis of the situation including a survey of the project’s high and low points.  Try to deliver them in equal detail and enthusiasm but be sure to define how a stack up of low points creates a failure mode.

For example: “This job is a remodel of a very large building which means we’ll be busy for the next six months out there.  We’ve got strong competition on it so our number needs to be tight.  The design calls for a bunch of new roof top equipment and the architect put a note on the plans calling for us to field verify and design as needed.  There was no job walk or as-built drawings and the building’s currently occupied so we can’t just get in and see what we’re up against.  The client requires all bids on their forms which don’t allow for exclusions.  Our competitor did one just like this last month only it didn’t have the roof equipment and the note’s buried on an elevation drawing so they’ll probably miss it.  If we include money for engineering and structural support, we’ll surely lose.  If we bid without the structural revisions, we may win but we’ll have to pay for it leaving us stuck on an unprofitable job for half a year.”

The idea is to patiently explain how the influencing factors are pointing to bad outcomes. If the boss decides to pursue it anyway and it goes as you predicted, they’ll remember your insight even if they won’t give you credit.

Sometimes it’s not the bid that’s the problem, but the client.  Here’s another example.

Following the bid, the client sends additional pricing requests for items that were not on the plans claiming it’s necessary to make a snap decision.  It starts with one or two items, then grows to a long list of several items that the client wants priced separately.  After some delay the client calls and says that the project is over budget $X amount but that they “really need” all the items you’ve priced.  The client says they’re hoping you can “find savings” to hit their budget and do the extra work for free.

This is a textbook example of how unethical clients begin a job.  It’s been said that “you can’t change human nature, you can only change how you feel about it“.  Bid shopping is unethical and serves as an insight into the clients values.  These clients are telling you who they are, only the most  naive or foolhardy interpret this as anything but a promise to screw you over every chance they get. There are few guarantees in this world, but you may rely on this: a bid shopped job will eventually cost you money, and diminish the standing of your profession.

Nevertheless, your boss may elect to take that bait.  These are the jobs it behooves you to warn Project Managers about.  No change order work should be priced without documentation from the design team.  No additional work should be started until a signed change order has been physically produced.  Informalities and “trust me” moments cannot exist.  Any gap will hemorrhage losses with unscrupulous clients.

Teaching by evaporation

Some bosses stubbornly refuse to admit when one of their initiatives is failing.  A pattern emerges where the work isn’t profitable and there’s never enough of it.  The boss answers this by demanding more bidding of the same kind of work.  The estimator is putting in considerable hours fruitlessly landing a small percentage of terrible work.  This is like being knee-deep in a swamp where continued struggle only traps you further.

There are a few things to get clear on.  Number one: the swamp is killing your business. There is no opportunity and it’s consuming resources that could be successfully applied elsewhere.  Hard headed bosses who learn by erosion are often “swamp dwellers”.

Number two: You must find somewhere to be successful while you’re stuck in the swamp.

Why are we bidding this anyway?

Pro tip: STOP DIGGING!

Landing a low risk, profitable job, for a good client is like having the sun dry out the swamp.  The boss wants success – giving them something more likely to be successful is leading by example.  The difficultly about an exemplary action is that it’s really, really difficult to do.  Some bosses will be willing to concede to a pitch where you might say “hey instead of bidding swamp-thing, let’s try this job instead”.  It’s more likely they’ll allow you to bid swamp thing and the new thing.  This means you’re required to invest your own effort into your idea.  Uncool bosses will mercilessly undercut you if your idea doesn’t pan out.

Try anyway

A consummate professional rises above the challenge.  Your job is not only to bid jobs, your job may also be to protect your company (and your job) by performing above your pay-grade.  Life is long and you never know who’s watching.  You can be helping an unworthy boss and furthering your career.  It’s important to remember who you want to be regardless of where you are.

Remember that wherever you are on your way to the top, turds float.

Leadership

Poor morale can be like cancer to a company.  Dissent grows until it overtakes all motivation and positivity.  The economy won’t always be on your side and making headway can feel like you’re swimming against the tide.  A subtle feature of depression is that it saps motivation to change course which threatens its existence.  It’s a parasitic mindset that feeds off the status quo by believing everything would improve if only life were fair.

Life isn’t fair which is why market constructs are so complicated.  Contracts seek to protect parties from undesirable outcomes.  Which is another way to contain risk.  The risk eventually boils down to life not being fair.

An estimator must maintain perspective.  The unavoidable risk is why you’re there.  Make the most of the opportunities and lead with enthusiasm.  Act with wisdom and follow your conscience knowing that not every invitation to bid is an opportunity, not every win is a success, and not every job is a career.

Communication

There’s an old proverb that reads: “If you want to go fast, go alone.  If you want to go far, take a friend.”  Long term plans should be clear and inspiring to everyone.  Effectively communicating the long-term plan and the enthusiasm to everyone builds trust and commitment so the group moves in unison.

However when things are going wrong, a company can be like a stampeding herd. There are only two ways to affect the course of a stampede.  Be an immovable force like a mountain, a cliff, or the person who signs everyone’s checks.  The second, is to outrun the herd and make your path the one they want to follow.

In practical terms this means building a personal plan to bring new opportunities to the front.  Research what’s out there, who’s winning it, and how you can emulate their success with your firm.  This also means adding more bids to the workload as mentioned above.

Stay focused on fixing the situation through sound decision making and things will improve.

Why are we bidding this anyway?

 

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© Anton Takken 2014 all rights reserved

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