Tag Archives: Uncertainty

Clarity of Purpose

Whenever I think about the truly exceptional people I’ve worked with, there’s only one quality they all shared; clarity of purpose. Now it seems like fulfilling the job description that Human Resources typed onto your offer letter would succinctly define your purpose, sadly that’s not always the case.

Timely and tidy

I’ve worked for people who had well-defined expectations for their estimator, however they didn’t consider the estimators purpose in their organization. Delivering tidy proposals before the deadline is an absolute job requirement but that’s documentation (process), not procuring work (product). I’ve never seen an estimating job offer that stipulated how much work you’ve got to win, but I know plenty of people who “used to work in estimating”. The pervasive mindset of most firms is that executing a proscribed process known as best practices will lead to an acceptable number of awarded contracts. Anyone who isn’t successful must not be working hard enough. Estimating is viewed as a machine, and they’re hiring you to crank out wins. The problem with this perspective is that it only works when winning profitable work is easy.

Clarity of Purpose

Competition is different in a booming market

Too much and too little

Meanwhile, there are lots of estimators struggling with the estimators paradox: You lose because you included something extra, and you win because of something you left out. Knowing what to include in your bid can be a strenuous exercise in judgment. Balancing the gaps in information against the surpluses of available minutia can easily consume all the estimators time. Time is lost right at the start as some estimators struggle to get the invitations to bid (ITB) out to their subcontractors (subs). The struggle is compounded when questions arise and the estimator has to write Requests For Information (RFI’s). All this information management work is in addition to actually estimating anything. The problem is compounded by the standard practice of having several estimates in process.

What do you think you do here?

It’s a simple question, what’s your purpose in this business? The answer is emphatically not “estimate the cost of projects” because that’s the process not the product. Your purpose is to win profitable work. Working from that position, it’s obvious that there are immediate hazards surrounding the winning number. If you’re a little too low, the work won’t be profitable. If you’re a little too high, you won’t win. These hazards get more severe the further your number is from the correct answer. Way too low may irreparably harm your company, and jeopardize the project. Way too high, and you may harm your firms reputation, leading to exclusion from future opportunities.

How to get where you’re going

Effectively dealing with these hazards can be summarily described as controlling risk. Let’s take a moment to visualize uncertainty in the example below.

Guessing——————————————————————————————Actual built price

Greatest uncertainty                                                                                                     Least uncertainty

 

The left side represents the least amount of work, and the greatest amount of risk. There’s a chance that you could guess perfectly, but it’s very small. This approach is better known as gambling. The right side represents the most amount of work and the least amount of risk. Companies obviously can’t afford to build models of every project to negate risk. They can, however compile past project information to help price similar work.

Clarity of Purpose

Above: Design driven risk

Estimators conduct Quantity Take Off’s (QTO’s) of the Construction Documents (CD’s) to quantify and value the project scope. The relative merit of their efforts will place their bid proportionately on the scale above. This is the reason estimators control rather than remove risk. If there was no risk, the bid would be done by a cashier.

Multi-level thinking

So if estimators are supposed to win profitable work by controlling risk, and risk is controlled by QTO’s, how are contractors wrong for overemphasizing timely and tidy bids? The problem here is that not all risks are driven by project scope uncertainty.

If we recognize that not all clients are fully funded, we’re forced to admit that not all opportunities are equal. “Winning” a bid with a client who can’t/won’t award a contract is a risk that has nothing to do with how accurate your QTO’s are. Picking only opportunities that you’re likely to profitably win is a fruitless exercise if there’s no contract award.

Very successful estimators pick opportunities that they’ve got an excellent chance of landing a profitable contract award. Remember the estimators purpose is to win profitable work. No contract means no work. From this perspective, estimating could just as accurately be called “Contract targeting”.

Clarity of Purpose

Sheep’s dog, isn’t the same as sheep dog.

What defines an estimators chances of landing a profitable contract? Competition for one, efficiencies of scale for another. General Contractors (GC’s) by definition, contract portions of the project scope to subcontractors. The VAST majority of the actual work is completed by subs. GC estimators are competing on the basis of their relationships with subs. The GC with the most market leading subs has the best chance of winning. Success here, is all about building market leading subcontractor loyalty.

What defines if the work will be as profitable as it should be? In-house, the leadership and administrative abilities of the Project Manager and the on-site staff. Chasing work that’s aligned with their skills, abilities, and past successes is the best way to ensure profitability. On the other side of the contract sits the client and their representatives. Ethical clients with solid design teams are rare gems that attract fierce GC competition for their projects. Incomplete plans and short deadlines is the signature play of the troublesome client.

Clarity of Purpose

“Well our design isn’t complete but we’ve got cloud based computing to share the misery equally”

There’s never time to do it right the first time, but there will be time to do the work again. Unresolved issues handed from estimating to project management tend to harden in the arteries of a project, choking off progress until you’re lucky to simply escape. The estimators purpose is to win profitable work. If it’s not going to be possible to profitably complete the work, there’s no reason to pursue it. Estimators need to keep track of clients and design teams who’ve run contracts into the ground. Very often the client or their design team is the contractors greatest risk on a project.

Deductive reasoning and streamlining your process

Deductive reasoning is a process where you begin with premises that you must assume to be true. Then you try to determine what else would have to be true if the premises were true. Applying this to our situation, we have two premises; Estimators must win profitable work, and estimators work by controlling risk. Earlier I applied deductive reasoning to explain why we do QTO’s, or why it’s important to pick the best opportunities. My intention was to reveal the wider scope of what it really takes to be a successful estimator. If you’re already struggling with the stress and boredom of grinding out bids, this probably looks like I’ve dropped a whole lot more on you. Take heart, that’s not really the case. First off, MOST estimators are losing more than they’re winning. If you’re winning profitable work all the time, I implore you to start a blog! For the rest of us, this means that the majority of your daily work isn’t achieving your purpose.

A critical concept of successful estimating is that in order to win more, you’ll have to bid less. Winning comes from bidding only good opportunities that strategically align with both the GC AND their subs. It takes a lot more focused effort to bring all of that together on an individual bid. Losing bids diminishes the GC’s reputation with the market leading subs. Not only are you wasting your company’s time, you’re damaging your “pull” with subs. More bids means less focus which means higher risk which inevitably translates to lower profitability. Simple things offer no shortcuts.

Most estimating managers won’t consider reducing your workload until you’ve won more work than the company can handle. This circular pattern is why very few people want to become estimators. It’s a ton of work that’s rarely successful because the focus is on single-minded process rather than multi-faceted product.

Elevating the situation requires multi-level thinking. Being able to accurately identify your odds of success is a basic necessity. For more, read up on estimate tracking here. Once you’re clear on the odds, you should be tailoring your efforts to get things rolling quickly. Keeping momentum is how we keep the stress and boredom at bay but that’s not enough to really solve your problem. It stands to reason that you’re tasked with bidding something that’s an obviously poor fit.

Clarity of Purpose

“I can see this client has made some risky decisions…”

Treating every opportunity like it’s equally valid may sound like a best practice but it’s profoundly counter to your purpose. If you’re certain to lose the job, you’re not helping yourself by compromising better opportunities.

Many managers are amenable to courtesy bidding the turkey job to free up resources to land the great opportunity. Gaining a little leg room, then delivering the victory builds faith in your judgment. Backing your judgment with facts and figures, is how you prove your expertise. Trust is built through honesty, transparency, and accountability.

Overworked estimators often hear: “You can’t win if you don’t bid”. The unsaid counterpoint is:”It’s not the job you lost that puts you under, it’s the job you won”.

Clarity of purpose is a simple concept with powerful implications. Give yourself time to consider what you’re doing and ask how it achieves your purpose. We get a lot of encouragement to maintain disciplined process like a regiment on the march, but very little for picking the right direction. It’s only after you’ve arrived at the destination that people realize you knew what you were doing.

 

For more articles like this click here

© Anton Takken 2016 all rights reserved


Reliable Estimating Part 2 Building momentum!

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.

 

For more articles like this click here

© Anton Takken 2015 all rights reserved

 


Where do estimators get their prices?

This simple question is complicated because the answer depends on the application. Just as fruit comes from plants, it also comes from soil, water, and sunlight. The more specific the answer, the more it will involve larger, and more complex factors.

Pick any two; Fast, Complete, Cheap,

The way an estimator proceeds will be balance their client’s needs against their firms risk.

If a client wants a fast answer with no margin for error (complete), an estimator will reduce their risk by raising their prices, and padding their bids with contingencies. The bid-day price is high, but the client is relatively safe in assuming it won’t cost more than that amount.

If a client looking for fast and cheap pricing, should expect lots of exclusions on the proposals. Expensive and necessary items may not be included so client takes a risk in relying on this information.

Complete and cheap pricing only comes from a dedicated effort to find only what’s needed, and get the best pricing possible for it.

Balancing act

Estimators must weigh the likelihood of being awarded a profitable contract against the effort to price the work.

Where do estimators get their prices?

Artistic rendering of a conceptual bid

Conceptual or budgetary exercises are often done as courtesies to clients and architects. Historical pricing of past projects is the most useful resource for this work. Comparing the proposed project against past projects gives the estimator a project-level price comparison.

By taking each projects cost and dividing its square footage, an estimator can compare square foot costs across differently sized projects. Experienced estimators exercise great caution here because some costs are not proportional to the area.

For example, restrooms and kitchens are very cost intensive because they require the work of so many trades. A large and a small office might have the same number of restrooms and kitchens. The contributing cost of these rooms is spread over a higher square footage in the larger office.   This leads to a lower square foot cost than would be reasonable if the exact same finishes were used in a smaller office.

Estimators lacking historical data may refer to annual publications of cost data such as the RS Means books. There are reference books ranging from building use cost data, to trade-specific unit pricing. Every book includes adjustment tables meant to factor for regional cost variations, project size differences, and so forth. The important thing to understand about these resources, is that they’re national averages driven by audits of last year’s work.   It’s very precise for comparison, but not very accurate for bidding.

Accuracy versus precision

Accuracy and precision are not interchangeable terms. Accuracy is an approximation of how close a measurement system is to the subjects actual value.  Precision is an approximation of a measurement systems repeatability.

Where do estimators get their prices?

It turns out that Baxter is a precision instrument…

So to apply this to estimating, the contract is awarded to the lowest bidder. Any significant difference between low and second low benefits the client by driving down the project cost. Therefore estimators seek to just barely beat their competitors to maintain profitability. The degree to which an estimator is able to hit that mark is their accuracy. Winning a job with a 5% spread is substantially less accurate than a 2% spread.

Mistakes in the bid can easily make winning the project, a fate worse than losing. The estimators ability to reliably deliver an error-free bid is their precision. Successful estimators must be accurate and precise.

Think of it this way, you could theoretically win a profitable project by guessing on every bid until you were successful.   The win was not repeatable so the methodology is rarely accurate because it not precise.

Now if you come in within 3% of the low number on every bid, you know with 97% accuracy that your methodology is precise. Figure out how to cut 3% on the next bid and you’ll probably win.

Relevant detail in the big picture

Earlier I referred to the cost data books as precise for comparison but inaccurate for bidding. The market price for work is constantly changing according to prevailing economic forces. While each participant is a rule unto itself, as a collective, the market will follow fairly predictable trends.

Where do estimators get their prices?

Downward trends are easy to spot…

General Contractors (GCs) typically subcontract (sub) portions of the project scope. The GC writes a subcontract laying the responsibility to furnish and install whatever is stipulated for that scope on the sub in exchange for the subs proposal amount. The GC isn’t concerned with tracking the changing price of a wing-nut because they aren’t responsible for buying them, the sub is. GC estimators focus on quantifying scope items that will help define what to expect of their bidders. They use these expectations to scope the subcontractors proposals on bid day.

Professional subs in the skilled trades will conduct detailed estimates down to the literal counts of nuts and bolts. The advancement of computerized Quantity Take Off (QTO) systems has made it possible for subs to estimate with greater speed, precision, and accuracy than ever before.

It’s important to take a moment to point out that granularity does not correlate to accuracy or precision.   Square foot cost’s can be just as accurate and precise as a detailed estimate. What changes is the uncertainty. Detailed estimates allow minute changes to address uncertainty related to the smaller issue. In larger firms, estimators have their work checked by the department head who doesn’t have time to conduct their own detailed estimate to check the work. Instead, the totals for meaningful scope areas are compared on a square foot basis. Detailed estimates require great focus and attention to compose properly. Many estimators end up reviewing their work many times before it’s completed. By then the numbers become familiar and it becomes harder to see when something is wrong. Estimators who don’t have anyone to check their work are well advised to review old bids to improve their ability to identify square foot costs. Being able to switch perspective from micro to macro without losing accuracy or precision is a critical estimator skill.

Detailed estimates are used to reduce uncertainty within the bid. However the bid is only accurate and precise through the crucible of competition. Market value is typically provided by only the base bid amount. This crude metric must be interpolated to define how things added up to that number. The only things not subject to opinion, are the Construction documents, bid amount, and the square footage.

But…

Market leaders set market prices. The only accurate estimate is the profitable win. Estimators who spend all their time looking for stuff to include aren’t considering what the market leaders are doing. Their common excuse is that the low bidders are giving the work away.   This excuse is rooted in the notion that market leaders get the same sub prices as everyone else. In fact, market leading subs may decide to only bid to the best GCs. GC estimators with stagnant bid-lists may go their entire career without ever seeing a market-leading subcontractor proposal.

Estimating is about controlling risk. Counting stuff and ringing up the tally is a cashier’s job. Estimating demands much more than tidy spreadsheets and vigorous accounting. Controlling risk requires judgment, strategy, communication, and relationships with market leaders. There are estimators who fall short on these factors and they lose a lot of bids.

It’s probably a let-down for some people to learn that there isn’t a set price for anything. Even if you’re self-performing the work and you know with great certainty exactly how much it should cost. The going rate may be more or less than the amount calculated due to the economic forces of the local market. The best we may do is to stay current on pricing to maintain an informed opinion.

Where do estimators get their prices?

It’s much easier said than done

Summing up, Estimators get their prices from their from a combination of QTO’s, estimate templates, subcontractor proposals, proprietary software systems, historical data, direct vendor quotes, market conditions, and brute-force accounting of what their company needs. All of which are constantly re-evaluated and adjusted to reflect market insights and field conditions. Every price is subject to change, so be wary of trusting any resource that promises otherwise.

For more articles like this click here

© Anton Takken 2015 all rights reserved

 

 

 

 


Excuses and Uncertainty

I recently encountered an estimator lodging a familiar complaint. “My competitors are bidding at a loss.” Sure, on the surface it’s entirely possible that the low bidder stands to lose money at the amount they proposed for the work. People make mistakes all the time.

However there’s a tendency for some folks to assume that being low-bidder implies low quality. The time-worn comment attending every perceived failure is “What else can you expect of the lowest bidder?”

Excuses and Uncertainty

To be fair, the losing bidders are a bit biased …

Somehow it escapes notice that it takes a lot of investment to produce something cheaply. Consider how affordable cars are made possible through huge factories, infrastructure, and training. The total investment to make a luxury hand-made vehicle is minuscule in comparison. Sure we may appreciate the craftsmanship of a luxury car, but few can afford it. Unattainable quality has no practical value beyond inspiration.

Low bidder could be compared to the winning golfer who faced the same conditions as every competitor, yet took fewer strokes to achieve the same end. Market leading General Contractors (GCs) attract market leading subcontractors (subs). The very best sub prices go to the very best GCs which means those GCs can build the same project for less money than their competition. In some cases the advantages for the market leading GCs can be so profound that not only are they unbeatable, but they are making higher profit than the high-bidder stood to gain if they’d won.

These relationships don’t happen overnight, and they certainly don’t happen from random chance. There is absolutely no substitute for knowing your market.

At the subcontractor level there can be enormous disparities in material costs depending on the scale of the firms revenue. A subcontractor who buys their material by the train-load enjoys prices unattainable to a competitor who buys a fraction of that amount. Efficiencies of scale play decisive roles in determining who will be market-leader. However it’s here, we encounter another tiresome excuse.

“The big guys can afford to call the shots and push everyone aside. There’s just no beating them.”

It’s foolish for estimators to pretend that every company is excellent at all things. Chasing opportunities that are too big, or too small sets you up to fail. Bidding work you know you’ll overprice or underperform is disrespectful of the opportunity and a waste of time. Perhaps the biggest mistake that estimators make is failing to prove the relationship between being able to pick a good target, and hitting your mark.

That being said, smaller firms offer more direct access to stakeholders than their larger counterparts. It’s often possible for a hard-working but small firm to build a relationship with a bigger client than they could otherwise attract.   Not every project hinges upon the purchasing power of a small-fry company. Clients find occasions where the agility and dedication of a smaller firm is worth paying a premium for. Estimators at small firms must look to leverage their size against lumbering bureaucratic competitors.

Excuses and Uncertainty

It takes a lot of patience and even more follow-through but this is how little firms compete with big ones. It bears mentioning that for every company with a huge sign on a huge project, there are hundreds of smaller ones quietly building everything else.

Only they that lost, knew what they were doing.

At the heart of these excuses is an effort to claim that the estimator who lost is the only one who knew what they were doing. If this were true even half of the time, we’d see near-constant business failure across the construction industry. Many of the estimators making these excuses haven’t collected enough information to say what happened with much certainty. Knowing you lost by $X amount or Y% only illuminates a very small portion of what goes into a bid.

Right off the top, it should be obvious that so long as there are differences between the competitors, there aren’t equal odds of success. With observation and experience, it becomes obvious what firm constitutes the long shot in every bid letting. If that firm is yours, you’re probably chasing the wrong opportunities, or your company hasn’t adapted to the available work.

Starving Artists and poorly informed bidders

Competitive bidding proves market value over time. Under-bid work is a self-correcting condition. GC’s who can’t accurately define market value often struggle to be competitive. A lot of companies like to believe that they are delivering a higher level of quality than going rate will pay. As estimators, we cannot allow our firms to become “starving artists”. If you’re selling up-market services, then by all means pursue work higher in the market. If these options are scant, then it’s time to diversify goods and services to meet actual market needs. Every business must meet its customers’ needs at a sustainable profit level. Even non-profit entities need surplus funds to allow for growth, and the occasional set-back.

Winning perspective vs. losing percentage.

Again, estimators must actually know the market value and the market demand before suggesting a structural change. Estimators learn their way around by digging into to every win and loss. The monetary difference is a single number outcome of a huge variety of factors. Estimators face a great deal of uncertainty trying to determine what factors played the commanding role to determine victory. Start by roughly defining the differences in each proposal. Then move on to define what’s “behind” each proposal in terms of sub roster, schedule, site logistics, relationships, market segment, and so forth. Breaking down the “winning combination” can be immensely instructive. The goal isn’t to exclusively look for quantitative differences, so much as differences in perspective. These are the insights that mold options into opportunities.

Excuses and Uncertainty

“After a lot of effort, it became clear that Mark doesn’t see a pattern here”

Risk is relative

Estimators are keenly aware of the quantities of all the building components. One area where each estimator is looking at the same job and getting different measurements is risk. Risk is the potential for loss presented in a deal. Estimators must understand that some portion of the risk in a job is quantifiable according to the strengths and weaknesses of the GC.

Estimating is about controlling risk and uncontrolled risk is very expensive. In some bids, it could be said that the lowest bidder was the least afraid of the opportunity. In other situations, the lowest bidder might be the least informed of the risk they’ve undertaken. Estimators work by bounding uncertainty. Every job could potentially suffer catastrophic and costly problems, but we’re in the business of preventing them. The better we are at our business, the less likely the problems are to occur. Better firms have lower risk. Perhaps more accurately, better build teams have lower risk. To this end, estimators should become very curious about which subcontractors were on the winning team. By tracking the results across the GCs and subs, a picture will emerge of who’s the market leader for any given scope of work. Like anything worthwhile, it takes a lot of work to develop this knowledge. Growth doesn’t always mean expansion. As businesses mature, their ability to do more with less grows in proportion to their commitment to excellence.

Nagging, price checks, and why cashiers don’t win bids.

Some GC’s are prone to assuming that broadcasting an invitation to bid (ITB) to every sub in a five state radius guarantees they’ll receive the best bids that the market has to offer.   Many subs interpret the “cattle call” ITB to be a waste of their time. As a rule, the very best opportunities tend to be discrete because the leader of the “winning team” begins their campaign by enlisting their best players. If you’re a GC who must constantly resort to nagging subs for bids, you’ve probably wasted their time in the past, or your projects are simply unappealing.

Both cases are a symptom of a GC without any sense of who their subs are and what they’re good at. Estimating this way becomes little more than a cashier demanding a price check over the stores intercom. Lots of waiting, incomplete information, and very little money saved. When such a GC loses by an amount roughly equal to their profit, they assume their competition has bid at a loss. This cashier mindset leads to “checking the receipts” rather than comparing stores.

A roster of the awarded subs could potentially reveal an exclusive GC-sub relationship. It could also reveal that the winning GC carried a sub who wasn’t competitive among the bids you collected. This could imply that sub bid a lower amount to the winning GC. It could also imply that the winning GC found the make it or break it cost difference in a different trade’s proposal.  Often, these look too good to be true, so the estimator has to sink a lot of their precious bid-day into deciding if it’s legitimate or not. This can lead to situations where low-value scopes of work are laid on trusted subs even if they’re not the cheapest.

It’s also possible you’ve found an angle to defeat that GC on the next similar project because you’ve got a better sub. Be advised that your precious sub may find their way to the competitors bids if you don’t reliably land work. It’s incredibly frustrating for market leading subs to bid to a GC who keeps a few dullards on the roster to pull the whole bid into a loss.

Excuses and Uncertainty

Protip:  The sub who’s never cranky about the losses is the one causing them.

Faster follow-up

GC’s typically have the benefit of timely bid results from their clients, especially those with public readings. However many GCs would benefit from considering all avenues of information, including asking their subs. It’s terrifically common for clients to indulge in post-bid pricing requests with one or two of the bidders. Some clients believe in remaining silent until they feel certain of the decision to award. Many otherwise honest clients fail to reconcile that they transcended from bid scoping several proposals, to negotiating a different deal entirely with a favored bidder.

Subcontractors are often involved in these rapid post-bid pricing requests which in turn often requires that distributors and vendors be consulted. Everyone in the supply chain has personal and financial interests involved which means things won’t stay secret for long. GCs who can’t get their client to answer the phone should reach out to trusted subs to see what’s going on.

Bid shopping is a serious problem that thrives in secrecy and delayed information. I know of many jobs that were successfully won against bid-shoppers through coordinated efforts between the legitimate GC and their subs. Your average estimator would absolutely love to do their part to hurt a cheating competitor. I should point out that GCs who consistently and voluntarily provide accurate, and timely bid-results on everything they do earn the subs best efforts.

Glory follows virtue as if it were its shadow: Marcus Tullius Cicero

GC estimators must understand that there’s no sense in being an ethical bidder if you don’t prove it by acting virtuously. Success lies in being the best, and nothing sets the field of close competitors apart more starkly than the measure of their honesty.

But if it’s the client’s job, don’t they get to change their mind?

It’s absolutely and unequivocally unfair to send a Request For Proposal (RFP) promising contractual award to the lowest complete bidder by the deadline without committing to the low bidder on those terms. Once they’ve fairly awarded the contract, they’re free to negotiate any further changes with that GC at their convenience and according to the terms of the contract. If they want greater range to negotiate with a specific GC, they should dispense with the competitive bidding in the first place.

If an auctioneer accepted an offer after bidding closed, the entire auction is little more than a fraud. GCs need to hold clients to their own terms. The practice of proving market value by competitive bidding is why bids are “free” in the first place. Moving the goal posts to suit the client’s desires after the bid is dishonest and unfair. No good comes of pretending otherwise.

Excuses and Uncertainty

Submitted without comment

 

It takes a lot of losses to know what you’re doing

Uncertainty is the reason estimators exist. If it were possible to simply tot up everything perfectly, we’d use cashiers instead. Estimators must continually switch between deductive (top to bottom) and inductive (bottom to top) reasoning to balance uncertainty against market value. Inductive reasoning starts with the presumption that profitable work exists at market value. Working “backwards” from that market value, the estimator looks for ways to make that happen. Deductive reasoning is the comfortable and familiar “add everything up” practice of QTO’s bid-scoping, and spreadsheets. Both systems of reasoning involve uncertainty, however there is a cross-canceling effect when the systems are properly applied to one another on the same project. In most cases, you stand to learn more from your losses than your victories because the winner gets no feedback beyond the contract award. Losing a bid is a costly endeavor, so estimators should gain knowledge to improve from every effort.

For example. Let’s say you lost a bid on a simple remodel project. Working deductively, you did a QTO, and made sure that all the obvious scope was attributed to a subcontractor bid, or vendor. In your view, the majority of the risk of the project was driven by unknown/concealed conditions. You may have decided that approximately 15% of the shared wall space would require some measure of re-work in order to facilitate the project. Many estimators will provide a bid-directive to that effect to all bidders. Some subs will interpret this to be an open-ended question intended to prevent change orders. As such, the 15% of re-work might well be priced at change-order rates.

Working inductively, we compare the winners bid against our own. Unless specifically indicated, we must assume that their bid was complete, and that the work stood to be profitable at that amount. Compare the competitor’s operation to your own. If the competitor consistently wins similar projects, they probably have extensive experience mitigating the predictable risk. This doesn’t mean that they bid less than 15% of rework. Repeat business is the goal of most companies. Subs who regularly win work with a GC tailor their proposals to suit that GC’s preference. Subs learn what the GC will and won’t consider a valid change order. If some rework will be expected without a change order, the subs will include that work at their much-reduced bid-rate. Lacking a specified amount, the subs exercise their judgment. The more expert the team, the better the judgment, and the more likely the victory.

Working inductively, you might inquire with trusted subs to see how your competitor addressed the risk with their bidders. This conversation opens up avenues to compare the subs competitors and gain insights thereto. Keep yourself open to multiple premises to explain what happened. The rework was necessary in your opinion based on your perspective. Your competitors past experience in the building, or knowledge of the client might have altered your view of the bid-day situation entirely.

Be wary of gossip, or mean-spirited conjecture. We’re working by inferences and deductions that are based on corroborated information. Curiosity, positivity, professionalism, and kindness open the doors of opportunity. Everybody wants to win work, and everybody takes a loss from time to time. Begrudging a competitor their victory is a petty move, which is unworthy of a professional. Take the opportunity to share what you know to cultivate future communications. As with anything in estimating, you never get a perfectly certain view of what’s going to happen, but you can get very close. With time and experience, it becomes possible to see the critical dimensions of projects that drive your chances of winning the job profitably. With good information, the only thing you can’t make, are excuses.

For more articles like this click here

© Anton Takken 2015 all rights reserved


Making Bidding Fun!

A much overlooked aspect of what it takes to be a successful in business is the fun of actually doing the work.  Estimating need not be boring, anti-social, or frustrating.  The key is to maintain some perspective on what you’re actually doing.

Making Bidding Fun!

A different take

In most offices, the estimator’s role is stiffly defined as “pricing stuff to win work”.  While there’s certainly some truth to that, there’s a lot missing as well.  For example, most entrepreneurs would view every invitation to bid as an opportunity.  Every opportunity is a chance to further their goals.  Every success opens new avenues to further opportunity.

The entire entrepreneurial plan is based on cultivating excellence from what’s available.  Estimators  interpret challenges in terms of risk versus reward.  Reward often get’s narrowly defined as profitable.  By limiting the appraisal of reward to profit exclusively, much of the entrepreneurial mindset is lost in the exchange.  Along those same lines, estimators  frequently interpret “unknown” to mean:  “not worth it“.

Estimating becomes drudgery when you’re grinding through pricing exercises without any focus beyond covering your hind end.  Estimators control risk and there will always be risk on an estimate.  Certainly there’s more risk in doing something new.  Quantify the risk and make it possible to push your boundaries.  Don’t squander opportunities with unqualified pessimism.  Eagles and Moths share the gift of flight, but Moths use it to bang into windows.

Winning bids is more fun than losing them but finding a perfect client is better still.  Finding that rare profitable niche where your firm offers some unique value to the client is a watershed moment for a business.  You’ll know when you’ve found it because you’re able to beat market pricing, exceed market value, and make more profit for work in that niche.  It’s a great feeling to be at the top of your game.

Making Bidding Fun!

 Like this guy for example…he’s having a great time!

Getting there from here

Before you go off thinking that happy estimating is simply optimistic bidding , there are a few points to be made.  First off, let’s start by making everything you bid rewarding.  Every bid must have a primary, secondary, and tertiary reward.

The primary reward is to professionally represent your firm, your vocation, and our industry.  In a perfect situation, you profitably win the job.

The secondary reward is to gain knowledge about the bidding environment.  The bidding environment is a complex intersection of clients, design teams, competitors, market conditions, and local factors.  Success is going to hinge on your judgment which is informed by paying attention to what happened on every bid you participated on.  Just as estimating is often about taking a huge amount of unknowns and systematically filling in the gaps, so too must the post-bid investigations.  Track what you can and interpolate the rest.  You absolutely must gain new information from each bid, otherwise you’re going through the motions which is depression with spreadsheets.

The tertiary reward is networking.  To many estimators this is largely limited to clients and design teams.  New subcontractor talent is a market control that can not only ensure competitive pricing, but market value.  Institutional inertia is a potent force in the construction industry.  Many new technologies, techniques, products and services get stymied because established firms don’t face serious competition from companies that are doing everything they can to gain market share.  Many estimators seek to reduce risk by focusing exclusively on “their team” of subcontractors.  Somehow it escapes their notice that low risk bids are often long-shots in the competitive market.  Get new talent involved whenever you can.  Figure out which subcontractors are doing work for your competitors and not for you.

Over the course of your career, the bid list is a silent marker of the professionals you’ve encountered.  Nobody wants to bring more confusion into their world.  It often seems like every group has a few difficult characters.  Herein lies a quiet advantage.  New contacts are fragile things.  If a new subcontractor turns out to be a turkey, you’ll have little regret taking them off the invite list.  It’s much harder to be rid of difficult people with whom you’ve had a long working relationship.  But once again, new competition might solve that problem for you.

Making Bidding Fun!

 Yeah, this guy definitely needs to go…

 

Turning things on their head

Lots of people hear “estimators must control risk” and think that means putting money into the bid equal to the dollar value of the uncertainty.  That’s entirely wrong for a variety of reasons.  First of all, it’s an estimate which means there must be risk. If there’s no risk, there’s no reason for an estimator to be pricing it.  Second, bidding is not done in a vacuum which means that competition forces the winner to be the best market value so padded bids are often losing bids.

Third, if you actually know the value of the uncertainty, it’s not a risk, it’s the cost of making a decision.

For example:  If a low bidder is 5% cheaper than 2nd low, you firm’s risk in hiring them is 5%.  If the low bidder fell through (or raised their price) before starting the job, your firm would have to come up with the 5% difference to hire the second low.  The greater the price gap, the more likely that is to happen.

That’s all fine but it assumes that all the risk is resolved prior to contract award.  If a subcontractor “falls down” on you during the job, it will cost much, much, more to get the job back on track.  This is because you can’t simply sever a contract with the first subcontractor, then hire the second contractor for the bid-day difference in their proposals.  The first Subcontractor has legitimate pay applications up to the point they fell down.  The 2nd subcontractor has to price the amalgamation of new work using whatever they can salvage of the first guy’s work within the now-compressed timeline for project delivery.  Basically, you’re asking the 2nd guy to take on a much harder project than the bid day proposal addressed.  Their price might be less than their bid day amount, but the sum-total spent on that scope of work will be much more than the low bid amount.  Notwithstanding the inevitable court costs.

Successfully controlling risk is about judgment far more often than monetary padding.

If you find it’s not possible to define the value of an uncertainty you’re almost surely out of your depth, don’t bid.

So how does this apply to me?

If everything in the estimators purview is defined in terms of dollars and fears, there’s no light of opportunity making the job something meaningful.  Estimators have a wonderfully unique position in the market that gives them information, insight, and leverage that’s profoundly influential.  The key to unlocking this worldview is exercising judgment.

Go faster, good tools make everything but excuses.

In order to “buy time” to do all this thinking, investigating, interviewing, and planning you must understand the continual need to accelerate your QTO’s and estimate building.  It’s incredible how many estimators are choosing to short-change their success by spending so much time with the phone off and door locked trying to pound out a take-off.

Market leading software solutions are plagued with poor input systems, frustrating file management, and stodgy workflow arrangements that are seemingly  “optimized” for befuddled pensioners.

Get used to the idea that you’re going to have to push the envelope by adapting to this adversity.  Take the time to learn keyboard shortcuts, menu sequences, and drop down lists.  In some cases, it’s possible to learn entire shortcut “phrases” which quickly move through routine tasks.  Speed is your friend and flexibility is critical for swift progress.  Inexplicably systems continue to be developed with monstrous lists to represent every variable of a construction project rather than allowing the input to be logically derived by the user.  Get to a point where the “counts and measures” aren’t consuming the lion’s share of your time.

Rise to the challenge

Estimating is an executive position that bridges sales and production.  Embrace the opportunity to thoroughly understand the job and what drives the cost while aligning the job’s needs with the best your market has to offer.  Be a market leader, and motivated professionals will flock to you.  It’s a lot more fun.

Making Bidding Fun!

Maybe not as fun as bear walking, but still… pretty good!

In most places, the construction market experiences severe fluctuations in roughly ten-year cycles.   Many firms find it’s tough to quickly adapt to a downturn and few professionals feel the pressure so acutely as the estimator.  The furious tempest of chasing every bid opportunity is starkly contrasted by how  little work goes to contract.  It’s a sad and predictable fate for the unprepared.  Estimators should take heart, there is always opportunity for the willing.

Knowing the market, and knowing the market pricing means you know what it takes to win.  These informed insights are invaluable to the firms decision makers.  As an observer, you should be on the constant search for quiet market sectors.  The more diverse these sectors are, the better.  Market downturns are not always uniform and many firms find themselves uniquely positioned to expand during such times.  Be sure to maintain a long list of clients to call upon when that happens.

Judgment is all important

Much of the joy in work is about having a purpose to what you’re doing.  Fear, survival, and inertia are the three leading reasons miserable estimators reply to: “why are you bidding this job?”  All three options are passive acceptance of a very corrosive notion.  The idea that winning a bid is little more than simple chance  barring some bidding error.   The overwhelming focus on “not missing anything” obscures the much bigger picture.  By and large, most competitive bids come in quite close between bidders.  That isn’t a function of luck or missing something huge.  Most of that difference is professionals doing their best with what they have.  After all the adding, calculating, scoping, and measuring, take a moment and look at the job and it’s cost.  Find a past bid that’s similar to this one.  Is this job’s cost in line with the winning amount on that project?  Now think!

If your total on this bid isn’t looking competitive, it’s time to figure out why.  Maybe the schedule could contract, maybe you carried the 2nd low sub on something expensive.  Resist the urge to simply tinker with the profit percentage until no other options are available.

What you’re doing right now is controlling the risk of losing the bid.  You’ve put a lot of yourself into this effort, make sure that you finish strong.

You should know exactly why you made whatever changes you made so you can connect your actions to the outcome.

This is where estimating steps into its purpose.  Estimating is not simply harried mathematics, plan reading, or typing proposals.  It’s not just guessing, bargaining, or gambling either.  It’s about hitting the mark in a complex, dynamic, and demanding environment.  Picking an opportunity, positioning yourself properly, and landing a profitable job for your firm is a wonderful rush.  There isn’t much room for “fat dumb and happy” on the hard bid market.  Stay sharp and you’ll find that even in a crowded market, you can make it happen.

Final thoughts

To recap a little: an estimators purpose is directly tied to the entrepreneurial mindset.  In place of optimism, the estimator brings market knowledge, and nimble problem-solving to turn opportunity into success.    The estimator is a scout, a guide, and an adviser to help direct the firm’s actions.  Personally, the estimator is a well-known professional who can earn a reputation that opens doors at every level of their career.

In many ways, seeing “the job” for what it really is (or should be), fundamentally changes how it feels to work every day.  Be the change you want in your life.  Make bidding fun!

 

For more articles like this click here

© Anton Takken 2014 all rights reserved