Babel Buster Network Gateways: Big Features. Small Price.
De Wachter, President
Al De Wachter has worked in the Building Automation industry for over 30 years. He has held senior positions with Honeywell, Landis/Siemens and TransAlta Energy. He is the president of Independent Control Specialists Inc, where he has directed the development of advanced productivity software for Building Automation Contractors since 1990.
November's article illustrated the necessity for effective cost estimates, without which the deck is stacked against a BAS contractor's success. When a contractor suffers the effects of project non-profitability other job contractors, owners and consultants also risk being drawn into debilitating battles. It is to the owners' benefit when all contractors are able to achieve their planned profit levels, since in the absence of contractor success, conditions and cooperation can quickly deteriorate.
In this article, we will ask some questions that contractors may want to consider when they review their own estimating processes and capabilities. We will also suggest some of the benefits available by using a structured estimating system like the ICS SOCC© package.
What is an "Accurate Estimate"? Some point out that the expression is an 'oxymoron' - if it's an estimate, it can't be accurate. We prefer the term "Reasonable estimate" which we define as follows: A Reasonable Estimate is one that is 'accurate' in its count of the quantitative cost elements such as devices and installation materials, and that has 'sensible' assumptions made about the intangible cost elements such as risks and labor contents.
We suggest: if your estimating spreadsheet merely adds device costs and extends simple labor factors, you may be exposing yourself to unnecessary risk. Your estimate should and can reflect the realities of installation difficulties, design and documentation problems, task repetition and learning curve effects, and the building structure itself. As reasonable steps are taken to consider these and other factors, the estimate will become more "accurate", i.e. more representative of actual results as they are likely to occur under the anticipated circumstances.
If time is money, how much time should be spent on an estimate? There are at least two ways to look at that cliché: wasting time is akin to wasting money - and investing time is like making money. Investing too little time is a recipe for disaster, as quality is likely to suffer, and risks lurk everywhere.
We suggest that within some practical limits, the quality of an estimate is more important than the "time spent". After all, it makes little sense to put together a fast estimate, only to live with a problematic project for the next 2 years. However even if a "perfect" estimate were possible with unlimited time investment, there is still no guarantee that the contractor would receive an order. Obviously a balance is required. The real trick is to achieve optimum quality with minimum time and effort. That depends on your estimating system: time spent can be minimized, and quality optimized, if your system can re-use a library of previously proven estimates.
How accurate does an estimate need to be? The estimator's goal is to predict what the final cost will be to deliver the project. But not everything can be known in advance, and there are risks. Using his estimating tools, the estimator must maximize and include the "known" things, while minimizing and allowing for the "unknowns". If there are too many unknowns that cannot be adequately measured, it may be prudent to qualify the bid, or even decline to bid. While there is no contracting without risk, the type and degree of risk should be understood and managed. Ideally an estimate reflects a balance of optimism versus pessimism, resulting in a "reasonable" price for which the contractor can deliver the project at a profit.
We suggest: "Reasonableness". The estimate should represent a scenario that allows the contractor to deliver the project for the estimated cost, given that the circumstances are as reflected in the estimate. A good estimating system can help the estimator to make adjustments in accordance with known conditions and anticipated risks.
Will a reasonable estimate guarantee success? Alas, no. Observation of countless projects has shown that a successful project is one that is based on a reasonable estimate, and that is executed in accordance with an intelligent plan. Without one, the other is insufficient. We also know that it is impossible to 'manage' the whole project as a single piece, and that successful execution demands that projects be 'segmented' into smaller pieces that can be adequately estimated, measured and controlled. An estimate must reflect the various pieces of the project for financial reasons, and a plan must be structured to guide effective and efficient project execution. It makes sense, therefore, that the estimate and the plan should have similar elements or segments.
We suggest: A great estimate can still result in a bad job, and the estimated profit must be protected during the life of the project. The estimating system should allow the estimate to be structured using the same segments that the plan uses. That way, the plan is virtually ready when the estimate is complete, plans can be validated against the estimate, and adherence to the plan assures knowledge about the adherence to the financial expectations. BAS project estimates should therefore be segmented in geographic or other pieces that add up to the whole project, but that are identifiable, measurable and adjustable by segment, based on careful evaluation. If your estimating tool does not support that concept, you are seriously disadvantaged.
Every project is different. How can we adjust for that? There are many situations that affect the risks on a project. Each must be taken into account.
The type of building (hospital or school, correctional facility or office building?)
Construction methods (drywall or poured concrete?)
Building height (effect of elevator wait times, tool movement, work breaks in tall buildings)
New or retrofit work (existing work to be demolished, or work around existing occupants)
Past experience (has your crew just completed 10 schools? The next one may be easier..)
Documentation quality (what is the effect of messy documentation or contract documents?)
Difficulty factor (government high security building?)
We suggest: Your estimating system should help you identify the various elements that can affect the anticipated cost, and make appropriate allowances. However to the extent possible, the factors affecting the cost should be determined in advance by sober and dispassionate people, not by an estimator in a hurry who really wants this job, or by a project manager who is imagining all the worst scenarios that COULD happen.
How can we recognize cost changes for long-duration projects? When a project is expected to last beyond a defined time, it may be necessary to add cost factors for changes in material and labor cost.
We suggest: Your estimating system should recognize that not all materials are delivered at the same time, and therefore different products and labor costs may be subject to different escalation factors. Your system should allow you to do design at today's cost, but startup at a labor rate expected to apply 2 years from now. Or, perhaps wire prices may be expected to rise, but computer equipment is expected to be reduced in price.
Are your estimate reports helpful? Estimates are typically prepared against some kind of deadline. Important decisions are made under less than ideal circumstances, and decisions are made by estimators that may require discussion and review with their manager before a bid can be finalized.
We suggest: estimate reports are the barometer of reasonableness and clarity. If your estimating program does not provide reliable, understandable reports, the quality of your decisions may suffer.
Do your designers re-estimate the project? Many contractors want to review the original estimate once the project is designed, and before they purchase the equipment, to ensure that there was no departure from the as-sold work scope.
We suggest: your estimating system should allow the comparison of the "as sold" and "as designed" projects. This avoids expenditures due to over-design, or perhaps identifies errors in the estimate. Either way, there is an opportunity to proactively address the issue.
Could you use assemblies? Assembles (or 'kits') can greatly reduce both the time to put together large estimates, and the risk of forgetting to include important products.
We suggest: your estimating system should support the use of assemblies to achieve speed and reduce risk. Pre-assembled packages are typically well thought out, with input from project managers or design people to assure completeness. Complete systems (HVAC units, heat pumps, VAV boxes…) can be prepared for use by all estimators.
Emotion has its place. But not in estimating. Steps should be taken to remove opportunities to skew the 'real' costs with overly optimistic or pessimistic viewpoints and subjective adjustments. If a product database with costing and labor factors has been approved by both estimators and installation people, and dispassionate and realistic factors have been assigned for the purpose of various known situations and difficulties, the contractor's estimates become predictable, understandable, defensible and repeatable. Gone are the days that two estimators differ by 50% on the same project.
We suggest: An estimate must be more than an addition of columns of numbers. If organized and assembled properly, it can offer a revealing look at a project. It can be compared to similar projects, and conclusions can be drawn that support management decisions because they engender comfort and credibility.
Growing the business? When a small business grows, the original owners can no longer 'do it all'. Estimating is one of the more difficult things to delegate, as the impact of an estimate assembled by an inexperienced person is well understood.
We suggest: make sure that there is a clear, dispassionate, advanced estimating system in place that guides a new employee, limits his opportunities for mistakes, and clearly reports what is included in the estimates, and what assumptions have been made.
Subcontracting. Often, certain installation work can be better subcontracted to other specialty companies. To have a better appreciation for the scope and a negotiating position with a cost figure in mind, it is preferable that you estimate the work as if you were going to perform these tasks yourself.
We suggest: your estimating system should offer the option to check your own cost with and without the subcontracted work, with minimum effort. The improper value of a subcontract can cause you to lose the order, so it's best to be prepared.
Utilities are often used to help estimators manage the process. It is handy to have these functions available right in the estimating system, as this encourages improved communication and accuracy. For instance, does your estimator have access to an easy method to make on-the-fly notes that become part of his estimate? How about valve-sizing utilities, preferable tied directly to his product database, that allow him to accurately size and select control valves? How about the ability to view electronic data sheets for the products in his product database? How about the ability to print technical (submittal) data for the parts he added to the estimate?
Work smart. Your estimating system should have the ability to copy existing estimates so they can be re-used. It should be able to copy just a piece of a project, like a complete HVAC system. Global changes like substituting one part with another would assist in finding optimum costs if the material cost as well as the labor effect were adjusted automatically. It would be helpful if it offered 'what-if' scenarios where you could temporarily disable a system or even a complete building segment, to evaluate its impact on the total cost, or to create alternate prices. It would be good to be able to create new parts on the fly, and to make changes to estimated parts, but without changing the master parts list. Expenses like travel, parking, etc should change automatically when the estimate grows in size. And last but not least, there should be easy powerful ways to filter the product databases so that specific parts can be located easily and quickly.
We suggest: all of that, and more, is now possible. Why not have a close look at the SOCC© Estimating Software, built especially for high-tech BAS contractors. You won't be disappointed. www.ics-controls.com.
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