Know the scope, and don't guess on material costs / crane costs

Discussion in 'Managing Projects and Business Issues' started by Clifford Bryan, Apr 10, 2008.

  1. Clifford Bryan

    Clifford Bryan Industry Observer

    Most of my estimating experience (10 years) is from the General Contractor?s point of view, however, most of this applies to every tier of contractor estimating on wireless projects:

    1) It's the little costs that KILL you. Do not guess on what the cost of supplying bolts, hardware, guy wire, mortar, lighting receptacle, whatever it is. Know you have firm pricing from a reliable vendor for every component of the scope of work for which you are providing pricing. Especially if you have subcontractors involved, have firm pricing from them. How long is their pricing valid? What are their exclusions? Does their proposal suggest they have a clear understanding of the scope of work, or are they missing something?

    2) Your proposals to your customers should include the scope of work for which your proposal covers. When I obtain estimates from subs that simply read "Site XXXX - Tower work - $XX,XXX.XX".. it goes right in the garbage. The pricing needs to indicate the scope it reflects, and indicate what materials / labor is being supplied and excluded.

    3) List exclusions and assumptions. In this fast-paced industry we don't always have time to look at the project first hand prior to estimating. In that case, if you do not list assumptions and exclusions in your proposal, you are just asking to get raked over the coals for items you did not foresee. Examples: Our proposal assumes easy access for equipment, that the existing access road will provide adequate support for our 90T crane, that all work will be performed during normal business hours, that the monopole has hand holes existing at XXX feet, that the shelter we will be setting will weigh no more than 65K lbs, that water tank coating repair work will be done by others, that site restoration will be done by others, etc., etc., etc., ...

    4) THE COST OF MONEY! - You have to take into consideration payment terms, and not just the terms in writing, as rarely are those followed. I do work for several customers that pay on time, and several that do not. My company is little enough to be competitive, but big enough to wait for the money. However, those that take longer to pay we price accordingly. Offer discounts if paid early. To keep a business going, CASH IS KING.

    5) DO NOT BID WORK AT COST TO KEEP GUYS WORKING!!!! BIGGEST BUSINESS KILLER THAT SEEMS TO CONTINUE TO SPREAD THROUGHOUT THE INDUSTRY!!!! I want our business to be a solid workplace for our valued staff as well, and when work is on hold or drying up, YES I would be making calls trying to drum up more business, but am not going to cut the collective throat of the business to keep guys busy.
  2. These are all valid points in any construction endeavor. Numbers 1 and 5 are the most frequently violated rules. Number 5 may be done by mostly anyone that runs their own crews and doesn't rely exclusively on subs.

    The moment you win that bid at or near cost "to keep the crews working", you will be expected to get that work done and you will inevitably end up winning a project with an normal (descent) margin that will need to be completed at the same time. The desire to generate revenue will likely have you putting emphasis on the profitable venture and not only will you not make any money on the "at or near cost project", but you stand a high probability of injuring a new or existing relationship because of not completing that project in a timely manner.

    I will agree with Clifford that in the end it is not worth the trouble to a business you worked hard to build that the VLM (very low margin) project will create. I can say that I have seen this done often (and been responsible for it happening once or twice in the past) and it never seems to turn out well. Your mileage may vary.

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