Could you be losing money with the way that you give estimates? Jim Adrian, President at Adrian International LLC, Peoria, Ill., offers some best-practice advice, here and at the 2015 World of Concrete.
Q. What’s the biggest challenge concrete professionals face when it comes to estimating?
Adrian: The biggest challenge is that firms do not keep historical data from past projects. Also they need to be more efficient when doing take-off and costing. The firm only gets one of five to ten jobs they bid, and therefore they need accuracy but also efficiency when preparing an estimate.
Q: What’s the biggest mistake concrete professionals make when it comes to estimating?
Adrian: The biggest mistake is spending too little time determining their job and company estimate. The firm must remember that the estimate fails at the weakest link. Be accurate with take-off and costing but do not overlook the need to accurately determine job and company overhead needed.
Q: How have new technologies enabled more accurate project estimates?
Adrian: New technology is improving quantity take-off. Firms need to regiment their estimating procedures and new technology should enable them to it. When firms take on new technology they need to "re-engineer" their estimating process.
Q: What would you say to someone in the industry who just can’t seem to get past “doing things the way they have always been done”?
Adrian: To change people, I would like them to see some of the statistics that characterize our industry; estimate versus actual cost often is 10% or more inaccurate. Also, when estimating labor costs; my analysis indicates that they often miss by double digit percent. The profit margins are too small to accept this type of estimating inaccuracy. We must be open to new ideas and new technology.
Q: If you could suggest one change for individuals in the industry to make this year, in terms of how they do estimates, what would it be?
Adrian: Get regimented with estimating, control, and scheduling procedures, constantly looking for improvement.
Q: Can you share an example of how proper estimating made a tangible difference?
Adrian: Approximately four years ago, a client in the Tampa Bay Fla., area – and a frequent attendee at the World of Concrete and my seminars (to include estimating seminars) – implemented several of the procedures I have set out at the seminars to include the following two initiatives:
- After every project, the firm has a post-job meeting that evaluates actual costs expended versus estimated costs with the purpose of investigating causes for differences in the estimate versus actual costs. The costs are summarized in total, such that the firm keeps a chart updated after every project to calculate the total average spread between actual cost and estimated cost. Four years ago, they determined that the spread (estimating inaccuracy) was averaging approximately 11 percent. In other words, on average, the actual costs expended were averaging eleven percent different that the estimated cost; sometimes higher, sometimes lower. The post job meeting investigated the reasons or causes for the variation and actions were taken to address them; sometimes job production issues, sometimes estimating oversights or errors.
- The firm also started an initiative of keeping historical labor productivity data from completed projects for important work tasks; e.g. craft hours per square feet of forming completed, craft hours per cubic yard of concrete placed, etc. In addition the firm documented in the history date various factors they believed might have influenced the productivity; for example, superintendent name, weather conditions, number of wall penetrations, height of wall formed etc. in an attempt to predict or estimate productivity for future projects.
In recognition of the fact that measurable estimating benefits may take months or even years, the firm has continued these procedures for the past four years. Today, the firm has seen significant estimating and profit benefits. The firm has documented that the difference in the estimating risk (the difference between estimated cost and actual cost has decreased from 11% 4 years ago to 4% today. The firm gives credit for this improvement in their ability to estimate costs for projects to the 1.) steps taken to investigate and correct estimating variances determined from a mandatory post job analysis, and 2.) the on-going collection and use of historical data from past projects that they have kept using EXCEL spreadsheets that are used when estimating projects. The firm is evidence that the ability to estimate accurately via the collection and use of historical data enables them to prepare more accurate estimates, help them to determine which projects they should bid, and also keep them from submitting bids on projects that have too much risk versus potential reward (profit). The documented historical data also enables them to share historical data with newly employed estimators that enables the new estimators to benefit from the firm’s productivity data from prior projects. The firm is less dependent on the “memory” of people as a basis of preparing project estimates. The firm recognizes that estimating will never be a complete science, but estimates can be improved by analyzing post project results and be keeping structures historical productivity data.