Basic Principles of Estimating DR. Nabil Dmaidi

Estimating A prediction of probable cost. Is figuring out how to put the pieces together in the most economical manner. Estimating is both art and science. DR. Nabil Dmaidi

Estimating (cont.) Identify and quantify the pieces-takeoff. Identify construction methods. Engineering - Will it be stable during construction? Productivity DR. Nabil Dmaidi

Bidding is NOT the same as Estimating Identify RISK How do you get paid? DR. Nabil Dmaidi

Successful Estimating Contractors are not in business to win bids. Contractors are in business to make money. Estimating is the base of a company’s success. DR. Nabil Dmaidi

Estimating for Profit Good estimating minimizes contractor’s risk and facilitates project management and defines the scope of work. The estimate is the plan that furnishes the field people with all the details in a controlled and prearranged format. DR. Nabil Dmaidi

Estimating Requires: Skills Effort Above all, an organized system that will prevent errors and omissions. DR. Nabil Dmaidi

Estimating is very expensive; therefore, we must use our time wisely and effectively if we are to be successful. DR. Nabil Dmaidi

Size of Project in Thousands of Dollars Cost of Estimating Chart 1 55 50 A 45 40 hours B 35 30 25 C 20 15 10 100 200 300 400 500 Size of Project in Thousands of Dollars A Simple project B Medium complexity C Difficult project DR. Nabil Dmaidi

Cost of Estimating (cont.) Chart 2 170 160 A 150 140 130 B 120 hours 110 100 C 90 80 70 60 50 40 30 1.5 2.0 2.5 3.0 3.5 Size of Project in Millions of Dollars A Complex B Medium complexity C Simple DR. Nabil Dmaidi

Profit Should Correlate to Risk Job Comparison Compare two jobs of identical direct cost, yet very diverse in overhead and risk factor: Job “A” Job “B” Material $200,000 $100,000 Labor 20,000 230,000 Subcontractors 100,000 10,000 General Expenses 30,000 10,000 Subtotal 350,000 350,000 Overhead @10% 35,000 35,000 Profit @10% 38,500 38,500 Selling Price $423,500 $423,500 DR. Nabil Dmaidi

Profit Should Correlate to Risk (cont.) Job Comparison # labor 7 7 7 6 6 5 5 5 5 5 5 4 1 2 3 4 5 6 7 8 9 10 11 12 week 12 weeks  65 labors 15 15 # labor 10 10 3 3 3 3 2 2 2 2 1 2 3 4 5 6 7 8 9 10 11 12 week 12 weeks  65 labors DR. Nabil Dmaidi

Profit Should Correlate to Risk (cont.) Materials Low to medium risk Labor High risk Subcontractors Low risk General Expenses Low risk DR. Nabil Dmaidi

Accuracy is Critical for Success A typical project can be broken down as follows: Material 40-45% Labor 35-40% Equipment Expenses 8-10% Overhead 10% Profit 2% DR. Nabil Dmaidi

Common Estimating Mistakes Misread or misinterpreted specifications, drawing, or any other contract document Takeoff omissions or overlaps Missing quotes Estimating by unit prices Using the percentage method to establish the cost of certain systems Prorating indiscriminately Crumbling under pressure to procure work DR. Nabil Dmaidi

Common Estimating Mistakes (cont.) Cutting prices to meet or beat someone else’s quote Underestimating the complexity of a project Expecting an excessive amount of favorable changes Overemphasizing volume purchasing Undertaking a project with incomplete bid documents Scaling drawings DR. Nabil Dmaidi

How to Improve your Estimating Procedure Company labor tables and current material prices should be stored in your database. Manual estimating is not cost effective and it is subject to more errors and omissions. Computerized estimating should automate and expedite the manual estimating process. Establish the company labor unit sand labor factoring tables. Maintain current material pricing. Establish an estimate review procedure. DR. Nabil Dmaidi