Every aspect of life seems to have its own language. From construction to medicine to computers, all industries have jargon that is unique and must be understood. Language is communicated with words and phrases. To understand, you must know the meaning of some keywords. For example, pilots have the “aviation phonetic alphabet,” which allows them to clearly communicate with the air traffic controller. If a pilot fails to clearly communicate with the tower, tragedy may follow.
Likewise, the estimator must understand the meaning of key concepts of the estimating process to properly perform his or her job.
I contend that estimating is 100% science. Any portion of the process you may consider an “art” has very little impact on the outcome. Guessing the amount of time it takes to hoist a generator to the roof is different than guessing what is in the scope of work and what is not. And if you run your estimating department by “gut feeling,” a bad feeling may be just ahead. I think you get the idea.
Following are 20 important terms every estimator must understand:
- Scope of work — The scope typically will define drawings and spec sections, and it may include a list of responsibilities for the contractor. This usually is defined in the specifications. If there is no scope of work given to the contractor, the contractor must provide a detailed list of items included in the bid price.
- Project schedule — The number of days or weeks determined by the start date and completion date of the project. A project schedule will affect the crew size. The larger the crew size, the greater the negative impact on productivity.
- Project phasing — A phasing schedule typically will identify areas or portions of the work that need to be completed in a chronological sequence. A phasing schedule may require the contractor to demobilize and re-mobilize these areas.
- Addendum — Addendum means “something added.” Architects issue addendums to correct design mistakes/changes and add omissions to the contract documents. Cost changes directed by any addendums must be reflected in the contractor’s price.
- Request for information (RFI) — A memo or email submitted to the architect or engineer for clarification related to something in the contract documents. The RFI can become an estimator’s best friend.
- Bid security — A bid bond or certified check that guarantees that the contractor will sign a contract (if offered) in accordance with his proposal. Failure to enter into a contractual agreement will result in forfeiture of the bid security. For example, a project with a 10% bid security and a bid price of $1,000,000 would result in a $100,000 loss to the contractor.
- Base bid — The estimated costs for the primary work requested by the customer, often including the scope of work.
- Alternates — Alternates provide the owner with a choice between different products and construction methods or can define the addition or deletion of a portion of the work. Alternates may be additions or deductions from the base bid, and they provide the owner flexibility when a project has limited funding.
- Labor unit — The amount of time to install material and/or equipment. The basic standard labor unit is comprised of the following: 65% installation time, 20% material handling, 10% layout, and 5% supervision.
- The takeoff — A complete list of materials and labor units to install the work. Typically generated with estimating software, this list will provide the estimator with the total material costs and direct labor hours required to install the materials.
- Feeders — The conduit and conductors or cable between the main service disconnect switch or main switchboard and distribution panels, transformers, motors, and transfer switches.
- Site power — The conduit and conductors from the local utility source to the main service disconnect switch, main switchboard, or main distribution panel.
- Installation labor factor — An adjustment of labor units made to specific takeoffs based on the ease or difficulty of the installation. For example, more labor is required to install conduit at 40 ft above the finished floor than installed at 8 ft.
- Project labor factor — A project condition that will impact labor productivity negatively. There are many project labor factors. The wise estimator will research and learn as many of these as possible. There may be as many as 50 conditions that will cause a project’s labor to be impacted negatively. Here are a few to consider: project location, multistory, cold weather, hot weather, occupied premises, and overtime.
- Allowance — In bidding, money set aside in the contract for items that have not been selected and specified. For example, the owner may not have selected all the lighting fixtures needed and may specify a certain amount of money to be included in the contractor’s bid to be used to purchase fixtures selected by the owner.
- Direct costs — The costs directly attributed to a work scope, such as labor, materials, and subcontracts. It does not include indirect costs like office overhead.
- Indirect costs — Costs for items and activities not directly related to constructing a structure but are necessary to complete the project (i.e., contractor’s overhead expense).
- Job expenses — These are expenses that are not part of the material costs of the project. This can include depreciation of tools or equipment that are used from job to job, testing, site office/storage trailers, and similar expenses.
- Overhead — The costs of doing business if you have no projects. Some contractors use a set percentage; others use a dollar amount per labor hour in the estimate. One thing is certain: Overhead should not be viewed the same for all projects.
- Profit — The return on the investment and risks or funds that remain after all project costs and overhead have been paid. This should be the sole reason that you are in business.
Learning the language of estimating will provide clarity in the process. The product of miscommunication is an inaccurate estimate. The product of an inaccurate estimate is an inaccurate bid price — and an inaccurate bid price may provide the contractor with a net loss on the project.
Don Kiper is an independent electrical estimating trainer and consultant based in Niagara Falls, N.Y. He can be reached at [email protected].