To ensure an accurate estimate, you must determine all job-related costs. Are you overlooking direct job expenses? Blueprints and specifications often don't indicate these costs. If you don't identify and quantify these costs, your profits can quickly evaporate. When you estimate a job, be sure to consider the following items.
Many jobs require as-built plans. In addition to the engineering time, include the additional field labor and administrative costs. Make sure you include the cost of revising as-builts when you invoice for change orders.
Business and occupational fees (B&O)
Some localities require you to purchase an additional business license or pay an occupational fee before pulling the permit. Include the administrative costs of obtaining a license, as well as the cost of the license itself.
You might need an architect or engineer to seal the changed drawings and specifications. Be sure you anticipate this cost when you “value engineer” the job. This cost might also occur with change orders.
It's often more cost-effective to rent or lease certain equipment than to purchase it. If you own equipment that other contractors typically rent, include the apportioned cost in the estimate. Base this cost on the lifetime cost of the equipment and the percentage of its expected useful life for which you use it on that job. An accountant can help you work the numbers.
Field office expenses
When calculating the related expenses of the job office, include trailer rental, setup, maintenance, office equipment, office personnel, trucks, gas and oil, phone, and rent.
All electrical installations require a warranty. Typically, this warranty period is for only one year. Some localities also require extended warranties for certain types of installations. Predict this cost based on experience with similar installations.
Do the specifications say the job must have a fire insurance policy to cover the value of material on-site? What about insurance for the job trailer, office equipment, material, and tools? Be sure to include these numbers, if they apply.
Miscellaneous material items
Sometimes, a job requires a miscellaneous expense such as engraved labels. While this may seem minor for just a label or two, the time and cost involved in creating and applying specialized labels becomes significant as the quantity increases.
Most jobs require some cost in getting the job set up as well as closed. These costs include the time involved in loading a truck with tools and supplies, driving to the site, unloading the truck, laying out extension cords for power tools, and reversing the process at the end of the job.
Can you think of any costs required to comply with OSHA for that particular job? What about confined-space entry, safety rails, straps, or ladder tie-downs? What about training and certification classes?
When you are estimating a job that is out of your local area, be sure to include all travel expenses such as tolls, mileage, lodging, meals, and long-distance phone calls. Also, you might need to pay a premium or provide a bonus to induce workers to travel to a particular location or be away from home beyond a few days.
If you're estimating a job in a large city, the cost of parking per day often runs $20 or more per vehicle.
Permit and inspection fees
Expenses for permits and special inspections can range from a few dollars to several thousands of dollars for the same kind of work. If possible, don't include permit costs in your bid, but indicate this exclusion in your job proposal. Try to make the owner or general contractor responsible for these costs.
Include the cost to ensure public safety at a construction site, via such means as safety cones, barricades, locks, or security gates.
Federal and state laws often require the proper disposal of environmentally hazardous products. Account for the cost of handling and disposing of environmentally hazardous products for recycling. Be sure to include the recycling charge. The Table shows costs for recycling fluorescent lamps and ballasts.
Many jobs require a secure location for the storage of lighting fixtures, switchgear, generators, wire, and tools. Some jobs might only require a storage trailer, while others call for warehouse space. Be careful in storing equipment, tools, and materials on the job site, as the following two cases show:
Case Study No. 1: One electrical contractor attempted to remove his job trailer in the middle of the night, and he was arrested for trespassing.
Case Study No. 2: A group of owners did not pay the electrical contractor, and the owners kept the electrical contractor's tools, equipment, fixtures, gear, and generator. By the time the contractor got a court order permitting the contractor access to the site to remove the equipment, everything was gone. The owner claimed to have no knowledge of where the material or tools were. The electrical contractor still had to pay the supplier for the equipment.
If it appears you're not going to be paid, get your job trailer, equipment, tools, materials, and other items off the property as soon as possible.
Few electrical contractors have the tools, skills, and human resources to perform all aspects of the job efficiently and effectively. However, a smart electrical contractor will secure the contract for all aspects of the electrical system, including underground, power, control, signal, and communications. This allows the owner to contract with one party who, in turn, is responsible for ensuring the integration of the electrical systems. Do not mark up subcontractor cost at this stage in the estimate. All you are trying to do at this point is determine what the job will cost, not what you are going to sell it for.
Some jobs require a nonworking foreman or project manager on-site. If the nonworking labor is not productive, you must determine the cost required and include this cost in the estimate. The cost of a project manager who oversees multiple jobs is generally considered an overhead expense, and this cost will be recovered when you apply overhead to the job.
If the job requires you to supply temporary power and lighting (most bids do include this item), your proposal must clearly state the number of poles, lights, receptacles, and switches. If your bid does not include maintenance and repairs or utility charges, be sure to state that in your proposal. Determine who's responsible for paying the electric deposit or the monthly electric charge.
Don't agree to vague terms such as “to provide temporary wiring as needed.” One electrical contractor submitted a bid that included this stipulation. He failed to visit the job site, and he just figured an allowance of $300 in the estimate for a temporary pole with a few 110V receptacles. However, the nearest electric service was 2 mi from the site, and the electrical contractor was responsible for supplying four generators for one year — including fuel and maintenance.
Testing and certification fees
If the job requires you to measure the ground resistance of the grounding system, test the generator or fire alarm, or certify the communications system, be sure to include the cost for these items. Don't forget to include the labor for testing and certification in your estimate; and insist that your subcontractors include these costs as well with their bids to you.
Someone must remove trash and other disposable items from the job site. Today, some owners and contractors are charging the subcontractors a fee to cover the cost of disposing of trash and other debris. Are you responsible for removing your trash? Can you throw the trash into the construction Dumpster? Will the general contractor charge you for throwing your trash in the construction dumpster? Make sure your contract is clear on this subject and your estimate includes any fees for this item.
Contractors often underestimate direct costs or don't address them at all. That's one reason the average margin on an electrical contracting job is only 2%. Ignoring or forgetting these expenses can have a serious impact on your bottom line. But, by knowing these costs upfront and managing them as you go, you can enjoy one profitable job after another.
Direct Job Expenses
- As-built plans
- Business and occupational fees (B&O)
- Engineering/working drawings
- Equipment rental
- Field office
- Insurance - special
- OSHA compliance
- Out-of-town expenses
- Parking fees
- Permits and inspection fees
- Recycle fees
- Shop time
- Storage/storage handling
- Subcontract expenses
- Supervision cost
- Temporary power and lighting
- Trash disposal