Like any industry, blame and accolades are an inevitable part of the electrical contracting business. I once heard someone say, “If you could buy people for what they are worth and sell them for what they think they are worth, you would be a millionaire.” Who knows, that might be an understatement — maybe make that a billionaire.
In my electrical contracting experience, when a project makes money, credit is usually chalked up to the project manager’s expertise. When a project loses money, the estimator is typically blamed for a bad estimate. The fact is the connection between estimating and project management is inseparable. The project manager would be out of a job without the estimator. This means a quality estimator and project manager are both necessary for a company to make a profit; therefore, both must share the blame for loss and the praise for success.
How does this work? The estimator must be accurate, and the project manager must be efficient. Accuracy, as well as efficiency, can be measured. Estimators should have benchmarks by which an estimate is analyzed to determine if it is accurate and correct. Following are some benchmarks that should be considered:
1. Labor hours per square foot — When tracking labor hours per square foot, the estimator will begin to see a pattern develop. This pattern will become predictable for similar projects. Labor hours per square foot of the current project being bid should be compared to similar project types previously bid.
2. Labor hours per device in all systems — i.e., lighting, branch, fire alarm.
3. Average length of conduit and wire or cable per device in all systems.
4. System with the largest percentage of labor — Projects are comprised of various systems, such as lighting, branch wiring, feeders, fire alarm, data, and generators. Depending on the type of project, the percentage of labor in each of these systems will vary from one project to another. For example, if the lighting system contains 40% of the labor and the fire alarm is only 5% of the total labor, a close review of the lighting system is necessary.
5. Accurate material pricing — Both basic materials packages must be priced at market levels. Failure to maintain a method of keeping up with current pricing will increase the risk to minimize profits.
6. Competitively quoted complete packages — Obtaining at least three quotations each for lighting fixtures, switchgear, and generators will help the contractor know that current market prices levels are being quoted. The contractor must maintain a good relationship with suppliers in order to receive competitive pricing.
7. Total percentage of quoted packages of the total project costs.
8. Material items with the largest total costs — For some projects, 7% of the total number of items can account for 90% of the total material costs. For instance, a project with 230 electrical items in the estimate, 90% of the material costs may be comprised of only 16 items. The estimator must ensure accurate pricing has been included in the estimate for the items that comprise the largest percentage of material costs.
9. Schedule vs. the crew size to determine supervision costs — The project schedule must be considered when determining the final price of a project. An accelerated schedule requires more workers, and workers must be supervised. Depending on the project, a full-time nonworking foreman may be required.
Of course, these benchmarks will vary from project to project, especially between commercial projects, industrial projects, and correctional facilities. Just as an estimator has benchmarks to analyze accuracy, the project manager must have benchmarks to determine efficiency. Here are some benchmarks for the project manager:
• Time — How are we doing with the project schedule? The project schedule is controlled by the general contractor for most projects. Thus, the site foreman must monitor the project completion progress. If the schedule is not being maintained, this must be documented by the electrical contractor.
• Costs — Is the project under budget or the estimate?
• Percentage complete vs. percentage of total costs — When the percentage of total costs is greater than the percentage of the completion, a problem may exist. Tracking this comparison sooner rather than later is best.
• Resources — How much time, staff, and equipment are you using? Are you committing too much in management without a return? Is there any unused rental equipment on the project that should be returned?
• Scope — Is there scope creep or seep? Creep is uncontrolled or unauthorized changes. This occurs when the client wants work done at no costs. Scope seep is “allowed extras” without charge by the project manager. The project must be kept within the limits of the estimate.
• Performance — Are you meeting estimated labor units, including labor factors such as loss time, overtime, or multi-story effect? This includes performance of the general contractor.
• Risks — Are the project risks being managed? The project manager must monitor any changes to the project’s schedule, work sequence, and staging areas. If these items are interrupted by the owner or general contractor, the electrical contractor should be entitled to compensation for additional labor and loss of labor productivity.
• Quality — How is the quality or your work? Are electricians correcting and fixing unacceptable work due to poor planning and management? The project manager must provide the necessary information, materials, and tools for work that conforms to the contract documents. The contractor’s work is judged by these documents.
At the end of the project, you should compare the estimator’s accuracy to the project manager’s efficiency. That way, you can truly know who should be praised and who should shoulder the blame. The real prize, however, is not in blaming or praising. It’s in the ability to arrive at solutions that enhance both the accuracy of estimating and the efficiency of project managing. When you stop placing blame and start seeking profit-making solutions, only then will you arrive at the true spirit of successful contracting — teamwork at its best.
Kiper is an independent electrical estimating trainer and consultant based in Niagara Falls, N.Y. He can be reached at [email protected].