By: Conley Smith on October 1st, 2020
5 Things You Should Never Leave Out of Your Bid
It’s Bid Day and do you know how accurate your numbers are? Construction industry insider George Hedley estimates 80% of construction owners don’t know the true cost of doing business. Even if you have a backlog of work, bidding more does not always translate into winning the right projects—especially if you’re using bad numbers.
You never want to expose your construction business to unnecessary risk. But that’s exactly what you’re doing when you fail to prepare an accurate estimate. You can count quantities correctly all day long, but if you haven’t fully assessed the scope and requirements of a project, you may end up on the wrong end of a low bid.
Juggling incomplete plans and requests for alternates are only a few of your typical estimating challenges. Whether you’re a doors and hardware contractor or a concrete firm, your success depends on taking the proper amount of time to prepare the bid in a professional manner.
Don’t Miscalculate: 5 Things to Check
While no project is ever perfect, it’s important to be diligent when it comes to estimating, especially if you want to win the most profitable project for your construction business.
Here are five items you never want to miscalculate in your final bid.
- All of the equipment required - Calculate for each piece of equipment—from the company pickup truck to special rental cranes and forklifts. Be sure to divide lifetime ownership by billable hours to arrive at an accurate cost.
- Where the dirt will go once it is excavated - Inspect the site and calculate the number of cubic yards of dirt to be excavated. For example, if you win the low bid for digging a swimming pool, taking away the dirt could cost thousands of dollars.
- Long lead times for certain items that might impact deadlines - Make sure to plan for long-lead items like cladding and glazing systems, escalators, and steel frames. Show how you will handle these items in your bid, so you don’t slow the construction schedule.
- Special safety rules that may apply in the state where you are working - Don’t overlook the cost to ensure public safety like cones, barricades, locks, or gates. There may be additional state laws concerning the proper disposal of hazardous waste.
- Whether the construction site is on a hill, in a rural area, or in a city with little room to work - Make sure to visit the site so you are aware of all physical conditions. Unique conditions like working in a tight urban space could prove more costly and cut into your profits.
Double-Check Your Labor Rate
When you’re rushing to complete your bid, it’s easy to repeat the same mistakes. Did you forget the unreliable supplier or which trade always runs late? Nobody wants the last 5% of any job to drain 50% of your profits, but it happens—even to the most experienced subcontractor and general contractor.
For example, you always want to double-check your labor—whether your scope of work is framing an eight-story parking garage or painting 62,000 square feet of floor space. You may assume labor is the base wage plus 26 percent.
Instead of investing time with the accounting department to determine what makes up your true labor cost, you may take a shortcut and not include the labor burden, which is the actual cost for an employee, aside from their salary.
Also, don’t forget to factor in the accurate hourly rate when hiring specialty labor or craftsmen. By going over labor records weekly, your construction business can also spot issues early in your project.
Get a Jump on Your Next Construction Project
If you dig a little more into your estimating process, you may find there is room for improvement. Fine-tuning your estimating workflow is one way to avoid repeating mistakes. Here are a few more great tips and tricks to help you get a jump on the next construction project:
- Track progress against your original estimate so it is easier to accurately predict just how long it will take to complete the next job.
- Meet with clients after the project and provide positive or corrective feedback to the estimator and team.
- Complete each job with a profit-and-loss (P&L) statement so everyone knows their part in making each job more profitable than the last.
Embrace Digital Takeoff and Estimating Tools
Another great way to win big on Bid Day is to use digital tools that allow you to save your historical calculations to see the impact of cost overruns and project delays. When you consider that rework has been know to eat up 5% or more of the cost of an average construction project—it’s hard to make the case for manual takeoff and estimating.
If you’re still fighting to keep some of your manual estimating methods, consider how much you are spending just on printing. Printing, shipping, organizing, and storing paper plans is expensive. Many contractors save thousands of dollars annually switching to estimating software. Not to mention—capturing and analyzing data is much more complicated on paper.
More importantly, manual entry errors add up quickly. It’s difficult to keep pace with change orders and addendums using paper plans. If you’re keying data into Excel and cutting and pasting across spreadsheets, you’re also more likely to miscalculate labor and materials, which could prove costly.
Not to mention, experts say nearly 90% of spreadsheets contain errors—plus, there is the issue of version control. With digital drawings uploaded into applications, an estimator can see that every door and window has been counted and materials quantified.
It is also important to consider whether your digital tools are integrated, which could result in even more savings. No doubt, greater accuracy in estimating and predictability in construction timelines will deliver significant cost savings for many subcontractors and general contractors.
Ready to improve your bidding with digital tools? Check out our Takeoff and Estimating Solution Finder. Just answer a few questions to see which takeoff tool is right for you.