Improper Estimating Methods

What an Accurate Estimate Must Include

An accurate estimate must include all the direct costs including; labor (taxes, vacation pay, holiday pay, medical, and retirement), material, sales tax, subcontract and rental expenses, direct job expenses, and overhead.

Author’s Comment: Profit is added to the estimate total as the final step before submitting the bid.

Improper Estimating Methods

Ignoring the Specifications

Plans and specifications work together to communicate the requirements needed to complete the project. The estimator is required to include all the costs required to comply with them both. Thinking that “you will get away without including a requirement” isn’t a good strategy if you plan on staying in business.

Ignoring Errors in the Prints and Specifications

Be sure to look for errors and omissions in the plans and specifications during the early part of the estimating process. Submit a request for information for clarification or correct the errors in your bid document so others will be submitting bids comparable to yours. Counting on unnoticed omissions or design errors in the job documents to create a change order in your favor is a sure way to create conflict and lose money after the bid is awarded.

Purposely ignoring errors in the prints and specifications shows your lack of honesty, or worse your lack of technical ability and professionalism to recognize the requirements of the project. You’re the expert and should be guiding your customer through the entire process even before you’re awarded the bid. Be doing so, you’ll create a reputation as a partner with the contractor and customer that will make it easier to discuss real changes in scope later in the project. Comparing the specifications to the version of the NEC and all other applicable standards that are in effect where the project is being built is imperative.

Review your supplier’s bill of materials for compliance with bid requirements before submitting your bid and understand that something as simple as the wrong brand of wire can be a very costly mistake. Discuss any needed changes with the customer, contractor, and engineer and update the project documents before completing your estimate and submitting the price.

Meeting the Lowest Bid

“Hey, if they can do it for that price, so can I!” Again, not a good business plan. An estimate is based on your historic ability to do a specific type of work. Since every company has different practices, employees, and skill sets, it’s possible for your competitor to make a good profit on a job at a much lower price than you can. When you discover you weren’t the low bidder, check your work for errors. Sometimes a simple error will take you out of the running. You need to learn from your mistakes, so you’ll know what to look for the next time.

The “Shot-in-the-Dark” Method

“Let’s see, this project has five electrical drawing pages so it should go for about $10,000. Yeah, that’s the ticket, $2k per page . . .” With this method, the price can be way out of line, either very high or very low, and you’d better hope you aren’t awarded the low-price jobs.

The Square Foot Method

Estimating a job by the cost per square foot should be considered a “Shot-in-the-Dark” method, although tracking these costs can be a way to help you check your estimate. Square foot pricing is a method that general contractors use to put together budgets based on generic averages of the cost to build different types of buildings. While this will help you form an idea of the cost of a building, it doesn’t account for the many special considerations that make every project unique. Simple things like a lighting package, different wall construction types, or the height of the ceiling can add a huge amount of cost to the job and erase all hope of making money on a project. Stick with accurate estimating methods instead of “guesstimating” so you can make the most money on every job.

The above content is extracted from Mike Holt's Electrical Estimating Program.

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Mike Holt is an author, businessman, educator, speaker, publisher and National Electrical Code? expert. He has written hundreds of electrical training books and articles, founded three successful businesses, and has taught thousands of electrical code seminars across the US and internationally. His company, Mike Holt Enterprises, has been serving the electrical industry for over 40 years, creating and publishing books, DVDs, online training and curriculum support for electrical trainers, students, organizations, and electrical professionals. 

Mike has devoted his career to studying and understanding the National Electrical Code and finding the easiest, most direct way to share that knowledge with others. He has taught over 1,000 classes on over 40 different electrical-related subjects to tens of thousands of students. His knowledge of the subject matter, coupled with his dynamic and animated teaching style, has made him sought after from companies like Generac, IAEI, IBEW, ICBO, NECA, and Fortune 500 companies such as IBM, Boeing, Motorola, and AT&T. He is a contributing Editor for Electrical Construction and Maintenance Magazine (EC&M) and formerly Construction Editor to Electrical Design and Installation Magazine (EDI). His articles have been seen in CEE News, Electrical Contractor (EC) International Association of Electrical Inspectors (IAEI News), The Electrical Distributor (TED) and Power Quality Magazine (PQ).