Implementing Lean Estimating

This article was revised on May 29, 2020.

In the continuous pursuit of excellence information sharing is vital. If efforts have been made to analyze and deduce something then that information needs to be shared as quickly and concisely as possible in order to avoid the duplication of effort. Information documented early in the estimating process has the potential to grow in value exponentially if the estimating effort is successful. Below is a process for capturing, retaining, and sharing data discovered during an estimating cycle.

OVERVIEW:

1.      The essence of lean is to maximize value by reducing waste.

o  Redundancy, in the form of duplicated effort, is one of the greatest areas of waste during the estimating phase of a construction project.

o  Opportunity costs rise as time is wasted by the individual analysis and sorting of large volumes of information in a relatively short amount of time by all stake holders who need differing levels of detail.

o  If information is missed or misunderstood due to time constraints and the complexity of the information then the overall effort could be wasted.

2.      Providing a trusted resource of condensed and consolidated information that can be utilized by all stake holders will reduce the amount of time that is needed to familiarize one’s self with the details of a project.

o  Directed familiarization of project details means faster implementation of project facilitation by all stake holders. Directed familiarization is the effort of highlighting critical path information and eliminating the review of less important and unimpactful data. 

• Management can decide quicker if a specific project has sufficient ROI to offset the amount of risk involved.
• Vendors, subcontractors, and stakeholders such as Owners & GCs, will better understand the intended execution and therefore will be able to refine proposals, eliminate overlapping activities (i.e. redundancy), and adjust expectations.
• The project team can decide on constructability paths sooner, and actively guide estimating, purchasing, and labor allocation.

PROCESS:

1.      Lead Qualification

o  With the minimal amount of information initially available, decide if an opportunity is worthy of further investigation as quickly as possible. Metrics need to be created so that opportunities can be weighed and evaluated against finite resources.

• Does the risk outweigh the reward?
• Are the correct resources available when needed?
• Is this an existing relationship opportunity?
• Is this a book of business that needs to be capitalized?
• Is there a gap to fill in the existing backlog?

2.      Initial Meetings and Site Walks

o  Assign a Preconstruction person or team to attend Request for Proposal (RFP) meetings and site walks.

• Whether this group is part of the eventual project team, or an estimating representation, all project data needs to be captured.
• Try to get anticipated strategic partners (vendors and subs crucial to the success of the project) to attend as well.
• - Firsthand knowledge by strategic partners will expedite the Discovery Phase and improve pricing by eliminating too much contingency in quotes.

o  All project data needs to be conveyed and uploaded to an estimating file in the form of photos and written outlines. 

• Photos are forever and are especially valuable if the bidding process is drawn out or if the RFP is cancelled and reissued at a later date.
• Taking the time to type an outline of the project information ensures that the person or team creating it understands the information captured, or affords an opportunity to perform further investigation for clarification.
• - This initial outline should be an evolving (evergreen) document that can be utilized as the base to create project documents such as: the Executive Summary, the Specification Summary, the Scope of Work, the Terms and Conditions, and the Schedule of Values.

3.      Review of Project Documents

o  EXTREMELY IMPORTANT – all thoughts to: constructability, order of operations, prefabrication, questions, exclusions, points of interest, and requirements, need to be captured during the first review of all contract documents! This is a brain storming phase where the project is being conceptualized with regards to constructability for the first time with fresh eyes, so all items of note need to be documented.

• On the same outline created after the initial meetings and site walks, capture all items listed above.
• Organize and categorize items for efficient vetting.
• Utilize the outline as an index of the contract documents by adding document page numbers to correlating items. 

o  Highlight and annotate pdf copies, name as “Marked Up” versions, of drawings and specifications to allow for structured analysis after the initial review.

• Highlighted sections and annotations allow new stake holders to quickly review information that pertains specifically to the intended execution of the project.
• Once these marked up copies are created they can be continuously refined, easily shared, and kept virtually forever.

o  Update stake holders once all contract documents have been reviewed and analyzed.

• Create an Executive Summary and send senior management a copy for their review and possible use during project acceptance review.
• - The Executive Summary is a condensed summary of all issues pertaining to the project scope that has been created and extrapolated from all meetings, site walks, and contract documents.
• Create a takeoff folder in the estimating file and notify the estimating/take off team of its existence.
• - Include a copy of all “Marked Up” documents that include: drawings, addendums, highlighted sections, annotations, and specification summaries.

4.      Decide if this is a worthy endeavor

o  Management needs to decide if this is an opportunity worth pursuing. All of the data created has been to help management make this decision, and to get a jump start on the actual estimating process if a decision is made to move forward; all while limiting the opportunity costs involved in the initial investigation.

• If the decision is made to proceed then a project charter should be issued or approved by management.
• If the decision is made not to proceed then all data needs to be archived for possible future support in other opportunities.

5.      Creation of a nonproprietary file for strategic partner communication

o  Create a cloud based file via ICloud, Dropbox, Google Drive, Box, etc. that contains non-proprietary information that can be shared with vendors, subcontractors, and possibly partners such as Owners and GCs. This good faith effort to assist strategic partners will build rapport amongst the project team, and help ensure an accurate budget creation.

• Include: updated drawings packets with all addendums and ASIs, specifications, Executive Summary, any available schedules or timelines, and original RFP.
• - Possibly include intended scope along with Terms and Conditions for review and acceptance prior to receiving a formal proposal.

6.      Creation of Estimate

o  Utilize a companywide process with accepted templates to create the estimate.

• Some Estimators prefer to utilize their own personal template which mirrors their train of thought, then will fill out the company required template later.
• Utilizing a companywide process ensures transparency in case the project is handed off to a different group or team.

o  Build a complete Mental Model (MM) of the project from beginning to end by inserting assumptions (PLUGS/SWAGS) for material and equipment costs that may not be initially available.

• This allows for the allocation of overhead, labor, and pull through costs, to these tasks while waiting for quotes to come back from vendors and subs of actual pricing.
• Itemize as much as possible to keep transparency of intended execution of the project.
• - If possible build the estimate in a water fall or critical path flow of the project. This will help with creating a schedule for fulfillment.
• Review the Marked Up contract documents and the Executive Summary for: items of note, exclusions, and complete scope representation.

o  Import all takeoffs and actual pricing from vendors and subs into the Estimate.

• The estimate should be built on as an accurate actual cost basis as possible without addition of embedded contingency.
• Contingency per item should be tracked because it is unlikely to be the same value for all tasks, but it should be broken out from the actual task for transparency during review. 
• Review with a common sense approach that looks for too much risk contingency.
• - If risk contingency is added at every level (i.e. vendors, subs, takeoff, estimation, management, etc.) of the Estimate creation then the chance of being too high is a very real possibility.

7.      Creation of the Proposal

o  Fill out any required proposal templates in the RFP by utilizing information from the Estimate.

• If required to itemize or breakdown the price on the proposal templates use the individual tasks from the estimate to construct the summary.
• - Always verify a breakout against the estimate total!

o  Create a companywide standard proposal to include with any required proposal templates in the RFP.

• Fill out the proposal with the contact information and the overall price from the Estimate.
• Import the scope of work from the Executive Summary to the Scope section of the Proposal.
• - Sometimes the outlined scope on the Executive Summary is too condensed to adequately convey the legal scope supported in the Proposal, so more explanation and detail may be required.
• Import all project specific items from the Executive Summary for use in the Clarification and Exclusions, then vet the standard Clarifications and Exclusions to match the project.
• - If a copy of the Terms and Conditions was approved by management or the legal department and they were shared with the customer prior to sending the actual proposal, then it is imperative to use that language.

8.      Schedule and attend a Management Review

o  Management should be well aware of this opportunity since the decision to pursue it.

• Management should have been kept abreast of the scale and scope via the Executive Summary and possible project approval review.

o  Review Estimate and Proposal via monitors or screens in meeting rooms to facilitate an efficient review.

• Keep Executive Summaries, Marked Up documents, and Takeoffs as backup supplementary information during Management Review.
• Document meeting with official minutes or notes.

o  Make any recommended additions or corrections.

• It is easier to make corrections or changes while in review, but if time does not allow, then good notes will suffice.
• If any deviation is deemed necessary on the final proposal to the Terms and Conditions, then those items need to be highlighted or bolded to ensure transparency and maintain trust.

9.      Submit Proposal

o  If time allows submit Terms and Conditions a few days before formal Proposal submittal.

• This keeps partners such as Owners and GCs from being surprised by the covered scope and allows for any last minute negotiated corrections or changes.

o  Submit proposal via communicated means (i.e. website, email, in person, etc.).

• Always confirm receipt of the proposal by the customer, especially if a deadline has been established.
• - This can be done by a Read Receipt on email, Signed Receipt if mailing in, Receipt if dropping off, etc.

I hope this article has been informative and helpful. Please feel free to leave me your feedback or contact me if you would like to collaborate!