Manual Estimate, Software or a Service

There are three primary methods for effectively estimating a job correctly, with each having its own set of advantages and disadvantages.

Manual Estimates

Even though manual estimates are good for very small projects, especially if you use unit pricing, and have been sufficient for electrical contractors for over a hundred years, this method is not efficient for the electrical contractor who is regularly bidding jobs. Because it takes so much time to estimate a job manually, you have only enough time to get the bottom line price and not much more. Manual estimating requires so much time that estimates often become backlogged and project management suffers. Additional disadvantages include:

Overhead. No matter how we look at it, estimating a job takes time and costs money. Let’s assume we are a small contractor and we win one job out of every four bids we submit. If we successfully win 1 job out of every 4 bids we submit (25%) and we spend an average of 4 hours to estimate each job at $30 per hour (including benefits), it will cost us $480 for every job that we win [4 hrs. x 4 jobs = 16 hrs. x $30]. If we are able to reduce the amount of time spent on each bid, then the overhead cost per bid will also decrease and that is where computer estimating software shines.

Bid Accuracy. The pressure of completing the estimate quickly so you can move on to the next estimate can result in increased errors as you work with the many calculations involved, especially when there are last minute changes on the bid.

Bill-of-Material. It will not be easy to develop the bill-of-material that you will need to send to your suppliers for pricing and to the job foreman for project management.

Project Management. Because of the time it takes to manually extract project management information without the use of estimating software, most electrical contractors just do not do it. The result is that the job cannot be tracked to ensure it is properly managed.

Response to Changes. It will be very difficult to cope with last minute changes to the drawings or specifications. Sometimes the change is so great that you do not have enough time to redo the bid in a timely manner. This can result in an attempt to make an educated guess, or you may just give up and not submit a bid at all. Either way, this is not a good business practice.

Time. Today, more than any other time in history, we operate in an age of instant information and expected response. Because of cell phones, email, the Internet, and fax machines, customers demand and expect to receive information almost instantaneously. In today’s fast-paced world, few customers are willing to give you the time you need to prepare an accurate manual bid.

Estimating Software

The computer-assisted method of estimating is actually the same as estimating manually, except that a computer performs the mathematical calculations. While considerable effort and progress is being made to produce an estimating system that can produce a reliable bill-of-material from a set of drawings, that has yet to be accomplished. However, there are systems now that provide for on-screen take-offs. It must be understood that computer-assisted estimating is only as good as the person’s experience in using the system. The many advantages of using estimating software include:

Overhead. The cost of producing an estimate is an overhead cost. No matter how we look at it, estimating a job takes time and costs money. Let’s assume we are a small contractor and we win one job out of every two bids (50%) we submit. We spend an average of 4 hours estimating each job, and the labor rate for the estimator is $30 per hour (including benefits). Based on this information, it will cost us $240 for every job that we win [4 hrs. x 2 = 8 hrs. x $30].

Bid Accuracy. With estimating software, errors with pricing material and the application of labor units will be significantly reduced, as compared to the manual method. There are no transpositions of numbers, no mistakes on the totals, and no errors when transferring numbers to the estimate summary. Your bids will be clearer, more legible, and more professional in appearance. Estimates will not become backlogged and you will not feel the pressure to rush the estimate, especially with last minute fixture quotes, switchgear quotes, or changes.

Bill-of-Material. Estimating software automatically provides a list of material needed for supplies and project management.

Project Management. Estimating software produces reports with information that can be used for job management, job tracking, and bid analysis. This lends itself to fewer errors before the bid is submitted and allows closer monitoring of field costs as compared to estimated costs as the job progresses.

Response to Changes. It will be easier to accommodate last minute changes to the drawings or specifications.

Time. Estimating software permits you to produce up to four times as many estimates in the same amount of time required to produce one manually. What takes 8 hours manually can take less than 2 hours with a computer and the odds of winning the job are increased.

Estimating Service

An estimating service is a temporary agency that you use and pay for only when you need it. When an estimating service produces an estimate, you have the opportunity to review the information to ensure that the estimate is accurate and complete.

You might use an estimating service to double-check an estimate you have completed, or when you do not have the time to do it yourself. An estimating service is an excellent tool to help you gain estimating experience at a reduced risk.

Estimating services offer:

Low Up-Front Cost. You can enjoy the benefits of computer-assisted estimates without investing in your own computer estimating system.

Knowing Your Estimate Cost. With an estimating service, you will know in advance what it costs to estimate a job. Their fees are generally based on the total electrical bid dollar amount.

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).