How to Estimate a Project when the documents are unclear??
I have to laugh at this title, because the majority of your estimates will fall into this category. The economic pressures of today have caused owners to limit their architectural and engineering budgets; therefore the documents that are being produced are generally not the type of documents that clearly and accurately detail the project. Short cuts have been taken to save money, and they show. In most situations the documents being produced are the basic items necessary to identify the project only, but will leave many opportunities for interpretation and discussion.
Unfortunately this makes it extremely difficult to estimate a project in an analytical fashion, or cleanly identify all cost implications, and issues on a spreadsheet, that is both accurate and professional.
With the several software projects available, it becomes extremely confusing and ill logical to fit all the parameters demanded by the analytical profiling of the software, into a creative and comprehensive accurate analysis of a project that is not clearly explained and detailed.
What should we bid on? This becomes the Key question for all bidders.
Now we have moved from the highly analytical world of estimating, to the conceptual creation or a project value that should cover the necessary elements of the project. In lieu of an analytically correct estimate, without accurate and detailed documents, the estimate will be a creative and thoughtful interpretation of the documents and hopefully the owner’s needs. Hopefully, the intent of this exercise will have an end result of obtaining the contract for the project, satisfying the owner that we have all the necessary elements required to construct the job, as well as offer us, the contractor, the opportunities for additional work and favorable profit enhancing situations.
Unfortunately this type of scenario incorporates a considerable risk for all parties due to the following;
- Becomes impossible for the owner to obtain comparable cost estimates and proposals, due to the need to interpret the documents and the project as well as the varying interpretations by each bidder involved.
- Opens the door for the unscrupulous bidder to simply “low ball “the number, secure the project, and hit the owner with every change order possible.
- Discourages bidders to take their estimates seriously and competitively.
- Encourages the use of allowances and unit values within the proposal to “cover your liability “regarding lack of specifics and unclear coverage by the documents”.
- Reduces the liability of the architect and the engineer, due to nonspecific descriptions of the construction elements. This places the liability emphasis on the contractors.
- In general, increases the overall price of the proposals being submitted, due to the tendency to over price and cover the worst possible interpretations of the unknown.
- Implores the use of “guesstimates “and general, unit value estimating, that does nothing but inflate the cost of the proposal.
- Offers a substantial increase in change order opportunities, once the project is in construction.
- Adds to the difficulty in managing the project due to the requirement to interpret the documents and not simply read and build.
In general, the small amount of money that is actually being saved at the time of design and engineering, is more than lost ,during the actual construction of the project, and this is usually many times over.
Does anyone get it??? Owners must understand, that too short circuit the design team’s budget is nothing more than delaying the eventual expenditure of that money, and in many instances becomes a far greater amount of money, than originally saved.
Knowing that limited design and engineering is being performed, how do you actually produce a budget that is professional, efficient and competitive?
There is a way to solve this issue analytically it takes considerable construction knowledge and experience, as well as a legitimate desire to produce an estimate that not only makes sense, but can be presented to the owner and the architect in a logical and convincing manner.
My suggestions for this difficult and often obscure process;
- Assign a competent builder to review and assemble a logical and clear method of constructing the project, if you, as the estimator do not have the knowledge or the ability to do so. Once this is accomplished discuss this logic and understand it prior to actually attempting an estimate.
- Assign reasonable unit values to any product that is not specified. For example I have just completed an estimate that did not specify the type of exterior paver to be installed. In this case I assigned and identified a value on the proposal cover sheet for the paver inclusive of installation and sub base.
- If a particular assembly is not properly detailed, and you are unsure of the required manner of construction, assign an allowance value to this item. For example the architect did not show the detailing of the sanitary tie in within the adjacent tenant space. I simply applied a $5,000 allowance for this tie in, and identified this value on the cover sheet of the proposal.
- If there is a basic installation such as a roof air handler that is not properly addressed, call a competent and trustworthy vendor or subcontractor, have a five minute discussion describing the item as well as the pricing of same, and mutually decide on a value that is not overly conservative but certainly not the low ball value.
- Try to structure the presentation of the proposal in such a way as to give yourself plenty of space for maneuverability if necessary, if you are actually awarded the project. I am presenting a proposal today that did not have any of the proper requirements and detailing necessary to provide a subcontract price for the excavation, masonry and concrete. I simply stated in the proposal, that the existing elevations were not noted on the documents, therefore the estimate is being presented based only on site inspection and not actual engineered elevations. What does all that mean, who knows, however the language can be manipulated in any manner necessary by a clever, knowledgeable construction project manager. It is there for the asking, if required.
- If the project appears just too convoluted to even use the techniques identified in #1 – #5, then as a last resort, simply suggest that you perform the work as a construction manager with a fixed fee. You can identify the manpower rates, the overhead charges, as well as the fee percentages. If the project is so “unknown “that the value could range substantially, identify the fee on a sliding scale. The higher the value of the work, the lower the fee percentage will be, the smaller the scope of work, the higher the percentage.
Yes, it is possible to present what appears to be an accurate, logical and professional proposal for almost any type of project, no matter how the project is presented. However, in reality, what is being presented?
- An estimate of the cost that leans towards the high side of the job cost.
- Unit values based on average or less than average material. Do not use a high unit cost, even if you feel that the architect and owner will eventually select a high end product. Instead use the lower value to keep the total proposal artificially low.
- Allowances on the low end to again keep the total proposal value low.
- A presentation only, meaning the entire proposal has been structured to provide the opportunity for the contractor to make sure they were financially covered, and can take advantage of all change order opportunities if the project is awarded.
- In reality, an artificial attempt to provide a proposal that looks, tastes and feels responsible, as well as accurate, when in reality, it is a professional set up, to position the contractor in such a manner, that the project will be awarded, and there will be plentiful opportunities to make money, once the project is in construction.
To be very honest, this type of scenario is the best for making money.
If the project is awarded to you, as the successful contractor, there will be immediate opportunities to make money by using the unit values, the allowances, the proposal language, and the requests for information that will be immediately issued to the architect, once the contract is signed and sealed.
The trick of being successful in this type of project is to have a clever, intelligent, knowledgeable and experienced project manager / superintendent on the project. It is necessary that the project be both managed and supervised by the same individual with the communication skills to assemble all change orders, requests for information as well as misc. field directives necessary to make money. This individual must be experienced in this mentality and have already had a track record of turning oysters into pearls!
It can be fun, except there are few individuals that are capable of this tour of duty!!
If you find one, they will make you money!! Don’t lose them, once you find them.