If the Estimate is Wrong, Everyone Loses
A bad estimate can affect an entire company, so when an estimator hears about one, a number of things might burn in the back of their mind.
- Did we forget to include part of the estimate?
This could be as major as missing a light fixture quote, or possibly omitting a subcontract quote.
- Did we forget to include any allowances?
These can range from utility fees, light fixture packages, Cable TV, Closed Circuit TV, sound systems, etc.
- Were there liquidated damages that affect our bottom line?
These can be penalties for not completing the project on time, or not supplying enough manpower at critical times of the project.
- Were indemnity clauses overlooked?
An indemnity clause provides one of the parties with security against damages, and sometimes exempts them from liability caused by their own acts.
- Were the Net Terms for payments never clarified or defined?
If this is not defined in a proposal, the owner has more leeway on when they can pay the contractors. Sometimes this can extend out to 60-90 days after the bill has been submitted for payment. This impacts the bottom line as the field labor expects to get paid every week.
While project managers typically get rewarded when projects are profitable, estimators typically get rewarded after companies have profitable years. To ensure this profitability, companies should, if they don’t already, implement a solid system of checks and balances to reduce the potential for bad estimates.
Probably one of the most important steps of this process should be a review of the takeoff the day before the bid is submitted. This can be accomplished by the project estimator and the project manager meeting to review the plans, specifications and proposal. Admittedly, project managers get busy managing their current projects. This step requires them to take the extra time to review the bid, and trust me – it’s time well spent. It is much easier to find an error and correct it now, versus after a bid is submitted. Sometimes then it’s too late.
Remembering to check and recheck your work will reduce mistakes and prepare your team well-in-advance, to review bid documents and proposals. Don’t be afraid to burn the candle a little to make sure everything is organized and ready to go on bid day!
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