HOW EFFECTIVE IS YOUR ESTIMATING METHOD? THE ABILITY TO PRODUCE ACCURATE ESTIMATES IS ONE OF THE MOST IMPORTANT SKILLS A CONTRACTOR CAN HAVE. IT IS KEY TO SUCCESSFULLY COMPLETING PROJECTS AND BUILDING A BUSINESS. Estimating is the process of working out the cost of doing the work. A good estimate will also help plan how long a job will take and the steps involved, identify work that needs to be contracted out and consider potential cash flow issues.
Underestimating the amount and cost of time and materials needed results in unprofitable work. Here are some useful tips to help you review your estimating process so you can maximise your profits.
The Take-Off Sheet One of the key estimating tools is a ‘Take-Off Sheet’. A Take-Off Sheet is a purposedesigned form or spreadsheet used to record the various material and labour components of an estimate. The Take-Off Sheet may be a paperbased form, or part of a computerbased spreadsheet. Some software packages include a Take-Off Sheet as an integrated part of the job file.
What should a TakeOff Sheet include? To complete a well thought out estimate, your Take-Off Sheet should have the following components:
An accurate estimate of the cost of all job materials, broken down into each stage of the job. A total of the expected labour hours and cost of labour, broken down into each stage of the job. A method of planning labour and materials requirements, as each stage of the job approaches. Estimates should be arranged in a sequence that parallels the expected progress of the works. A materials list to facilitate the purchase of items, as they are required for each stage.
14
|
n e c a n e Ws
A safety margin for suspected but undefined problems that may occur. A way to easily compare estimated costs with actual costs. A technical reference for similar jobs priced at a later date. Details of the client, their name for the project, contact person (by name) and phone number. A method to allow you to determine a minimum profit margin, based on the number of labour hours in the job.
Know your charge-out rate Your charge-out rate is the hourly rate you charge for yourself and each team member. This needs to include the direct cost of wages plus ‘oncosts’ such as paid leave, public holidays, workers compensation insurance, superannuation etc. It also needs to include ‘overheads’, which are those business costs that cannot be directly attributed to any specific job. Examples include, but are not limited to, administration time/cost, office rent, telephones, liability insurance and equipment depreciation/replacement. To help calculate or review chargeout rates, the NECA Foundation offers a charge-out rate calculator on their website www.necafoundation.com.au
Estimating methods In estimating, there are two main general methods used: 1. Practical experience: Where a job is broken down into its various parts based on the way it is expected to progress. Personal experience is then used to estimate the labour (hours) for each part. Since, in most small and medium operations, the contractor is also the estimator and is often involved in the site work, this method is the most commonly used. 2. Unit rate method: Where the estimator calculates the quantities of items from the plans and other job information and then allocates costs from a labour unit rate list to these items. Many larger, well-established contractors have developed a unit rate list, in which the labour components for many common tasks have been detailed. This method relies on the development of an accurate list, which can only be developed after the work rates of the labour force have been carefully analysed and rechecked over a long period of time.
Using your Take-Off Sheet A Take-Off Sheet is one of the most important components of any contracting operation. A well-designed Take-Off Sheet will bring all the
USEFUL TERMS Estimate
The contractor’s direct cost to perform a project. It provides a forecast of the expected labour and material components and the associated costs to the contractor to perform the work.
Quote
The price offered to the client to perform a project. This must include all appropriate conditions of trading, as it forms the basis of the contract upon which payment will depend.
June 2021
