Choose the Right Work to Bid
The first step in the electrical estimating process is selecting the right type of work to bid. You should avoid bidding electrical projects where you have limited experience and are more likely to make mistakes during the estimating process and project execution should you win the electrical construction project. There’s a learning curve for electrical estimators and your field staff when taking on any new type of work that can eat into your profit.
Review the Specifications
Thoroughly review the GeneralSpecifications in addition to the Division 26 specifications and pay close attention to contractor qualifications, payment terms, bonding capacity, insurance requirements and make sure you can meet the qualifications and live with the legal language should you win the construction project. When you’re finished with the general specifications, it’s time to move onto the Division 26 specifications and make a note of the material grade, installation methodologies and responsibilities of costs (who provides fire alarm, communications, etc.) Generally, the spec’s will determine the quality of materials while the drawings determine quantities. It’s important to highlight anything out of the ordinary and make sure you include these items in your bid. I’ve seen many contractors take a black eye on an otherwise profitable project because they bid a less expensive material grade only to find during the project execution that it was significantly more expensive. If you intend to offer an alternate option, make sure it’s approved first and in writing because they will hold you to the specified material grades.
Review the Drawings
Look over the drawings at a high level to get an idea of the full scope of work. You should review the architectural in addition to the electrical drawings to understand working heights and elevations that will affect labor costs, material pricing and equipment requirements. Once you have an understanding of the general construction (think birds eye view of the project) it’s time to review the Division 26 drawings taking note of any technical details that are depicted and watch for any discrepancies between the drawings and specifications and write this down.
Perform a Quantity Takeoff
Pull out your highlighters, scale master or your favorite takeoff software to begin the process of counting and measuring items depicted in the electrical drawings like light fixtures, receptacles, conduit runs, panels and gear. Start with one item (we suggest light fixtures) and count all items sheet by sheet keeping totals per sheet before moving to the next item. If you find something you missed earlier, immediately count it and adjust your previously noted quantity. Now total your quantities for each sheet and move to a quantity takeoff sheet, example excel sheet below. Note: Are you responsible for HVAC hookups or any low voltage?
Request Supplier Quotes
One of the reasons we suggest getting your lighting counts first is to expedite the process of receiving a quote for these items because they’re generally quoted independently of the rest of your materials. A couple things to note, do not worry about getting the specifics on the light fixtures, rather note the designations used to identify the fixtures on the plans i.e. A1, B1, C1, etc. The lighting firm will reference the lighting schedule and look up the item details and provide a lump sum quote. It’s in your best interest to build a relationship with your local lighting firms to ensure you’re getting competitive pricing in a timely manner.
Create your Estimate
Now that you have the quantities laid out you’ll need to determine the unit cost for each item. To accomplish this, you need to determine the material and labor costs associated with each task and extend those out by the task quantity. Determining the material cost is simple, a quick call to your supplier or pricing service can give you this data, but the labor cost requires that you know how long it takes to install the material. This requires past production history and experience, or if you do not have past production history and limited field experience, we suggest purchasing the Best Bid Hybrid Proto use as a guide. Once the labor unit is determined you’ll multiply that by the burdened labor cost to determine the labor cost for the task. See the simple excel example quantity takeoff sheet below that includes material and labor costs per task and the totals summarized. Now you’ll want to summarize the total material cost and total labor hours for all the items and you’ll multiply the labor hours by your fully burdened hourly labor cost to get your total labor cost for the task. Add these two numbers together to determine your total direct costs for the project and the basis for your estimate. Keep in mind, you’ll need to add line items for any other direct costs required for the installation like equipment rentals or subcontractors.
Add Overhead and Profit
Now that we have our estimated job cost (direct costs) we need to add profit and overhead to those costs to arrive at our sales price. While profit is pretty self-explanatory, overhead is not and is the total of all the other indirect expenses that are required to run your business including your office lease, estimating, sales, marketing, bookkeepers, and other expenses that must be paid to keep your business operating smoothly. Like profit, overhead is a percentage that you add to the project costs to land at your sales price. Small contractors commonly believe they do not have overhead and shouldn’t charge for it and this is not correct. You’re leaving money on the table and it’s in your best interest to figure out the overhead required to run your small business with an accountant that specializes in construction.
Build your Proposal
Now that we have our sales price, we need to create a proposal that details what is included in our bid in clear and concise terms. We suggest using similar language to what was used in the project specifications and drawings. This makes it easier for the General Contractor reviewing your proposal to ensure you’ve covered everything and that nothing major is missing and he can therefore trust your price. Generally speaking, electrical contractors provide lump sum bids. This means you provide a fixed fee to cover everything outlined in your bid. This is where it’s important to clarify anything that you’ve included or excluded to avoid any confusion once the project is awarded.
Double Check Takeoff Quantities & Estimate
It’s always a good idea to get a second set of eyes from your estimating team to review your work prior to submitting your bid to make sure you have not missed anything. This review should involve a counterpart taking off the project’s major systems and ensuring that nothing was missed during the original takeoff. We suggest keeping a bid log (simple excel spreadsheet) that shows recent and successfully completed projects by type and size with the price per sqft listed for reference. While you should never bid projects this way, you can compare a previously completed project against your current project to see if there is a large variance in price. If there is a big delta, it’s worth looking into to figure out why. Note: you can use this log to help with preliminary budget numbers.
Once you’ve double checked your work it’s time to submit your bid. Today, everyone submits bids electronically either through the bid site that they received the bid or via email. We suggest that you read the Division 01 specifications again and looking for any bid instructions and follow them to a tee.
Review the Results
In the beginning it can be tough to determine where you’re in the mix compared to other electrical contractors bidding the same work. Remember, General Contractors go with numbers from vendors they trust, potentially years of experience working together, more than the low number, so it might take a couple bids to gain a General Contractors trust. When you lose a project, it’s always a good idea to ask the General Contractor how you stack up against the competition, sometimes they’ll send you the bid tabs with your competitor’s numbers and other times they’ll tell you that you’re high or too low for comfort. Unless it’s a public bid they’re not required to provide this information, but if you ask in a respectful manner you will receive feedback and this will help you with making adjustments on future bids. Note: It’s a good idea to request bid tabs on awarded projects as well to see if you’re leaving money on the table by bidding too low.
by Chris Lee