Estimating Electrical Construction Revised

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Table of Contents

1. What Does It Take to Be an Electrical Estimator?, 5
The Design Team, 7
The Construction Team, 8
Key Elements of a Bid, 10
The Estimate, 11

2. Finding Work & Submitting Bids, 13
Choosing the Right Projects, 15
Bid Documents, 17
Types of Bids, 23
Bid Form and Submission, 29

3. First Steps in Estimating, 31
Takeoff Items, 33
Takeoff Tools and Worksheets, 37

4. The Job Walk & Pre-Bid Conference, 45
Site Plans, 45
Job Phases, 46
Site Conditions, 46
Pre-Bid Conference, 50

5. Accurate Material Takeoff, 53
Shortcut Estimating, 53
Detailed Takeoff, 54
The Takeoff Procedure, 57

6. The Material Cost Estimate, 77
Transfer the Takeoff Data, 77
Calculate Each Item's Cost, 78
Material Cost Sources, 81
Accurate or "Best" Pricing, 84

7. Completing Your Estimate Manually (Labor, Equipment & Subcontractor Costs), 93
Labor Costs, 93
Cost of Equipment, 98
Subcontract Costs, 99
Completed Costing Sheets, 99
Factors That Increase Labor Costs, 101
Factors That Decrease Labor Costs, 107
Other Job Variables, 110

8. Takeoff Worksheets with a Computer, 113
The Sample Project, 113
Starting the Takeoff, 119

9. Figuring Costs with the National Electrical Estimator, 145
Estimating with National Estimator, 146

10. Overhead & Profit, 157
Adding Overhead and Profit to Your Estimate, 157
Calculating Overhead, 162
Calculating Your Company's Optimum Profit Percentage, 165

11. Other Costs to Consider, 173
Contingency, 173
Permits and Fees, 177
Bid Bonds, 178
Performance Bonds, 179
Insurance Coverage, 180
Progress Payments, 180
Retention, 181

12. Completing Your Estimates & Bids Manually, 183
Finalizing Your Estimate and Bid, 183
Adding Rates for Additional Costs, 184
Finalizing Your Bid Summary Sheet, 188

13. Completing Your Estimates & Bids Electronically using National Estimator & Job Cost Wizard, 191
Modifying Costs, 191
Printing and Saving Your Estimate, 197
Preparing Your Bid, 198

14. Cost Recording, 203
Why Keep Cost Records?, 204
Essentials of an Effective Cost-Keeping System, 205
Classifying Labor Costs, 208
Using Cost Data, 212

15. Smart Bidding, 215
Adjustment for Risk, 215
Asset Utilization Adjustments, 223
Project Adjustments, 231

16. Pricing Strategies & Selling Your Bid, 235
Market-Based Pricing, 235
Learn About Your Competition, 236
Selling Your Bid, 241
Scheduling, 245

17. Change Orders, 247
Why Changes Are Made, 249
Get It (and Give It) in Writing, 249
Review Meetings, 253
Processing a Change Order, 254
Effects of Change Orders, 256

18. Claims & Disputes, 259
Subcontractor Claims, 259
Preparing a Claim, 260
Backcharges, 262
Project Delays, 264
Estimating Software & Blank Forms Download, 266

Index, 267

Chapter 1: What Does It Take to Be an Electrical Estimator?

ELECTRICAL CONTRACTING IS A relatively new business. Masonry, plumbing, framing, roofing and most construction trades can trace their roots back hundreds or even thousands of years. There weren't any electricians or electrical contractors 150 years ago. The electrification of America didn't begin until the 1880s when the first commercial power-generating station was built in New York City.

In the early days of electrical contracting, there was no electrical code. Installation prac­ tice was poor by today's standards. In one group of 65 mills where electric power was installed in the 1890s, there were 23 serious fires - in the first six months! Still, the demand for electricity increased rapidly. During the 1890s, trade associations, insurers and manufacturers developed standards that became the National Electrical Code®, first published in 1897.

The NEC® is revised every three years to better protect people and property. Revisions are determined after studies by code committees and have resulted in better electrical materials, more advanced designs and improved installation procedures. Constant code changes make the work of electrical contractors and electrical estimators more difficult. But they also make for better, safer, and more durable electrical installations.

As the electrical contracting business developed and matured, the role of professional electrical estimators became more specialized. Anyone can quote prices for electrical work. Most states require that both electricians and electrical contractors be licensed; but electrical estimators need no license at all. Under the law, company owners, managers, engineers, supervisors, electricians and salespeople can quote prices for electrical work. Technicians from telephone companies, alarm system manufacturers, and electrical equipment manufacturers often quote installation prices for their specialized electrical work.

But please don't misunderstand. Estimating the cost of electrical work can be a very detailed, exacting discipline. It takes specialized skills and knowledge to create reliable estimates for electrical work. That's why electrical estimating is so important to the success of any electrical contracting company. Most work is awarded through competitive bidding. The lowest qualified bidder usually gets the job. Profit margins can be thin, especially when work is scarce. The penalty for a haphazard estimate can be a major loss, and no electrical contracting company needs more of those. Nearly every electrical contracting company needs the best effort of at least one qualified electrical estimator.

The Electrical Estimator

At one time, most electrical estimators were also electricians, usually with at least six to eight years of experience in the field. Experienced electricians tend to be good at reading drawings. They understand contract specifications and are proficient at following the NEC - essential skills for every electrical estimator. Years ago, master electricians commonly drafted electrical layouts, showing receptacles, switches and fixtures. These drawings became supplements to the architectural drawings and were used by installers to layout the work. Material takeoffs and cost estimates were created from electrical drawings prepared by a master electrician. That's still true today on small, service-type projects.

But work on larger projects is much more specialized today. Electrical estimators seldom draft electrical drawings and almost never specify materials or equipment. Those tasks are typically done by trained specialists, usually electrical engineers or Computer-Aided Design and Drafting (CADD) professionals. Many larger projects are "design-build" jobs, where the contractor is responsible for both the design and construction. There's no competitive bidding, but estimates are still required. On design build projects, the electrical estimator operates as a member of the design team, developing ROM (rough order of magnitude) prices for budget purposes.

The electrical estimators I know come from varied backgrounds. Most worked as installers before taking a desk job as a service estimator or residential estimator for a small- to medium- sized electrical contracting company. With additional experience and training, it's common to transition to more complex, more technical projects.

Some electrical estimators begin a career on the staff of a larger electrical contracting company. A typical estimating department in a large electrical contracting firm will have one or two junior or trainee estimators along with several more experienced estimators. When an electrical estimator has developed the skills and contacts necessary to be successful, many begin consulting, or even start electrical contracting companies of their own. Some of the busiest and most successful electrical estimators I know are freelancers. Both the rewards and the risks are greater when working for yourself. But clearly there are advantages to working at your own pace and setting your own hours.

An electrical estimator's primary task is to develop a reliable estimate of job costs. In practice, it seldom stops there. Experienced electrical estimators often playa major advisory role, recommending preferred installation details, identifying risks and opportunities in the job, and maximizing value while minimizing costs. A good electrical estimator can make a significant contribution to any electrical construction team.

On very large projects, there will often be a chief estimator and several junior estimators. In one of our practice examples, you'll figure the cost of work planned by the electrical design group. When done, you'll hand the estimate over to the senior estimator who will combine all estimates to calculate the project cost. That total goes to company managers who will set a percentage for markup, turning the estimate into a bid.

Electrical estimating can be either full- or part­ time work. Most smaller electrical contracting companies don't bid enough jobs to keep an electrical estimator busy full-time. The company owner may be the only qualified electrical estimator available. Some smaller electrical contractors don't even have an estimator on staff. Instead, they call on a freelance estimator when the need arises.

Many electrical contracting firms, both large and small, put the electrical estimator to work as project manager when a bid is accepted. After winning the job, the electrical estimator puts on a hard hat and manages the project. That creates a tight feedback loop, making the project manager a better estimator (more aware of costs) and the estimator a better project manager (more aware of installation issues).

The best electrical estimators have an instinct for finding jobs with better-than-average profit potential - and identifying jobs with more risk than potential reward. That's why a skilled electrical estimator is a valuable asset to any electrical contracting company - possibly the most valuable member of the team. Electrical estimators are the first line of defense against financial loss.

No matter where you fit in the picture, I hope you've decided to build the qualifications required to create a successful career in electrical estimating. Opportunities are plentiful. This manual is designed as a stepping stone along your career path.

The Design Team

Construction is far more complex today than in 1890 when buildings were first wired for electrical service. Today it takes a team of professionals to complete nearly any commercial or industrial building.

Every job starts with a property owner. The property owner sets the job in motion and pays the bills, frequently from loan proceeds made available by a commercial lender. The property owner isn't usually a member of the design team, but selects at least the leader of that team, the architect.

The architect plans a project that meets the needs of the property owner. The architect may also act as the property owner's representative, supervising construction to ensure compliance with plans and specifications. The architect prepares the construction documents. These include an advertisement for bids, instructions to bidders, the contract, general and special conditions to the contract, project specifications, project drawings, and guidelines for administration of the contract. On larger projects, the architectural firm will usually retain consulting engineers to advise on technical phases of the project. These can include a structural engineer, a mechanical engineer and an electrical engineer.

The structural engineer (SE) designs the skeleton of the project, the foundation, and supporting members. The SE plans equipment bases, suspended members, seismic and wind resistance and other structural components.

The mechanical engineer (ME) designs the Heating, Ventilating and Air Conditioning (HVAC) system, plumbing and drainage.

Rewards for Electrical Estimators

Electricians are among the highest paid construction tradesmen, and electrical estimators are among the best paid estimators in the construction industry. Most larger electrical contracting companies offer novice estimators a fair beginning salary with periodic increases. Some base an estimator's salary on a percentage of the rate paid to journeymen electricians. The percentage is low in the beginning but can be counted on to increase with experience and competence. Most electrical estimators work on salary, get paid either weekly or bimonthly, and receive good benefits. Advancement opportunities are excellent for progressive electrical estimators. As the planner of new work, you can make an important contribution to the success of your company.

Working conditions tend to be good. But time is a major limitation for most electrical estimators. Accuracy (quality) is important, of course. But so is quantity. The more jobs you bid, the more contracts you're likely to win. Bid dates are set by the owner or the prime (general) contractor. You have little or no control over timing. The clock can become an electrical estimator's worst enemy. Most bids are due on a particular day at a specific time. A heavy workload can require putting in extra hours at the office - a small sacrifice for a successful bid.

The electrical engineer (EE) designs the electrical system: power generation (either the primary or standby), primary and back-up lighting, a communications system (telephone and voice mail), the computer network, a paging system, a sound system, an employee- recognition security system, an intrusion system, and a fire alarm system. The electrical engineer must work closely with the architect, the structural engineer and the mechanical engineer. Electrical estimators have to estimate quantities and costs for nearly anything an EE can design.

The design team's work isn't done until construction is complete. The design team may be responsible for on-site inspections as the project progresses. The architect's contract with a consulting engineer usually requires inspections to ensure that installation complies with the plans and specifications. Consultants check the shop drawings (submittals) prepared by manufacturers and subcontractors to be sure the finished product will meet the property owner's and architect's expectations.

The Construction Team

A prime contractor has a contract with the property owner and leads the construction team, usually with the help of a few subcontractors. The prime contractor receives direction from the design team (plans and specs), instruction from the property owner (the contract) and rules from the building codes (including the NEC).

The bid documents usually require the contractor to supply a bid bond. If the contractor's bid is selected, the bid bond "binds" the contractor to sign the construction contract at the bid price. Most invitations to bid also require that the contractor supply a performance bond guaranteeing that work will be completed as shown in the plans. Bid bonds and performance bonds are underwritten by licensed bonding companies and are purchased at the expense of the contractor or subcontractor whose performance is guaranteed. If the contractor or subcontractor can't or won't finish the work, the bonding company hires another company to complete the job - and then tries to recover against the defaulting contractor.

The contractor must also provide insurance coverage for casualty losses and other hazards. Most electrical contractors also take out the building permit for the electrical portion of the job. Chapter 11, Other Costs to Consider, has more information on bonds, insurance, licenses and taxes.

On most jobs, there will be a prime contractor (the prime) and subcontractors (the subs). Sometimes there will be subs to the subs. A sub's responsibilities are very similar to those of the prime - just on a smaller scale. An electrical sub submits a bid to do electrical work described in the plans and specs. But that's not all. Subs have to meet all requirements of the contract, including bonds, insurance, licenses and taxes.

The prime contractor is responsible for the work of first-tier subcontractors as though the work was being done by the prime contractor's own crews. Second-tier subs are responsible for the work of third-tier subs, and so on.

On a large job that lasts many months, the property owner will usually make progress payments once or twice a month, creating a cascade of payments that go from prime to first-tier to second-tier, etc. If a contract doesn't allow for progress payments, the prime and subs may have to take out loans to finance the project. Interest on such a loan would then become another cost on your estimate form. We'll discuss progress payments in more detail in Chapter 11.

Subcontractors usually have little or no direct contact with either the architect or the property owner. They deal with the contractor one tier above and, of course, the inspector.

On small jobs, like renovating the electrical system of an existing building, the electrical contractor may be the prime contractor, working directly with the property owner. Again, one or more subs may be called on to do specialty work. The entire construction team may consist of the property owner, the contractor, the estimator, the foreman, and an office manager who checks the estimates and keeps the company books.

Whether an electrical contractor is the prime or the sub, the duties will be similar:

• Finding a job that matches company capabilities
• Estimating the cost of the job
• Submitting a bid to the property owner (if the electrical contractor is the prime), or to the prime (if the electrical contractor is a sub)
• Selling the bid - jobs don't usually just fall into your lap
• Signing a contract if the bid is selected
• Planning the work (much of this happens in the estimating phase)
• Doing the work - following the plans, specs, contract and code
• Getting the work signed off - and adding another satisfied customer to your list Changes in Electrical Contracting

Traditionally, construction projects have three primary players: the property owner, the designer (architect and engineer) and the general contractor. But there are many variations. In a design-build job, the designer is also the builder (the general contractor). Most states permit a builder to do design work for a project constructed by that builder, though the same builder-architect couldn't do design work for construction by others. More often, the builder isn't the designer - but still may be part of the design team, counseling on preferred materials and installation methods and even suggesting alternatives that can save money or add value to the building. The company I currently work for is a design-build firm. We do it all, using our own staff.

Some very large companies have their own construction division. If that's the case, the property owner may wear all three hats - property owner, designer and contractor. A builder who is also the property owner will usually administer the contract and set the construction schedule.

Most property owners don't have the time or the background to manage a complex construction project. It's usually easier, faster, and cheaper to assign the project to a dependable, experienced builder. In that case, the owner may prefer to have the builder take full charge of both project design and construction (design-build).

You'll also hear construction professionals talking about mechanical, electrical and plumbing (MEP) or mechanical, electrical, data and plumbing (MEDP) teams. Either way, it's a team approach which combines design and estimating for the largest project sub­ components. Estimators, designers, detailers and engineers work together as a team to meet the needs of the owner within a budget set by the property owner.

LEED® certification is another topic you'll hear more about in the future. The U.S. Green Building Council has adopted a certification program called the Leadership in Energy and Environmental Design (LEED) standard. There are four levels of certification: certified, silver, gold, and platinum. The more energy efficient the design, the higher the rating. Energy efficiency has an obvious advantage and a less obvious disadvantage. Energy efficiency makes sense in a world of high fuel costs. But energy efficiency also has its price. The more energy efficient a building, the higher the initial cost. That's why LEED certification is good business for electrical estimators. Property owners want to know, "Can we afford LEED certification? And if so, at what level?" Electrical estimators help owners make good decisions about LEED certification.

All electrical contractors, from the smallest residential firm to the largest multi-state company, have an interest in avoiding waste of electrical resources. They support restrictions on the use of incandescent lamps, promote fluorescent alternatives, solar generation for homes, commercial and industrial applications, better electrical management systems and designs for large commercial installations.

Key Elements of a Bid

The estimating process begins with the plans and specs and ends with the presentation of the bid. Bidding electrical work can be a complex process and may involve many hours of detailed work. Leave out any step and your bid can go from "first to worst."

Your job as an electrical estimator is to calculate the cost of completing the electrical work on a project. That's your estimated cost, your cost to the contractor for doing the work. Bid price is the figure quoted to the prime contractor or the property owner - what the property owner has to pay. The difference between cost and price is profit. We'll discuss both overhead and profit in detail in Chapter 10, Overhead and Profit.

A Successful Bid

Winning a contract for electrical work is seldom easy. In fact, an estimator who's successful 25 percent of the time is the happy exception to the rule. As an electrical estimator, assume you'll have many more defeats than victories. No lawyer, doctor, or baseball player would get by with a construction estimator's success ratio. An electrical estimator who wins as few as 10 percent of the jobs he bids belongs in the estimating hall of fame. A doctor buries his losses; a lawyer visits his in jail. You're lucky: The worst outcome is simply rejection.

Even on the contracts you win, you may have to defend your work. One common criticism: "Why was our bid so much lower than the next lowest bid? You left too much money on the table. We could have made thousands more." So keep good records. Be ready to defend your estimates against someone else's 20/20 hindsight.

You bid a job to get the contract. Obviously, it's wise to bid as low as possible. But bid too low too often and your company will eventually go broke. A successful bid covers all costs: labor, materials, equipment, overhead (managers, office, taxes, insurance, etc.) and still has a little left over - your profit. Being the low bidder and getting the job isn't always what you want. If you end up losing money on the job, you'd have been better off losing the bid and letting the "winner" take the loss. A good bid is high enough to earn a profit but low enough to get the work.

Finding the best bid price is a careful balancing act. Most competitors will have similar labor, material and equipment costs. Overhead costs can vary widely. Profit expectations also vary from contractor to contractor. As an electrical estimator, your primary concern will be the hard costs (labor, material, equipment) and overhead. Company management will decide how much to add for profit. In a small firm, the company owner will make decisions on profit margin. In a larger company, the head of the electrical contracting division may set the profit margin.

There may only be a few companies in the area qualified to handle the job you're bidding. If you're one of those companies, winning the job may be easy. But if there's a lot of competition for the same job, bidding will be competitive. If all bids meet job requirements, the contract will usually be awarded to the lowest bidder. If it's a government or public contract, the lowest qualified bidder will always get the work. But if it's a private contract, anything can happen: The lowest bidder doesn't automatically get the job. We'll deal more with this topic in Chapter 15, Smart Bidding.

The Estimate

Electrical estimating is more art than science. Electrical contractors know that most of the profit or loss in a job comes from an estimator's desk, not the construction site. By that, they mean that estimates for most work are going to vary more than the actual cost of doing the work. A good electrical estimate becomes an operating budget once the contract is signed. The project manager's job is to live within that budget. It doesn't always happen, of course. Mistakes in material purchasing and poor use of field manpower can blow any estimate out of the water. But that should be uncommon in a well-run electrical contracting company.

There are three basic ways to estimate electrical work:

• Pure guesswork - which I certainly don't recommend!
• Pencil, paper, and estimating forms
• Computer software specifically designed for estimating

Most electrical estimating is done with a computer. Quantity takeoff is usually done by hand, either based on a site visit or construction plans. Use a computer program to compile the list of materials and labor quantities. The computer converts those quantities into extended costs and accumulates totals for each segment of the project, including labor, material, subcontracts, tool and vehicle expenses, etc. Finally, markup and profit are added to complete the bid. I'll assume that you have a modern computer available for electrical estimates. And I'll also assume that you have pencil, paper and measuring scale available for doing what's still done best with pencil, paper and a measuring scale. Takeoff is covered in Chapter 5, Doing an Accurate Material Takeoff.

If you don't understand the basics of electrical estimating, a computer will only make things worse - at warp speed. Knowing how to drive nails doesn't make you an expert carpenter. Knowing how to use an electrical estimating program doesn't make you an expert electrical estimator. You have to understand the process from start to finish. Good tools just make it easier. In the chapters that follow, we'll do a couple of manual estimates with pencil and paper to help you understand the process and develop experience.

When you have electrical estimating with pencil and paper under your belt, and you've developed estimating habits that consistently deliver an estimate you can rely on, it's time to advance into the world of computer estimating. Once you've done the takeoff, a computer will make it easier to collect and organize material costs, manhours, labor and equipment costs, and totals. Then I'll introduce you to the companion volume to this book: National Electrical Estimator, a pricing manual, published annually, with quarterly updates, which includes the estimating software program National Estimator. Estimating software will just about eliminate transcription and calculation errors (the estimator's woe) and will always simplify changes and revisions. National Estimator lets you add any overhead and profit amount you select, then print the estimate (for internal use), and a bid using QuickBooks Pro.

Estimating Electrical Construction Revised

Explains how to create a reliable estimate for residential, commercial or light industrial construction - from essential preliminaries to submitting the final bid.

Every aspect of electrical estimating is covered - from plan take-off, to labor units, to material pricing, to assembly of the bid summary. Includes practical examples and sample forms to use on your jobs. Explains the electrical estimating process: types of bids and elements of each, what to look for on the job walk, how to deal with suppliers and use pricing sheets, how to modify labor units, and how to avoid the most common electrical estimating mistakes.

A complete estimate for a commercial building is included, starting with the scope of work, the materials and equipment to use, installation requirements, and a complete set of plans for the electrical system. Worksheets, pricing sheets, the bid summary sheet, telephoned quotations and the spreadsheets are all provided so you can compare your work with what an experienced professional electrical estimator would do. Includes detailed instructions for:

• Selecting projects
• Doing the material takeoff
• Calculating material costs
• Using an electronic measure and PC interface
• Completing an estimate manually
• Using estimating software
• Figuring overhead & profit
• Including all costs
• Using alternates for cost-savings
• Smart bidding
• Pricing for profit
• Dealing with change orders
• Handling backcharges
• Settling claims and disputes Explains click-by-click how to use the
• National Estimator electrical estimating software and the National Electrical Estimator, an annual cost book with a database of thousands of common electrical items, including material costs, manhours, and labor and equipment costs.

The estimating forms and checklists in this book are included with the FREE trial download of National Electrical Estimator, the estimating program used throughout this book. Load these handy forms (in Excel, Word and PDF format) onto your hard drive. Then use them on all your electrical estimates.

Mark Tyler is the son of Edward Tyler, the electrical estimator who wrote the first edition of this book over 30 years ago. Ed's estimating tools were primarily pencil, paper, and a calculator. Mark teaches the same principles. But his tools are very different: an electronic measuring device with PC interface, estimating software, and a database of thousands of electrical labor, material and equipment costs. Like most electrical estimators, Mark started as an electrician, progressed to estimator, and is now senior estimator/project manager for a large electrical contractor in the northwest.