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Estimating Preface

The major problem in electrical contracting today is low profit. The major cause of low profit are cost over-runs. If you want to increase profit then you must reduce cost over-runs.

Cost over-runs don't "just happen". They are caused by:

  • Under-estimated costs.
  • Poor job management.
  • Incompetent installation.

Since this is an estimating system, let's go further into the first cause, under-estimated costs.

Under-estimated costs are estimated costs that do not cover:

  • Enough money to buy the material needed to do the job.
  • Enough man hours to install the material needed to do the job.

The money in the estimate to buy the material, is determined by:

  • The bill of material in the estimate.
  • The quantities for each item in the bill of material.
  • The material unit for each item in the bill of material.
  • The accuracy of the arithmetic when the material units are multiplied by the quantities.

The man hours in the estimate to install the material are determined by:

  • The bill of material in the estimate.
  • The quantities for each item in the bill of material.
  • The labor unit for each item in the bill of material.
  • The accuracy of the arithmetic when the labor units are multiplied by the quantities.

So under-estimated costs are always caused by:

  • Estimated bills of material that do not cover what the job needs.
  • Estimated quantities that are not enough to do the job.
  • Estimated material units that are too low.
  • Estimated labor units that are not realistic.
  • Mistakes in multiplying and addition.

Therefore, the goal of the estimator is to develop direct job costs based on:

  • The complete bill of material needed to do the job being estimated.
  • Enough quantities for each item on the bill of material to do the job.
  • The right prices to buy the material.
  • Realistic labor units to install the material.
  • Mistake-free arithmetic.

This is why estimating is a science, not an art!

That's lesson number one.

Lesson number two......

Is learning which parts of the job have the highest material costs and which parts have the highest labor costs. If one part of the job comes to 40% of the material and another part comes to 3% of the material then the part that is 40% must be given more attention than the part that is 3%. And for a very simple reason.

A 10% mistake in the part that is 40% of the material will make estimated costs 4% too low (.10 x .40). A 10% mistake in the part that is 3% of the material will make estimated costs 3/10ths of a percent too low (.10 x .03)

This estimating system ultimately produces a Master Estimate Check, that breaks down each estimate into a distribution of cost, for the six installation steps called work codes.

  1. Rough-in.
  2. Switchgear.
  3. Wire.
  4. Fixtures & Lamps.
  5. Devices, Plates, and Equipment Connections.
  6. Special Systems such as Fire Alarm, Sound, Nurse Call, etc..

The material dollars and man hours for each of the six categories are broken out. The material dollars for each work code are shown as a percentage of the total material dollars. The man hours for each work code is shown as a percentage of the total man hours.

Over sixty years of breaking down thousands of completed jobs, by these six work codes, has proven:

  • The even-numbered work codes (2. Switchgear, 4. Fixtures, and 6. Special Systems) consistently averaged 65% of the total material costs.
  • The odd-numbered work codes (1. Empty Raceway, 3. Wire, and 5. Devices, Plates, and Equipment Connections) consistently averaged 79% of the total man hours.

Even more startling is the percentages of man hours that empty raceway and wire come to, over many different kinds of jobs.

About 10% of the empty raceway and wire percentages is feeder pipe and wire. About 90% is branch pipe and wire.

Throughout the electrical industry, very few estimators try to take off branch conduit and wire accurately. They think it doesn't cost that much so why spend the time. So they short-cut that part of the estimate. Or they use an average footage of pipe per outlet (of which there is not one, that's accurate). And here's the scary truth.

If the estimator is 10% low on his quantities for empty raceway and wire on a nursing home, he is going to be 7.7% too low on his total labor (.10 x .77).

He is also going to be 10% too low on the material for those two steps. Since they are 45% of the total material then the estimate is 4.5% short on the total material and 7.7% short on the total labor.

That's not the end of that story either.

Our research studies have shown, that 69% of the field calls for material involve empty raceway and wire. Which means the job is short to start with and inefficient because it is short.

One more point.

When an estimator misses 100' of ½" EMT he thinks, "So what? That's only about $28.00." At three hours per hundred to install that ½" EMT, and a full cost labor rate of only $32.00 per hour, he has also missed $96.00 worth of labor. Which is a total cost so far of $124.00. Notice the labor is about 3½ times the cost of the material.

But, the estimator also missed the connectors, couplings, straps, fasteners, and wire for that 100' of ½" EMT. And the labor to install them. Add the material, labor, and overhead costs, of those items and the actual cost of missing 100' of ½" EMT isn't $28.00. It's about $395.00 open shop and $665.00 closed shop.

The estimator might be able to offset the material cost by sharp buying. But he can't get a journeyman to install that material for nothing. Which is one of the reasons why material runs over a little and labor runs over a lot.

Lesson number three is short.

Under-estimated costs can be prevented. How? By using this estimating system 100%. It is designed to prevent mistakes that are preventable. And to catch and correct mistakes that are not preventable before the job is bid. Do that and every bid price will be based on:

  • A complete bill of material.
  • Accurate quantities.
  • Reasonable prices.
  • Realistic labor.
  • Mistake-free arithmetic.

That's called Accuracy. With a capital A. It will get you jobs that the field can bring in within estimated costs. Which will mean Profit with a capital P.

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Louis J. Pokrywka, Owner
Master Estimating Service

Master Estimating Service, Expanding Your Possibilities....