Success for a construction company is dependent upon having an estimate that can be met by the field forces. To achieve this success requires identifying the details. It is having the right scope. This applies to the traditional design, bid, build process along with the design build process. To prepare reliable estimates on any of these types of projects, details must be used in the estimate.
There are two types of detailed estimates prepared by contractors. The first is a “bid-level” estimate for estimating and/or bidding purposes on a project.
- This estimate contains the detail required to bid the project. It may be the board feet of lumber by size and application; the size, gauges, and overall length of metal studs, or the number and type of bolt-ups required on a piping system. The detail is enough to price out the materials, get quotations for the equipment and apply the labor hours. These bid level estimates can actually be used to procure most, but not all materials on the project. For the general construction trades it would be in the 65% to 70% range. For mechanical and electrical this would be 90%+ from the bid estimate detail.
The other detailed estimate is a “buy-out” estimate performed for purchasing the materials on the project.
- The buy-out estimate requires substantially more time to perform than a bid-level estimate. Because of the additional time required for a buy-out estimate, this level of detail is typically not done when preparing estimates for bidding purposes. The buy out estimate will contain the lengths required for metal studs, not just the size, gauge and total footages. All of the specifics will be identified. The extra materials required for installation, such as nails and other fasteners, will be specifically identified.
The bid estimate is highly prevalent today with successful contractors. It is followed up by these same firms with a comprehensive buy out estimate when they are the successful bidder.
In any market, and especially in down markets, success is due to the details. The successful contractors will reliably identify costs in the bid estimate. They continue to control costs with the purchasing of the materials specific for the project. Once the project is underway successful contractors continue to manage the costs with job cost control procedures and knowledgeable project management staff.
