I continue this blog series to break a decades-long silence in the construction industry – the nine true secrets of successful estimates.
FOURTH SECRET
The fourth secret concerns material prices. It is a simple secret, with a potentially complex variable. The secret is material prices go up and down. The complex part is the frequency and extent of the price curves.
Prices are affected by timing of the buying cycle. Does the purchase coincide with a peak or off time of the year for the manufacturer? This equates to demand. It also depends upon the size of the order. Will this be for one standard widget or one thousand custom widgets? The delivery requirements also affect the price. If an item with a ten week delivery time frame is needed in two or three weeks, get ready to pay a big premium. Payment terms on previous purchases also affect prices.
One big item of material cost are the sole-sourced items where there are no other brands of comparable equipment allowed for the project. This creates a tremendous upswing in the pricing. It is amazing how someone would allow sole-sourced items in their projects, if having the best possible level of pricing on the project concerns them.
Will the material prices in the estimate be perfect? It is highly probable that “Never” would be the best answer. However, by recognizing the factors that raise and lower the costs of materials, it is possible to get the lowest practical pricing on materials without resorting to bid shopping or other unethical and possibly illegal practices. No one company has a lock on this secret; all of the successful firms know one of the secrets to a successful project is having a reliable determination made of the material costs required to perform the work.
Don’t miss out on the remaining secrets! Check back soon!
