I was talking to an estimator and he said he had to train his new estimators how to use a scale and roller! It seems they only had a paper copy of the drawings instead of on-screen take-off. With the advent of new technology, what do you think will be the next thing that will go by the wayside due to new technology?
It’s amazing how a small gesture to an employee can actually increase the productivity. Just recently an employee jokingly made the comment that it would be a good donut day today. Well that turned into the President of Tempest Company stopping at a bakery and picking some up for the office which was a nice gesture and also tasted pretty darn good. This reminded me about a project several years ago.
A little background on the project; it was a four month project with an average of about ten field guys and was not located near much of anything. After a couple of weeks, the project manager realized the guys would all run to the gas station for a pop for both the morning and afternoon breaks. This quick run resulted in a 30 minute break twice daily instead of two 15 minute breaks. By doing the math, 5 hours a day was spent on the pop run over what was supposed to be taken. The project manager came up with an idea to supply the guys with the pop. The foreman would load up the coolers on his way to work with pop and ice for all the guys to drink on the breaks which cost about $10/day but we gained 5 hours of productivity.
Another result of this nice gesture was the efficiency of our craft seemed to improve. They were happy about the small perk and actually started to work harder. The benefits gained in increased productivity more than compensated for the relative low cost of the drinks. Sometimes even giving out some sincere compliments can improve the attitudes and morale of the workers hence increasing their productivity. It’s definitely a “win-win” situation.
Recently we have been asked by contractors and subcontractors to help them budget projects. This is nothing new. What is new is that these budgets were being prepared about one month prior to bids being taken by each of the projects construction managers. I do not know if this is promoted by the Owners/Developers or the Construction Managers. I do know that budget setting on a project one month prior to bids is more than a little bit late.
It is incumbent upon the owner to fully fund their project. It needs to be done early in the design cycle. By doing this they will get their facility built in a timely manner. It does not matter what delivery system they choose. When the project numbers come in from contractors, the project can proceed. If they budget can’t be met, then the project stops. This costs the owner, designers and contractors.
It is an integral part of the construction management process to make sure the owner has enough funds for the project. On a design, bid, build basis the architect/engineer must step up to make sure the project can be built for the funds allocated. On a design build project it is the construction manager’s responsibility.
Owners and developers also need to also confirm the architects, engineers and construction managers are doing their appropriate level of effort to make sure the budget is being met prior to bid day. This is one of the reasons organizations hold cost reviews at the intermediate design milestones.
Oh, By the Way… In these days of “cheap” bids just remember the low bid may not only be the biggest mistake, it could be the bid that ruins your project.
The California Bullet Train project costs are rising from $43 billion to over $98 billion. And, it’s all because of a decision to stretch out the construction period! The California High Speed Rail Authority is changing the schedule from a 2020 completion to 2033. But guess what! That’s not the news you will hear here first. The news is: Even the $98 billion number is too low. You are hearing it here first. Mark this date on your calendar.
It will be for several reasons too.
These two reasons are just a start of why the costs will exceed $98 billion. What are they using for contingency? Was it enough? Probably not! The proponents, in their search for money, have more to benefit if the costs are estimated artificially low.
Oh, By the Way… The next headline major news on the project may be, “Bullet Train Costs Balloon, Routes Reduced” or “Bullet Train Economically Not Viable – Project Cancelled”
The last blog focused on a couple of areas where we look out for our owner clients. This one will cover the assistance for our contractor clients.
The majority of our services are bidding related for plan and spec projects along with design assist/build. We do takeoffs and estimates for these bids, across the trades. Takeoffs are generally pretty straight forward for the plan and spec projects. Where it can be difficult is on the design assist/build projects with very little design information.
Some of our clients are not familiar with or comfortable bidding on design assist/build projects. These require them to define and determine the scope rather than the plan and spec projects defining the scope. On these projects the estimators need to layout, size and/or route the work scope before the takeoff can be accomplished. These become the basis of the estimate. While not engineers or architects, most estimators can come up with wall types or conditions, pipe sizes and wire sizes that can be close to what is finally designed. By being close, the budgeting and/or bidding becomes more reliable for the contractor. This enables better pricing and a lesser risk of a substantial cost variance. This also benefits the owner.
Our involvement with contractors also helps them resolve change orders and other related items before they become full blown claims. In some cases we help negotiate the changes. In others we may advise them to let it go and get on with their business. When the claims cannot be avoided, we assist them in making the best presentation possible to the judge, jury and/or arbitration panel.
Our clients are a diverse group of contractors, owners, attorneys and even a design firm or two. Contractors are by far our largest client base. About half of them are in the general trades and half are in the mechanical and/or electrical disciplines. We are usually assisting them in bidding projects. With the owners and design firms we usually are help them set and maintain the budget through the pre-construction period. With the attorneys we use our knowledge to help out the ones in trouble – whether contractor or owner.
But my job is not just about doing the work and getting a check. We assist the owners get the best value for their construction budgets with our estimates. Since we are in the actual construction market virtually every week with contractors, we do have a very good idea of hours, productivities, material and equipment costs along with indirect costs and profit amounts. In my almost 40 years in the industry I have seen too many owners taken advantage of. I knew even before I started Tempest Company that I wouldn’t run my business that way. We advise the owner on the competitive market conditions for costs of the work, markups and other considerations.
We point out to the owner where contractor prices are stupid low, about right or unreasonably high. We point out the cost details that need to be monitored during the construction process if it is a cost reimbursable contract. With this advice, they can usually get the proper amount for their construction dollars in negotiating with the contractors, subcontractor and others in the construction supply chain. Whether they take my advice or not is their own choice. At the very least we have provided them reliable information to make their decisions and to have a better project.
Just a few years ago, I would be willing to bet if an employer offered an employee the deal of a 40 hour paycheck in return for 47 hours of work, the employee would simply laugh and walk away. The situation above is having a much different outcome today. Not only are construction workers accepting terms similar to above, they are happy about it.
I recently learned about a union contractor that was able to negotiate a deal with the union to cut the hourly rate of the craft by 20% on a large project. This means with overtime figured in the craft will need to work roughly 47 hours to receive a 40 hour paycheck. I was actually told about this deal by one of the union craft members! Not only was he willing to accept the deal, he was excited about the opportunity to have a steady paycheck with the potential of overtime pay (at the 20% reduced rate of course).
It’s amazing how times have changed and how contractors have had to adjust their way of thinking in order to survive. I believe this type of situation will become more prevalent until the economy turns around. Unfortunately, the workers in the field have to take a pay cut while the cost of living continues to increase. But on the other hand, a pay cut is still better than waiting for the unemployment check to arrive.
It was 1981. Not great times, but not bad either. I came from a family involved in construction (I learned how to read blueprints and do takeoffs when I was twelve years old.) My career in estimating for the previous ten years was with some large firms. One was an Engineer/Architect and two were top 400 Contractors. At age 29, I wanted to do something on my own, not as an employee.
In starting a business I was told to start one in a field where I was experienced and one that I liked. I definitely knew and liked estimating. I was hot stuff in estimating, scheduling and project controls experience! And, as it turned out, quite ignorant on what it takes to own, operate and grow your own business.
My first contract was with a major utility company. It was a six month term for my services on a full time equivalent basis. It was great and eventually lasted eighteen months. In that time I didn’t market very much. I did pick up assignments from some local small and mid-sized firms from time to time. I also won some work with the federal government for indefinite delivery contract estimating.
I was riding high with two major contracts and a few minor assignments for these first couple of years. I was blissfully ignorant in a major way. Then the need for my utility company estimating came to a close. So did the work on the federal projects. In hindsight this is where my lessons really began on operating a business.
The First Rule is you need to have clients! No matter how good you are at what you do, there must be a demand for the services.
The Second Rule is you need to have a wide client base because the need is not constant from any one client.
The Third Rule is you need to let the potential clients know you are out there. No matter how good your services are, if they do not know about you they will not have the opportunity to use your services.
In a broad sense, this is when I learned that marketing, which is a broad subject category, is critical to the success of a business. I did not do very much of it in the first two years. Overall the success of the company is getting the word out that we exist, provide a valuable service, and at a reasonable cost with potentially great results for the client.
It was recently reported in ENR that the staff of a Florida electric utility thought they knew how to replace a steam generator better that the experts they were trying to hire, and at a lesser cost. So, they decided to do it themselves to save some money. The results were not good. The costs ballooned due to the practices followed and the repairs required. There’s nothing new here, at least in my profession and in the construction industry.
Oh, By the Way… I have to wonder when or what it will take to get the people to focus on getting the job done right, not the initial apparent cost. Because when a job is done right, it is usually the most cost effective solution.
