Estimating – “You’ve got to be in it to win it”


Estimating is often a complicated process. Although many would disagree with this statement, one cannot hide from the fact that to prepare a detailed, accurate and reliable estimate for a construction project the estimator must follow a procedure, which involves a detailed and thorough take off from the drawings, whilst considering the particulars for the project, as set out in the specification and any other ancillary documentation such as reports and surveys. Aside from this, the estimator must also obtain quotations from merchants, specialist manufacturers and specialist subcontractors.

Following this process often takes a lot of time and resource, and as a consequence many contractors and subcontractors, choose to not be as thorough as needed when estimating to secure new projects.

Thus it is understandable why many contractors and subcontractors, when choosing to not devote the necessary time and resource to estimating projects correctly in the first instance, encounter financial challenges on projects that they have secured.  

Be thorough with your estimates

After speaking to many contractors and subcontractors in our industry, the financial challenges encountered are as a direct consequence of missing off aspects of work from their estimates, examples would be a key item of plant, a specific section of work and in many cases, under estimating the amount of work relating to certain tasks and activities.

detailing a builder's estimateYet estimating is a necessary evil, as without submitting an estimate for a project you can not be in the running to secure the work.  “You can’t win the lottery, unless you a buy a ticket – you’ve got to be in it to win it“

So what do contractors and subcontractors do? Price a job thoroughly, thus knowing that their price is sound and reliable or, do they adopt a different and more commonly used approach the “back of a fag packet“?

Both of these methods have financial implications, the more detailed approach is going to take longer and expend the valuable resource of the tenderer up front, yet there is more financial certainty down the line with this approach so this is less risky. Whereas a quick price is cheaper upfront and potentially significantly riskier down the line… Down the line obviously being once the project has been secured and it becomes apparent that there are deficiencies in their price.

What is the best approach for Contractors and Sub Contractors?

The answers perhaps lies by asking a few simple questions and then making a few simple decisions:

Has the Company whom is requesting an estimate secured the work?

If the Company has not secured the work then they are in a competitive tendering situation, which could mean, by assuming that there are five companies tendering to the secure the work and each company has requested an estimate from five different Sub Companies, that you have a one in twenty five chance of being successful. Whereas submitting an estimate for a company whom has secured the work could result in better odds, such as one in three or one in five.

Have we worked for, or submitted estimates for work for, this Company before?

It is always satisfying to receive an enquiry from a new Company. From a positive perspective this can mean that you are being recognised for the good work you do or you are being recommended as a competent Contractor or Sub contractor.  It is important to determine this by asking the new client “why us?”.  From a negative perspective you could be being used as “a cover price” (an estimate used to check the value / validity of an estimate the Company has already received), or because the Company is not a good client and their current Contractors / Sub contractors do not want to submit estimates to them.  These two possibilities also apply to the situation where you have received projects to estimate for from the Company in the past, but have not been successful in securing one or more of them.

Can we return the estimate in the time frame available?

getting a builders estimate in on timeIf you are being more selective in your estimating, are you certain that you can devote the necessary time and resource in order to produce a reliable and accurate estimate?  If the answer is no then you will end up submitting, should you try to work to the deadline, an estimate that has large aspects of it that are based on the “back of a fag packet” approach.  This is obviously something you have tried to avoid by being more selective in your tendering.

If we are successful in securing the work, can we be successful in delivering it?

This is no doubt a key question that needs careful consideration.  Firstly consider if you have the capital to maintain a positive cashflow, also consider if you have the resource either directly employed, or within your current supply chain to deliver the project, then consider how you would manage the project, especially if the project is outside your normal working area.  There are other considerations, yet these are some of the very important ones.

Perhaps if Sub Contractors were more selective in the projects they tendered for then they could devote the sufficient time and resource required to prepare detailed and accurate estimates for projects.  Rather than the common approach of submitting estimates for every project that lands on their door mat / in their inbox.  Adopting the latter approach will ultimately lead to, if you are not already doing so, preparing estimates on the back of a fag packet, which poses more risk and uncertainty to your business.  You could always ask yourself those four questions and still estimate the works quickly, yet, as set out above this is a very risky approach to adopt.

So taking the above into account where does this leave us?

Is it a case of paying upfront for the detailed estimate, which mitigates financial exposure or, is it a case of trying to limit financial exposure, as and when the shortcomings of the quick estimate become a reality on the project?

A conundrum, yes, but if you are in this situation, it is a good one to have.

If you need any professional assistance with estimating please get in touch; we will be more than happy to discuss your project and wider estimating needs and how we can assist you.