PROJECT BREAKDOWN - CHOOSING THE RIGHT TOOL FOR THE RIGHT JOB: Fundamental Rules for Mechanical Estimating and Project Bidding Part VI
Commercial HVAC projects come in all shapes and sizes with varying degrees of complexity. Accordingly, not all projects need to be approached in the same fashion. let's take a moment and look at three of the most used and see what we can expect to achieve with each.
Joe, the general contractor says to Larry the HVAC contractor, "Larry, I've have a developer friend of mine who is thinking of building a 10,000 sq ft retail site. What do you think the HVAC would cost on something like that?" Larry steps back and scratches his he a moment and says, "Well, based on my extensive experience that should run you close to $80,000. BUT DON'T QUOTE ME ON THAT!"
Obviously Larry is using a rule of thumb of $8 sq ft*to give Joe a rough guestimate. We've all done this and Larry isn't wrong for doing it. This figure is going to give him an accuracy of ± 25%. Given the context, this method will certainly give your customer a starting point.
Joe sees Larry eight months later and says, "Hey Larry, do you remember that retail center I told you my friend wanted to build? Well, we have a preliminary design and I was hoping you'd take a look at it and give a good estimate on what we can expect to spend." "Sure, says Larry, give me a couple of days and I'll have something worked for you." When Larry gets back to the shop he spreads out the plans and works up a rough design-build estimate. He can use a format something similar to this:
Air Handlers...................$0.75* per CFM
Exhaust Fans..................$0.25* per CFM
Louvers..........................$20.00* per sq ft
Ductwork........................$9.00* per LF
We all know this isn't perfect but it is certainly closer that where we were. This process is going to yield you and accuracy percentage of about 15%. (We're getting closer) While we're being honest here, there are many companies who are basing their competitive bids using methods like these. People, if you're one of them, please stop. The risk is enormous and has caused the down fall of many new companies.
Finally, Joe calls Larry and says, " Larry I'm sending you an invitation to bid with a link to the drawings and specs on that retail center. If you would please give me a hard number that I can present to the owner." At this point Larry knows that he needs to come up with a detailed estimate that will reduce his margin of error. This can only be done by breaking the project down as extensively as possible. This method is going to show up in the form of accurate material count and most importantly labor hours. If you go beyond something as simple as a retail center then this will require even greater emphasis on a detail oriented estimate.
The general rule here is the more you break down the estimate the greater the degree of estimating accuracy. A corollary to this is the more unfamiliar you are with the item being estimated or the more complicated it is, the greater the need for break down is to minimize inaccuracy.
Some owners do all their own estimating but this can be a time consuming endeavor. Some companies have dedicated estimators if their organization is large enough to support the position. An alternative is to use an independent estimator, someone like, oh I don't know, Atlas Estimates, maybe. (please excuse the gratuitous self promotion)
We hope these tips will help you become more successful in bidding your next commercial project.
*(please feel free to use whatever number you feel is right)