1. Understanding the Estimate – Part 1 Foreman’s Development Series
Introductions
Have everyone put their name on a piece of paper and fold it so it sits on the table in front of them.
Introduce yourself and have the students introduce themselves
– Name, Company, Experience, Reason they are here, etc.
- Has anyone ever done any Estimating?
Rules
Turn cell phones and pagers off or to vibrate.
Please be sure to sign in and put your card number
Disclaimer
This curriculum is correct to the best of our knowledge and is based on current best industry practices.
We are not Estimators.
Every company has their own way of estimating so what you’ve seen may be different.
Participation
This class is an informal seminar. Feel free to express your views or ask questions at any time. Jump in at any time if you have something to add.
If you have any questions or do not understand something please immediately ask us to go over the point again! The only stupid question is the one that didn’t get asked.
Understanding the Estimate – Part 1 Foreman’s Development Series
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2. Monthly Job Cost Reports
What’s the Point?
As we will see here and in other Foreman Development modules, when the Contractor is successful, the Job Estimate will affect all other aspects of the Project:
Job Estimate
Job Budget
and Cost Codes
Project
Buy-Out
Monthly Job Cost Reports
Schedule of Values
Man-Loaded Schedule
2 Week
Look-A- Head
Pay Application
(Animated)
1) Ask the Class: Why should a Foreman learn about a Job Estimate?
2) A good Foreman should know something about everything when it comes to the job he or she is supposed to be running.
As we will see here and in other Foreman Development modules, when the Contractor is successful, the Job Estimate will affect all other aspects of the project:
The Estimate will turn into a Job Budget, which along with it’s cost codes, will be used to generate a monthly job cost report that tells you if your job is making money or not.
And if not – Why not!
The Estimate will be used to Buy-out all of the switchgear, light fixtures and materials for the job.
The job Budget will be turned into a Schedule of Values that we can bill against each month in our Pay Application.
The same Job Budget’s man-hours will be used to help you create a Job Schedule and man-load the schedule that you (the Foreman) will have to live with.
Your 2 week look-a-head plan will reflect these manpower needs.
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3. Questions? What is an Estimate?
What items are included in an Estimate?
As a Foreman why do we need to know anything about the Estimate?
How does the estimate affect what we do?
Is the Contractor going to show me the Estimate?
Should we be allowed to see it?
Is it my Job to make the Contractor Money?
Group Call out Activity:
write answers on the Class flip chart and refer to these items as the class progresses.
(Animated)
1) What is an Estimate?
2) What items are included in an Estimate?
What percentage profit does a Contractor make?
How much in benefits does a contractor pay on top of your wages?
3) As a Foreman why do we need to know anything about the Estimate?
How does the estimate affect what we do?
4) Is the Contractor going to show me the estimate?
What is your experience? Has anyone seen an estimate?
Should we be allowed to see it?
Some Foreman don’t want to see the estimate.
5) Is it my job to make the Contractor money?
Is it my job to help the contractor bring the job in under budget ?
Am I supposed to build the building or make him money?
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4. Objectives
The purpose of this Module is to give you a brief overview of:
How the electrical contractor gets work and the bid process involved.
How the Contractor arrives at the cost estimate.
How the successful bid estimate is turned into the Job Budget of labor and material that you, as the Foreman, will be responsible for.
Introduction:
The purpose of this Module is to give you a brief overview of:
How the electrical contractor gets work;
The bid process involved
How the Contractor arrives at his cost estimate and
How the successful bid estimate is turned into the Job Budget of labor and material that you as the Foreman will be responsible for.
Perspective / Read:
Although many Foreman are only concerned with getting the project built, whether or not the company makes money on the job is critically important! It is the only reason the Contractor went into business and without them we would not have jobs.
The “money” side of the project is usually handled by the Owner or Project Manager but the Foreman plays a key role. Labor productivity and an economical use of materials can save the Contractor a lot of money.
Because your job is also to make the Contractor money, it is important for you to understand where all these dollars and man-hours come from and how you can affect them.
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5. Simple Job Take Offs
During the Estimate, devices and fixtures would normally be taken off by hand for each individual electrical blueprint sheet.
The totals would be entered into the computer where labor and material prices are designated and extended for total costs.
During the Estimate, devices and fixtures would normally be taken off by hand by the individual electrical blueprint sheet.
The totals would be put on spreadsheets or entered into the computer.
Using computer software, both labor and material prices can be kept in the computer and as the material quantities are entered the costs for labor and material are computed and added up for total costs.
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6. Take Off Tools
In the old days a mechanical wheel, called a Rotamaster, that looked like a stop watch (like the Alvin double readout shown on the slide) was used to roll over the blueprints and count conduit footages.
The scale could be changed to match the drawing.
A mechanical hand counter can be used to count devices or fixtures.
Today, there are many more state of the art estimating tools that a contractor may use like the Scale Master device shown.
These run app. $100.
The blue button can be used to count devices or light fixtures, etc.
They can also be connected to a computer. You enter the type of conduit etc. into the computer and then roll the length.
It is automatically entered in the computer.
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7. Marked Up Drawing
Devices are marked off as they are counted so none are missed or counted twice. See the red slashes?
Some sort of counter or clicker is used as you count and mark off each device.
Conduit runs are highlighted as they are taken off for the same reason.
A mechanical or electronic measuring wheel makes this job easy.
Some contractors use different colors for each of the different systems as they are taken off – Power, Fire alarm, telephone, etc
- Again so nothing is missed or counted twice.
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8. Typical Take-Off Sheet
This might be an 11” x 17” spreadsheet with all of the symbols on the job drawn in on the top.
Each sheet of the electrical drawings is a horizontal line and the quantities taken off per sheet.
The totals are at the bottom.
Remember that each receptacle, for example, is actually made up of many separate pieces each with separate material and labor cost and everything has to be ordered if you get the job.
Ask the Class - Things like What?
4 sq. box, box mounting clip, mud ring,
receptacle, trim plate,
grounding pigtail, wire nuts,
wire labels and receptacle circuit label
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9. To / From Take Offs Feeders and Branch circuits
Feeders and branch circuits are entered on some sort of To / From take off sheet.
Panel HM-C is a 4” conduit with 4 – 500mcm and 1 - #4/0 ground.
There are 4 parallel conduits each is 200’ long.
The wire length includes an extra 20’ of wire for 10’ of make-up at each end.
Small conduit and wire are taken off and totaled per sheet in a similar fashion.
Once these feeders are all listed and taken off, the quantities of each type of conduit, wire, terminations etc. have to be added up for total footages and entered into the computer as well.
Pass out the Completed To / From TKO / Handout #1
Notice again, all the bits and pieces that could go into a feeder conduit. Things like:
Couplings, connectors grounding bushings
Hangers and supports
Rigid stub ups and 90 degree bends
Fire seals, expansion fittings,
Sleeves, core drilled holes and junction boxes
Wire terminations and labels
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10. Take off the Electrical Materials Required for this Room
Scale is 2 squares = 1 foot
8’ T-grid Ceiling, Metal 24” OC.
Room is 20’ from electrical panel
Use ½” EMT & #12 THHN wire
Use 4 sq boxes with 5/8” mud rings
Use 6’ long, ½” flex to lights
Receptacles are 18” AFF. UNO Switches are 48”AFF.
Home runs are overhead at 8’-6”AFF
As a Foreman you may need to do take offs in the field. Why?
You or the Project Manager may want to double check the fixture quantities on the Estimate.
You may need to order material for a particular piece of the project.
The kitchen, the 2nd floor east wing, etc.
An accurate take off will ensure that you aren’t short receptacles and didn’t buy too much EMT or 600mcm wire.
You may want to take off all of your feeder conduit and wire using the way you are actually going to run the conduit rather than the worst case used on the Estimate.
The Bid may have figured all overhead EMT feeders but you are going to run PVC in the slab instead.
This will give you all the bits and pieces per run and you can include this in your bulk material buy.
Based on your take offs maybe you want to buy your wire in 5,000 foot master reels?
When your guys go to do the work you can give them the complete list of material they are going to need for that run.
___________________________________________________________________
 Hand Out the Room Takeoff Activity / Handout #2
Work individually: Use the attached room drawing and take off sheet to figure out the electrical material required for this room.
(Allow app. 20 minutes for this exercise)
Use the next two slides to explain the process>>>>
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11. Room Take-Off Exercise
You have a Blank Take Off Sheet like this along with an electrical room drawing.
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12. Room Take Off
1st – Count the Symbols and enter the quantities
2nd – Count up the number of boxes, mud rings and blank plates that will be required based on the quantity of each of the symbols
- Which of the Symbols will require a box? Which symbol will require a 1 gang mud ring, etc?
3rd – Count the number of devices that will be required for each of the symbols.
4th – Count the number of trim plates required for each of the symbols
5th - Count the footage of each type of Conduit / # of wires as shown on the drawings
- Count all of the 3 conductor and mark it off. Then count all of the 4 conductor, etc.
6th - Total up the quantity of ½” EMT, #12 wire, etc.
Take Off Sheet
1st – Count the Symbols and enter the quantities
(Have them use highlighters to count the symbols, if available)
2nd – Count up the number of boxes, mud rings and blank plates that will be required based on the quantity of each of the symbols
Which of the Symbols will require a box? Which symbol will require a 1 gang mud ring, etc?
3rd – Count the number of devices that will be required for each of the symbols.
4th – Count the number of trim plates required for each of the symbols
5th - Count the footage of each type of Conduit / # of wires as shown on the drawings
Count all of the 3 conductor and mark it off. Then count all of the 4 conductor, etc.
6th - Total up the quantity of ½” EMT, #12 wire, etc.
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13. Exercise Answers Hand out the Take off Answers / Handout #3
Review answers / compare quantities with Class
There are no absolutely correct answers here. Everyone is going to have taken it off a little differently and will have different quantities of pipe and wire.
For instance:
The two home runs could be combined into one conduit but as an Estimator we need to figure worst case.
Hopefully your field conditions & installation methods will cost the same or be cheaper than what the Estimator had in mind when he did his take off.
What other miscellaneous items are NOT listed in our take off?
Remember that Each and Every piece of electrical material will have and material AND a Labor cost associated with it!
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14. The Job Estimate
These are the ingredients and their costs that go into creating a detailed job estimate that becomes the Job Bid:
Material
Pipe & wire, boxes and fittings, etc
Fixtures and gear – purchased from Supply houses / Vendors
Labor
Direct Labor (example; $29.90 / hr for a Journeyman Wireman)
Indirect Labor (Labor Burden)
Equipment -
Company owned equipment
Rental / lease for project (scissor lifts, cranes, etc)
Read to Class:
Companies are very secretive about how they estimate work. The material prices, overhead and profit margins, labor rates and the estimating system they use is all “Proprietary” information that they don’t want anyone else to know about. If you get estimate sheets that have the pricing blacked out that’s why.
They may also not want to you know how many hours you have to do your project for fear you might try to use them all.
These are the ingredients and costs that go into creating a detailed job estimate that becomes the Job Bid:
Material
Pipe & wire, boxes and fittings, etc
Fixtures and gear – purchased from Supply houses / Vendors
Labor
Direct Labor (example; $29.90 / hr for a Journeyman Wireman)
This will be in the form of total Man hours for the job.
This is money spent actually building the building
This is the most difficult and most risky component of the estimate!
Indirect Labor (Labor Burden – activity will describe what it is.)
Equipment
Company Owned equipment – hand tools, power tools, trenchers, etc.
These expenses can be considered either job costs or overhead
Finance charges, depreciation and insurance
Cost of running & maintenance / repair
Rental / lease equipment for project (scissor lifts, cranes, etc)
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15. Labor Burden What is Labor Burden?
“The extra labor costs, above and beyond the normal hourly working wage, that a Contractor must pay for each man-hour worked”.
These are “indirect” costs that do not contribute directly to either profit or production.
Use the Class flip Chart.
(animated)
1) Ask the Class: We mentioned indirect labor costs and called it Labor Burden.
What is Labor Burden? Can you name some of these costs?
2) “The extra labor costs, above and beyond the normal hourly working wage, that a Contractor must pay for each hour worked”.
A Journeyman only sees hourly wage on their paycheck.
For every hour worked by the Journeyman there are a number of other things the Contractor has to pay for.
These expenses are all part of the overall cost of the Journeyman
These are called “indirect labor” costs because they do not contribute directly to either profit or production:
Fringe Benefits like Health Insurance and Retirement
Workman’s comp insurance
State and Federal Taxes
Ask the Class: How many dollars per hour to you think Labor Burden costs?
See chart>>>>>>>
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16. Labor Burden – an example
Past New Mexico Union Labor burden / Journeyman Wireman with hourly wage of:
$29.90
FICA - Social Security & Medicare
7.65%
$2.29
FUTA - Federal Unemployment Tax Act
0.80%
$0.24
SUTA - State Unemployment Tax
5.40%
$1.61
NM Workmen’s Compensation Insurance
2.50%
$0.75
General Liability insurance
6.27%
$1.87
National Electrical Industry Fund (NEIF) 1%
$0.30
NEBF – National Electrician’s Benefit Fund
3.00%
$0.90
Local Health & Welfare Insurance Fund
$5.00 / hour
$5.00
Local Union Pension Fund
$3.50 / hour
$3.50
NECA membership
1.00%
Joint Apprenticeship Training Committee
Build New Mexico ( building trades fund)
$.02 / hour
$0.02
NLMCC – National Labor-Management Cooperation Committee
$.01 / hour
$0.01
LLMCC - Local Labor-Management Cooperation Committee
$.05 / hour
$0.05
Labor Burden Total Dollar Cost per hour:
$17.14
Total Cost of a Journeyman per hour:
$47.04
Labor Burden - Percent of Wages:
57.32%
Hand out the 2013 NM Labor Burden / Handout #4
Typically Indirect Labor is 40% - 50% of Direct Labor
Taken from Local #611 in New Mexico, this example shows all the extra percentages and dollars per hour that the Contractor must pay on top of the Journeyman’s regular wages of $29.90 per hour..
As you can see the $17.14 in Labor Burden on top of the journeyman’s $29.90 per hour means the contractor is paying an additional 57% more than what the Journeyman in the field sees on his check.
Helpful Hint / Instructors: Contact your Local, Code of Excellence teacher or the IBEW 7th District for Labor Burden information in your area. If possible print it up as a handout to give to the students.
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17. The Job Estimate Indirect Costs or Overhead Subcontractors
Jobsite Overhead
Jobsite trailer, furnishings, supplies & utilities, copying prints, parking,
Mobilization (Move in and set up costs) & Demobilization.
Gang boxes, toolboxes, and storage trailers
Toilets, ice & drinking water, cups,
Tools? – Can be considered either Overhead or Equipment
Office Overhead – The costs to “keep the doors open”
Salaries of executives, estimators, secretaries, shop boys, etc.
Office building, furniture, utilities, supplies, maintenance.
Company equipment, vehicles and warehouse materials
Subcontractors
They use the same procedures & the same Estimate items
So we talked about material and labor costs. What else is there?
Indirect costs / Overhead - there are two kinds
Jobsite Overhead
Tools & equipment? – Can be considered either Overhead or Direct costs
Jobsite trailer, furnishings, supplies & utilities, copying prints, parking,
Mobilization (Move in and set up costs) & Demobilization.
Gang boxes, toolboxes, and storage trailers
Toilets, ice & drinking water, cups, etc.
Office Overhead – The costs to “keep the doors open”
Salaries of executives, estimators, administrative support, shop boys, etc.
Office building, furniture, utilities, supplies, maintenance.
Company equipment, vehicles and warehouse materials
Overhead is generally a fixed percentage, somewhere around 15%, for all jobs. These costs are paid for by the jobs the contractor does. A contractor who has a more efficient office staff or fewer company vehicles could have a smaller overhead and be able to bid work cheaper.
Overhead is time related. Overhead costs continue for the whole job duration regardless of how many people are being employed and do not contribute directly to the performance of the work on a construction project
Jobsite Overhead can also be called “General Conditions” – the cost for being on the jobsite. When projects are delayed or go past their deadline there are additional “General Conditions” costs that accrue each day, whether work is getting done or not.
Subcontractors
They will use the same basic procedure and the same Estimate items.
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18. Mark up and Profit
Mark up is the percentage of profit and overhead that would be added to the overall actual job costs to determine the final Bid.
- Direct Job Costs + Overhead and Profit = Total Cost
Total Cost / Direct Job Cost = % Mark Up
- The percentage of mark up added to a bid can vary depending on a number of factors
Profit only becomes a reality if none of the above estimated cost amounts are exceeded.
Profit is the ONLY reason for the company’s existence.
Mark up and Profit
Mark up is the percentage of profit and overhead that would be added to the overall actual job costs to determine the final bid.
- Direct Job Costs + Overhead and Profit = Total Cost
Total Cost / Direct Job Cost = % Mark Up
The percentage of Mark up added to a bid can vary depending on:
The amount of Risk involved – this is the most significant variable!
Need for work (busy or desperate?).
Competition.
Size of Project.
Location or Time of year
Profit - After all costs have been paid this is the amount the contractor wants as compensation for performing the work
everything else was a “Cost”. This is the “Fee”
Profit only becomes a reality if none of the above estimated cost amounts are exceeded.
Profit is the ONLY reason for the company’s existence.
Profit must be made or the project has LOST money.
To break even on a job (no profit) is to have lost money. Why is that?
There are several things to note:
A company could plan on making 10% profit on a job. If they only make 6% they might say that they have “lost money”.
They did not make as much profit as they had budgeted for.
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19. What do You Think? Group Activity
For the average Union Electrical contractor the total Estimate costs can be broken down into the following typical percentages:
? % - Material
? % - Labor = ? % wages + ? % Labor Burden
? % - Jobsite overhead
= ? % - D.J.E. or Direct Job Expenses
+ ? % - Company overhead
+ ? % - Profit (Of the gross project price, before taxes)
= 100%
Group Activity:
Pass out Job Costs Activity / Handout #5
Have them work in groups to fill in the blanks – guess the correct numbers for the average job costs.
Have each group come up with 1 set of answers to present to the class when everybody is ready. Put them on their flip chart
Answers on next slide.
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20. Average Job Costs
For the average Union Electrical contractor the total Estimate costs can be broken down into the following typical percentages:
34% - Material
42% - Labor = 28% wages +14% Labor Burden
9% - Jobsite overhead
= 85% - D.J.E. or Direct Job Expenses
+12% - Company overhead
+3% - Profit (Of the gross project price, before taxes)
= 100%
Example: $1 million total job bid $30,000 = 3% profit
X 3% profit $200,000 = cash invested
$30,000 profit = 15% (return on investment)
Go over the Slide information:
These average numbers can vary depending on the company or project
DJE or Direct Job Expense is the actual cost of the project
- Normally, electrical work is approximately 10% of a total construction project. Mechanical is app. 30%.
Do you really believe your boss only makes 3% profit? This is the national average. Wouldn’t they be better leaving their money in the bank?
After taxes, the average electrical contractor makes 1.85% profit
At the end of every month the contractor will bill the Owner for all labor and materials used that month. This is called a Pay Application. The check for this work may take 30 – 90 days to arrive.
A contractor will need approximately 20% of the Job bid in cash to fund monthly wages and materials while waiting for the check to arrive.
If a contractor has $200,000 of their own cash invested for the duration of the project (to cover payroll and material, etc.)
In our example, the contractor is making a 15% return on the amount they have actually invested – not bad.
Remember:
The Contractor has already paid themselves wages as part of the overhead costs.
The bank’s rate of 3% is the rate they pay per year. If the construction project only lasts 6 months the 3% profit would be equal to a 6% rate from the bank.
Of course some jobs make much more than 3% profit but there are also jobs that lose money – the Contractor then pays out of their own pocket for the privilege of doing the job!
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21. What Costs can We Control?
As Foremen, what part of the Job Costs do we have control over?
Which ones can we improve upon?
Group Activity: Discuss and list on Class flip chart.
 As Foremen, what part of the job costs do we have control over? Which ones can we improve upon?
Material
Labor
Equipment
Indirect costs – Overhead
Jobsite Overhead
Office Overhead
Mark up / Profit
Some answers:
Productivity
Material handling
Electrical Layouts & design of conduit runs and rack, combining home runs
Manpower Efficiency – tasks, jobsite and job scheduling
Ordering / buying materials at a discount by buying in bulk
Keeping track of equipment rentals
By preventing losses – tools or copper theft
The costs associated with Safety
Whether the job loses or makes money was initially decided by the accuracy of the Estimate on bid day. As a Foreman, however, you can save the contractor money by how you run your job.
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22. Bid Depository
A voluntary system, used in some areas of the country, provides us with a good example of how bidding work takes place.
Many public entities are required to use this system
Standard bid forms, uniform bid exclusions, prevent last minute rush bids and to avoid unethical bidding practices.
After the process is complete all bids are published
Everyone can check their bidding methods and prices against their competition.
Architects and Engineers have a better idea of what things cost in today’s market.
Bid Depository
Literally; a box or location where bid documents must be lodged prior to the Bid Date to be eligible for consideration.
A voluntary system, used in some areas of the country, provides us with a good example of how bidding work takes place.
Note: Although you may not find a Bid Depository System in your area, the Bidding Process and problems involved are all very similar.
Many public entities are required to use this system so there are no questions of illegality or influence peddling.
The purpose is to provide standard bid forms, uniform bid exclusions, prevent last minute rush bids and to avoid unethical bidding practices.
After the process is complete all bids are published so everyone can check their bidding methods and prices against their competition.
These bids also give the Architects and Engineers a better idea of what things cost in today’s market so they can adjust their cost estimates for the next project they design.
Note: Antitrust aspects:
“The bid depository interjects a neutral party between the general contractor and the trade contractors to receive trade bids and present them in a timely fashion to meet overall project bidding. Where activities of the bid depository have restrained bidding, antitrust actions have been brought. As a consequence, bid depositories have had a checkered existence in the construction industry.”
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23. Upcoming Projects How are Jobs advertised?
Jobs are listed in various trade publication services such as Dodge reports, Construction Reporter, etc.
The Contractor decides which jobs he is interested in bidding.
Anyone wishing to bid the project will register with the Depository; get the bid forms and list of registered bidders.
Plans and specifications are picked up after leaving cash deposit that is refunded when the plans are returned.
Upcoming Projects - How are Jobs advertised?
Teacher Pass-Arounds - Pass around some of the On-Line subscriptions and Bid Depository Information
Jobs are listed in various print and on-line trade publication services such as Dodge reports, Construction Reporter, etc.
The Contractor decides which jobs they are interested in bidding.
Anyone wishing to bid the project will register with the Depository; get the bid forms and check the list of registered bidders to see who the competition will be.
Plans and specifications are picked up after leaving a cash deposit that is refunded when the plans are returned.
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24. This is a local Albuquerque job news letter with a list of Bid Depository projects at the bottom right.
You can see that a plan room is available where the drawings and specs can be looked at.
With a subscription service the plans are usually available in On-Line PDF format that can be viewed at home or viewed and printed on the company’s computers.
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25. The Estimate
The Contractor does take offs and completes the cost estimate of the project.
Prices come from the electrical supply houses – usually at the last minute on the day of the bid.
The electrical contractor may also get prices from other subcontractors for
Pieces of the project that are specialized, risky or that could be done more cheaply by others.
This could include things like the Fire alarm system and Lightning Protection
The Contractor does the take offs and completes a cost estimate of the project.
Prices come from the electrical supply houses – usually at the last minute on the day of the bid.
A wholesale light fixture Rep. will put together a light fixtures package from the various factory lines that they sell that are the same or equivalent to the fixture schedule. The light Rep gives the price to the supply house and they in turn give it to you.
Companies like Sq. D or Siemens also put together an electrical gear package that can include switchgear, transformers, panels and disconnects. This price is also passed on via a supply house.
The supply house does not necessarily give the same price to each Contractor!
The electrical contractor may also get prices from other subcontractors for:
Pieces of the project that are specialized, risky or that could be done more cheaply by others.
This could include things like the Fire alarm system and Lightning Protection
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26. Standard Bid Exclusions
Your bid will also include a set of “exclusions”.
The Bid Depository will require a standard Bid Exclusion form for each trade so all of the electrical contractors are excluding the same things.
Standard Exclusions could include:
Cutting and Patching or Bond fees
Temporary power or lighting,
Concrete work, trash hauling, fire stopping or painting
Standard Bid Exclusions
Your bid will also include a set of “exclusions”.
The Depository will require a standard Bid Exclusion form with your bid so all of the electrical contractors are excluding the same things.
This tells the General what work the Sub isn’t doing.
Work that is being excluded will have to be included somewhere else in the General Contractor’s price.
Standard exclusions may include:
Cutting and Patching – asphalt, sheet rock or concrete, etc.
Bond fees
Temporary power or lighting
Concrete work – slabs, pads or light pole pedestals
Trash hauling
Fire stopping
Painting
Be sure to check your bid and contract to see what exclusions your company and the General Contractor agreed to!
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27. Bid Alternates There can be one or more Alternates.
These Alternates divide parts of the project into separate pieces of work.
Each Alternate is priced individually on the bid form
Depending on the price, these Alts. can be included in the overall project or not as the Owner sees fit and their budget allows after the bids are opened.
Bid Alternates
 (animated)
1) What is an Alternate? (Ask the class) Do you remember this from Project Start Up?
2) There can be one or more Alternates as part of the bid package. These Alternates divide parts of the project into separate pieces of work.
Examples; new elevator, South Wing addition, more expensive lights, landscaping, etc.
The description of each Alternate may be found in the Specs, Drawings or both.
Each Alternate is priced individually on the bid form and (depending on the price) can be included in the overall project or not as the Owner sees fit and his budget allows after the bids are opened.
Estimator must be careful to put the proper moneys into each price so if the Alternate is not taken the rest of the job money is not affected.
Check the Job Bid and Contract when you get them - to find out just what Alternates were finally taken by the Owner. Make sure your prints reflect these changes!
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28. Bid Addendums
These are bid clarifications and / or additions to the Specifications and the Drawings.
Issued prior to bid day
These become a legal part of the contract documents.
Each contractor on the bid form must indicate the number of Alternates and Addendums received and included in the price.
What is an Addendum? (Ask the class)
“Clarifications and/or additions to the Specifications and the Drawings”. These are issued prior to the bid and become a legal part of the Contract Documents.
Can clear up questions that may have come up prior to bid.
They can correct misprints, add new drawings or clarify acceptable substitutes, etc.
Maybe the engineer ran out of time and needs to fix his prints!
New addendums can delay the job bid date.
Each contractor on their bid form must indicate the number of Alternates and Addendums that have been received and included in their price. Everyone should be bidding the same scope of work.
Construction drawings and specifications are not necessarily reissued with all of the addendums added. If not, then you need to make sure to correct your prints and specs to reflect these changes before you start the job!!!
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29. Bid Day The Sub’s bid (you) The General Contractor’s bid
And the Winner is…
The Sub’s bid
On the morning of the bid the various subcontractors, including the electrician, will deposit a set of sealed bid envelopes into a locked box (the depository).
These envelopes are individually addressed to each of the General Contractors with whom they wish to bid.
The Sub does not have to bid all Generals nor give them each the same price.
They might give a higher bid to an incompetent General or a better price to someone they work with a lot.
The bids are delivered to each of the General Contractors when the box is opened.
The General’s bid
In the afternoon the General Contractor opens their envelopes, compiles all of the subcontractor’s prices and picks who will be used. Each G.C. totals the subcontractor’s pricing with theirs and the individual sealed bids again go into the locked box.
On their bid form the General must usually list the subcontractor that they are using in each of the categories. This does not have to be the lowest bidder.
And the Winner is…
The bids are opened by the Owner or Architect involved.
The job will eventually be awarded to the General Contractor with the lowest bid.
In turn the GC should award the subcontracts to the various subs that were listed on the bid form.
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30. Ethics What are some of the unethical aspects of bidding work?
What is “Shopping the Bid”?
Bid Peddling?
When it comes to money there are lots of unethical people in the world.
What are some of the unethical aspects of bidding work?
 “Shopping the Bid”
A General may have their favorite electrical sub. The GC gets prices from everyone but then calls up their favorite sub to tell them what the low price is. That sub will then call everyone back and give them a number that is now slightly lower than what was the previously low bid.
If you were the low bidder, you got shopped and didn’t get the job how would you feel?
If you were shopping the bids you saved yourself some money. Subcontractors will find out, however and either give you a high bid or stop giving you their bids altogether.
Shopping the Bid can also happen between an electrical contractor and a supply house.
By turning in your price at the very last minute you are hoping that there won’t be enough time to shop the price.
Bid Day is always a crazy, last minute rush.
Prior to signing their contract the General may also come back to the Sub and try to demand additional concessions in money or scope of work.
This is another form of Bid shopping.
Some contractors will raise their price by 5% to this contractor so if they do get the job with the contractor they can lower it by 5% and still have a good price.
They might even give the work to someone else if the sub refuses to lower their bid price.
An Owner who rebids a project without substantially changing the project scope is also bid shopping. All of the contractors now know each other’s bids with the expectation that you will need to lower your price if you want the job.
“Bid Peddling”
This is the same thing but with the disclosed price flowing upstream: The subcontractor calls the General and coaxes them to reveal their lowest bid with the intent of modifying their own price.
When it comes to money there are lots of unethical people in the world!
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31. Other ways of bidding work
Owner’s Choice
T&M, Not to Exceed or Cost Plus
Unit Pricing or per Square foot
Conceptual Estimates or R.O.M.
Design / Build
Other ways of bidding work
Owner’s choice – A private company might chose to let only contractors they felt were qualified to bid the project. This could be 2 or 3 contractors from each trade.
Choosing the winning bid might include an interview process as well as a review of price and scope of work.
Unlike government entities they may not be required to always take the low bid.
Time and Material (T&M), Not to Exceed or Cost Plus basis - where the Owner is charged for all labor and material costs plus an agreed upon percentage for profit and overhead.
Have you heard of Cost + 10% (10% = OH & profit)? It’s not enough to stay in business these days (remember our job costs slide?).
Unit Pricing – per receptacle, per 100’ of conduit.
Or pricing a type of building using a rule of thumb / per square foot price for a Wal-Mart style big box store. To build a hospital in 2010 cost app. $45 per square foot for the electrical work .
Conceptual Estimates or R.O.M. – Rough Order of Magnitude – a ballpark estimate for a building that is only just a concept and not fleshed out with any details.
Design- Build. This is a new, up and coming concept in which the electrical engineer and contractor or Architect and General contractor might team up to provide a price for both the design and the construction of a building.
The winning bidder is chosen for things like qualifications, content and scope as well as low price.
This allows the team to coordinate their efforts rather than be at odds with each other.
This usually results in a smoother construction process and a better, cheaper finished project.
These types of projects are also usually more profitable for the contractors involved.
 Which is Better?
There are lots of advantages and disadvantages along with legal implications and monetary fine points to all of these types of work - for both the Customer and the Contractor.
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32. Test Your Knowledge In Groups:
As the next slides are shown, discuss in your group the correct answer. The first group to write on their flip chart the correct answer gets a point.
Keep your Group discussions to yourselves – don’t give the answers away!
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33. Labor Burden Test Your Knowledge
The extra labor costs, above and beyond the normal hourly working wage, that a Contractor must pay is called what?
Labor Burden
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34. Standard bid exclusions
Test Your Knowledge
Cutting, Patching, Bond Fees, Temporary Power may be examples of what?
Standard bid
exclusions
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35. Test Your Knowledge Material Labor Equipment Overhead Profit
Name 1 of the 5 categories that go into a Job Estimate…
Material
Labor
Equipment
Overhead
Profit
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36. Test Your Knowledge
As a Foreman, which of the costs listed below do you NOT have control over?
The answer to this is Labor Burden. They may be able to affect it indirectly if they were able to finish the project with fewer hours than projected. But they can never affect the amount of money that a contractor pays for labor burden per hour.
Jobsite overhead is also probably a fixed cost depending on your setup.
Material
Man Hours / Labor
Jobsite Overhead
Labor Burden
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37. Test Your Knowledge
Give an example of something that would be considered a JOBSITE indirect cost or overhead …..
Jobsite trailer, furnishings, supplies & utilities, copying prints, parking,
Mobilization (Move in and set up costs) & Demobilization.
Gang boxes, toolboxes, and storage trailers
Toilets, ice & drinking water, cups
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38. An Alternate Test Your Knowledge
A piece of the project that is priced separately at bid time is known as a what?
An Alternate
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39. Project Buyout Project Buyout
Preconstruction process after the award of the bid to the General Contractor.
The General Contractor has time to review the scope of each bid and the sub’s ability to do the work along with any gaps or overlaps in scope of work.
All of the bids are converted into subcontracts and purchase orders for the materials.
This should be done in an ethical and timely manner.
A number of things take place in the preconstruction process after the award of the bid to the General Contractor as the Estimate and Bid is handed from the Estimator to the Project Manager:
The General Contractor has time to review the scope of each bid and the sub’s ability to do the work along with any gaps or overlaps in scope of work.
This should be done in an ethical and timely manner.
The Project Manager will issue subcontracts and purchase orders for materials based on the bids received.
The Electrical Contractor will do the same thing:
This is called Project Buyout
The Electrical PM will write contracts for the various sub contractors
And write Purchase orders for the switchgear and light fixture packages so the submittal process can begin.
Factories won’t do submittals without a P.O. which is the way that they will get paid for their work.
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40. The Job Budget
Along with the Project Buyout a Job Budget is also created:
The money from the Estimate is juggled around into various job categories and budget line items.
It can be divided up by the different activities, by areas of the building and much more.
Job Budgets
Along with a Project Buyout, the Job Budget is also created by the Project Manager.
The money from the Estimate is juggled around into various job categories and budget line items.
It can be divided up by the different activities,
By the different areas of the building and much more.
The Job Budget can also be divided up by Job Cost Codes
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41. A Simple Job Cost Coding System
01 / Mobilization – Job site set up & removal: trailers, office, gang boxes, materials, etc.
02 / Demolition – Removals and demolition
03 / Site work – Underground, pole lights, temporary power, etc.
04 / Branch – conduit, boxes and wire; up to 1”.
05 / Feeders – conduit, boxes and wire; 1 ¼” and above.
06 / Gear – Switchgear, transformers, starters, disconnects, contactors, etc.
07 / Fixtures – receiving and installing any and all fixtures
08 / Special Systems – Security, fire alarm, PA, etc., including all conduit and wire
- does not include sub contractor’s work.
09 / Devices – plugs and switches, trim plates, etc.
10 / Warranty Work
Many companies will use a Cost Coding system to create a Job Budget but will also use this system through out the project to track labor costs.
Ask the Class: How many of you have used Cost Codes?
Pass out the Simple Job Cost Codes /Handout #6
Review the Cost Codes
Cost Coding is used to track how much labor you are spending on the different budget categories.
If you’ve used up 30% of your money but are 50% complete the job is making money.
On the other hand if you’ve spent 75% of your labor and material money but are only 25% complete the job is in the toilet!
Perhaps the branch circuits are going great but the feeders are way behind – Why?
Is it the crew, jobsite conditions or lack of equipment?
You and the Owner need to find this out EARLY in order to turn the job around.
Cost Coding is also used to create historical data on how much labor and materials it took to install bus duct or big conduits, for example.
If the Estimators and Project Managers use the same cost codes or categories in their estimates and budgets, over time, the company will get a good idea of what it actually costs in man-hours to install a 15KV Duct bank or to hang T-grid light fixtures.
This makes their estimating more accurate.
Some companies use extensive Cost Coding and Labor Tracking and have generated years of historical production information.
The Foreman would be required on their daily time cards to keep track of how many hours were worked on each cost code by each worker.
A summary of cost code hours worked along with the dollar value would be produced each month prior to doing the pay request. The amount of labor hours and money spent can be compared to percent of work complete.
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42. An Actual Job Budget An Actual Job Budget
Pass out the Job Budget /Handout #7 and Job Cost Report / Handout #8
Here we see a simple $212,000 High School Remodel Job budget
Notice that the contractor is using 10 easy Labor cost codes or line items to build their budget.
Each of the Budget line items will include all costs involved; labor and materials, equipment, overhead and profit, etc.
As you can see, all of the line items will add up to the contract amount
As we’ll see in other modules, this Job Budget and Cost Coding can be used to create:
A job Schedule based on man loading and labor hours in the job
A Schedule of Values that will also be used is submitting a monthly pay application (so you can get paid by the General Contractor) based on work complete.
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43. A Job Cost Report A Monthly Job Cost Report
Code
Labor Hours
Labor Costs
Labor Spent
% Labor Spent
Material $$
Material $$ Spent
% Material Spent
Contract Amount
%Total Spent 1
Jobsite set up 20
$600.00
$500.00
83%
$700.00
140%
$1,265.00
95% 2
Demolition
107
$3,210.00
$2,000.00
62%
$0.00 0%
$3,691.50
54% 3
Site work
132
$3,960.00
$4,000.00
101%
$1,107.00
$1,000.00
90%
$5,827.05
86% 4
Branch Circuits
500
$15,000.00
$7,000.00
47%
$2,805.00
71%
$20,475.75
44% 5
Feeders
182
$5,460.00
$3,000.00
55%
$7,668.00
52%
$15,097.20
46% 6
Gear 66
$1,980.00
$100.00 5%
100%
$5,727.00 7
Fixtures
495
$14,850.00
$12,000.00
81%
$98,941.00
$80,000.00
$130,859.65
70% 8
Special Systems
221
$6,630.00
30%
$3,481.00
$20,252.65
25% 9
Devices
102
$3,060.00
65%
$683.00
88%
$4,304.45
60% 10
Warranty Work 11
General
$4,600.00
Totals
1825
$54,750.00
$32,600.00
$118,185.00
$94,300.00
80%
$212,100.25
A Monthly Job Cost Report
Most contractors generate will a Job Cost report (usually on a computer) each month to see how much of the budget money has been spent and how much is left.
These material and labor amounts will be compared to how complete the job actually is.
If you’ve spent 50% of your money and are 75% complete the Boss is going to love you.
If you’ve spent 50% of your money and are 25% complete you have some serious problems and need to find out the reasons immediately!
Here is a Job Cost Report for the same High School Remodel using the same budget numbers:
You’ve spend 47% of your labor on Code #4 / Branch circuits.
To date you’ve used 60% of your Labor
You’ve used 80% of your Materials
This percentage may be higher because all of the material was purchased in a big Buyout and is now on site?
You’ve used a grand total of 60% of your money.
Is the Job 60% done?.
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44. Summary
Do the terms and costs of an Estimate make a little more sense to you now?
Will you be a better Foreman for having learned what you did in this Class?
Check out our Understanding the Estimate Module - Part 2 for more advanced information on this subject.
Pass out the Estimating Definitions /Handout #9
Pass out the Funny Construction Definitions / Handout #10
Go over both handouts with Class
Summary
Do the terms and costs of an Estimate make a little more sense to you now?
Will you be a better Foreman for having learned what you did in this Class?
Check out our Understanding the Estimate Module - Part 2 for more advanced information on this subject.
Rev.1.5 44 44