A Simple Formula for Better Construction Estimates

Our deep thoughts for construction estimators are brought to us this week by Norman Foster in his book, first published in 1961, Construction Estimates from Take-off to Bid. In this helpful book, Mr. Foster reminds contractors that, “A good estimate is built around a good set of quantities and a proper feeling for cost, rather than being a by-product of statistics.”

This is the nexus between the art and the science of construction estimating.

If you want better outcomes from your construction estimates, focus on “a good set of quantities” This aligns with what we have termed “Thorough Data Capture” or TDC and “a proper feeling for cost” which mirrors what we have termed “Accurate Data Input” or ADI. Stick around as we discuss a simple formula for better construction estimates.   ​

Contractor Career Growth Tips

Before we dive into this week’s delicious topic, let’s recap our conversation from the last episode. In addition to sharing the record-breaking results from contractors throughout the United States and Canada for the fourth annual SOCKTember charitable event. We had some excellent input from contractors who are investing in the future of the skilled trades. I want to make sure no one missed the truth bombs Nicole Humber, CEO of Bravo Restoration in Windsor, California shared. ​

Learning from Restoration History

The topic for today's episode is a simple formula for better construction estimates.  As I am preparing for a course that I will be teaching at the beginning of 2024, I’ve been researching various authors, approaches, and case studies related to estimating. I’m a sucker for old books. I love to find older books on current topics so that I can compare and contrast the best practices from our history. 

March 2007 Founding Fathers Article in C&R Magazine from Pete Consigli 

History often demonstrates that there is nothing new under the sun. The problems are similar and the solutions are often much simpler than we want to believe them to be. Gaining ground is less a battle for new knowledge than it is the discipline to execute on what you know. This should not dismiss the importance of adaptation. Rather, our job is to understand the principles, and break them into processes that our teams can execute, and for most people in a position of leadership this means making the concepts as clear and simple as possible. Our good friend and industry legend, Cliff Zlotnik, quoting Albert Einstein says, “If you can’t explain it to a four-year-old, you don’t understand it.” 

You may notice that phrase, clarity, consistency, and accountability, or the Three C’s, as we use it often in The DYOJO. Another way of saying this is, what Bebo Crain shared in Episode 108, “The simpler the better,” and then he qualified, “Or, the more understood, the better.” Because, as he shared, “As contractors we are held accountable for what we can document, not just what we did.” 

There may be technologies that help us to be more efficient and effective, but if we do not have a base knowledge of how to compose an estimate without software, we are going to have issues. This translates to all parts of the business. When we become over reliant on a process or a resource, we lose sight of the foundational elements of the industry and struggle to dissect reasonable fixes for basic issues. Basic issues that continue to plague many organizations. Estimating is just one of these areas that demonstrates this dissonance between what an organization says it wants to accomplish and its day-to-day habits.

Estimates are Communication Platforms

A project always consists of at least three elements: 

• The scope
• The duration (schedule) 
• The cost

The duration and the cost are directly related to the scope. Most people want to focus on the cost, but scope is the most important to clarify among all parties first. 

By contrast, what happens in a typical change order transaction between a TV-based remodeling personality and their chosen contractor? 

POINT #1 - All estimating platforms are communication platforms. 

In the insurance world, an Xacimate estimate is room-by-room, line-by-line. It’s not a format many contractors or customers are familiar with. But who is familiar with the format? Insurance companies. Who has the money? Insurance companies. So, if they have the money and you want to work with them, perhaps it is helpful to think of Xactimate as a communication platform more than it is an estimating platform. 

Xactimate estimates are built with a diagram/sketch, there are many helpful means of creating and communicating scope using the sketching tool. 

Xactimate estimates allow you to forward photos that are labeled in correlation to the rooms and scopes that they refer to. A labeled photo helps to prevent many unnecessary headaches. For example, a photo labeled “Kitchen cabinet base section one face damage, replace box” is much more helpful than “IMG 1008” or “cabinet was broken”. If you are an owner or manager listening to this episode, these are things you have to train. What does it mean to label a photo? It doesn’t happen without intention and training. 

Before you resort, as many do, to simply blaming the estimating tool. Stop and think about your processes. Does your team regularly create an estimate that the insurance company, the entity with the money, the customer, the entity with the contract signing pen, and the production team, the ones who have to complete the work, all understand? 

An estimate communicates to the money, the signier, and the worker, what is and what is not part of the project. If one, or all of those parties don’t understand the scope, you need to fix your communication platform. If one, or all of those parties don't understand the scope, you need to fix your estimating process.​

All Estimates are Data Driven

POINT # 2 - All estimates are DATA driven 

If you don’t understand the scope, you won’t be able to price the estimate correctly. 

Potential solutions for getting better scope details to the estimator:
 

1. Skilled estimator, limited skills inspector: Send someone out who can utilize technology to share as much data as possible with your estimator (internal or external). This is a good example of where technology can expand your capacity. Maybe you have one, or a few people, who write in Xactimate (or fill-in-the-blank estimating platform). They cannot inspect every project, so utilize your resources to keep the estimator in one location so they can write as many as possible. Volume approach. 
2. Skilled inspector, limited skills estimator: Send someone who understands the scope's technical aspects out to do the site inspections. They can fill out a tick sheet or very detailed scope comments. The key issues here are what items are going to be difficult to find or explain in a standardized estimating platform. An estimator with limited skills can then look up the best line items that fit the scope. You’ll probably still need someone who can double-check the estimates before they get sent. 
3. If you are new or have limited skill sets, do the best you can. Play the volume game and learn as you go. 
4. Or you can try to play the quality game and only take those projects that you believe you have a good chance of winning and/or supplementing to a profit. 

What is the common thread? DATA. Having the right people capture the data and the right people enter the data for your approach. 

When we consult with or write remote estimates for a client, we always ask them to complete a minimum level of documentation. This HAS to be a dimensional scope, as accurate as possible, and scope details. For those who are new or have limited knowledge, a video is one of the best ways to ensure the estimator is writing what the person scoping the project wants to achieve. In insurance work, photos are a must. This is Commandment Number 2 from my first book. But if the estimator, the adjuster, or the client has no idea where the photo came from - ie room and what the photo is telling them, it’s useless. Labeled photos are key. 

IMPROVING ESTIMATING OUTCOMES: 

• What is your approach? 
• What are your strengths, build on those. 
• What are your weaknesses, supplement for those. 
• What is your process for internal review - before the estimate goes out, once it is “approved” and when you are ready to contract? 
• What are your results? ​

In Episode 111 of The DYOJO Podcast: 

• 0:00 Deep thoughts for construction estimators
• 2:47 Career growth tips with Nicole Humber
• 4:48 Learning from restoration history with Cliff Zlotnik 
• 11:48 Three critical elements of a construction project 
• 16:45 The importance of communication 
• 21:37 All estimates are data-driven 
• 28:01 Simplifying the estimating process

Credits 

The DYOJO Podcast is produced by The DYOJO (D-Y-O-J-O). Host Jon Isaacson, the Intentional Restorer, is an author and contractor based in Puyallup Washington. You can find out more about this podcast, including blog posts with content references, as well as Jon’s books for contractors and other services at thedyojo.com. If you have enjoyed this content, please like, subscribe, and share.

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