How often is there a miscommunication between the estimator (scope of the estimate) and the production team (agreed-upon scope of work)? What if there was a resource readily available to every member of your team that could help you reduce miscommunication and increase profitability? In this article and accompanying video we will discuss how you can improve project outcomes with THIS simple tool. 
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• What happens when the production team DOESN’T complete all of the scope of work?
• What happens when the production team does MORE than the scope of work?

Watch The Video ​

Prevent Scope Creep & Increase Profitability 

Doing less than you estimated and having to go back is costly as it takes resources that could otherwise be performing profitable work offline to return to a jobsite that should have been completed. Doing more work than you estimated and not capturing the revenue means your teams are working for free. Both outcomes will impact project completion, profitability, and customer satisfaction.

One simple tool, that is already in the tool kit of every estimator, is the video function on their smartphone. Did you know that conducting a job walk through video recording what they are seeing and uploading that to a shared database, can help offset miscommunication during the project lifecycle? Save your team time, your company money, and your customer frustration by making a recorded initial scope walk a habit. 

Conducting a Video Construction Scope Walk Through 

A video construction scope walk through does not have to be anything complex, but it does need to cover a few key points.

• Walk through each area of the damaged structure 
• Record the conditions and the estimators thoughts about the scope
• Comment on unique aspects of the project
• Speak to customer concerns or areas of importance 

The estimator walks through the project and verbalizes what they are seeing on-site, unique aspects of the work, specific directions from the client, and how they are approaching the estimate. Having this video in the shared database will help everyone downstream to have a better understanding of what IS and what IS NOT in the agreed-upon scope of work (contract). 

• The estimator can review the video before they compose the estimate to refresh their memory 
• The project manager can review the video after the project file handoff to understand the scope and conditions
• The project manager can review the video with their production team to clarify the gameplan and resource allocation 
• The project manager can review the video with their subcontractors to clarify their scope of work and materials list

If this is helpful, tune into The DYOJO Podcast - helping your shorten your DANG learning curve - Thursdays on YouTube, Spotify, and Apple podcasts.

​During a recent three minute video, that I recorded while I was taking a walk, I discussed some thoughts on the topic of labor supervisory hours for insurance claims. Most of my comments were geared towards the repairs or reconstruction side of the insurance claims process, but the principles apply to water and fire damage mitigation as well. 

In the construction realm, supervisory labor (i.e. project management time) is something that is regularly charged for, but it is embedded in the lump sum pricing. When a consumer hires a contractor to remodel their kitchen, they likely will receive a one page document that says,
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• Kitchen Remodel
• Some rough specifications like soft close doors, oak cabinets, quartz countertops, under cabinet lighting, farm style sink, etc.  
• And then a price $X.XX

 
This is lump sum pricing and it's common. There is nothing out of the ordinary or wrong with this pricing model or estimating presentation. 

For the typical insurance claim, carriers prefer to see estimates itemized in what's referred to as unit or standardized pricing. Often an estimating program called Xactimate is utilized to create these estimates. In this format, the scope and pricing are presented as line items. The bid is build line by line and room by room. 

In unit, or standardized pricing, those items like supervisory labor, overhead, and profit are not embedded in the cost. Supervisory is separated out as an additional line item while overhead and profit are factored as markups at the end of the estimate similar to the way sales tax is accounted for. Again, in construction, these charges are normal but they are presented in a different manner. For an insurance project, since they are listed separately, it gives the impression that they are up for discussion or optional; this is not the case.  

The charges are common, but the format is not. It's important for the consumer and the contractor to understand these unique elements when working through an insurance claim. 

​Supervisory labor, or project management time, is the primary focus of this article. Even contractors misunderstand that this element is not an overhead cost, it is a direct cost of the project. Overhead costs are considered indirect costs. These are real costs for every construction business but they are are aspects of business that are not specifically attributed directly to the individual job.

Examples of indirect costs (aka general overhead) might include your business licensing, company insurance, office rental, administrative labor, utilities, etc. All items that must be accounted for or the company will not be able to pay their bills and won't be in business for long. 

On the other hand, supervisory labor includes the direct costs of having a representative on the work site, meeting with the client, lining out the project, making sure materials are properly ordered, and that the work is progressing along it's key intervals. These are direct costs. The company pays for their managers, supervisors, foreman, and safety personnel to be onsite. These costs should be charged for and not lumped into general overhead. 

​Supervisory labor is a direct cost that should be accounted for and approved on the front end. It is common to factor supervisory as a percentage of the total estimated hours or to be tallied and charged at the end of the project. The charges and factor should be agreed to in writing at the project outset. On a large project, it is recommended to send regularly updates on the hours applied so that the total hours and charges are not a surprise to all parties at project completion.

An example of how a contractor would present their charges for project management, including any applicable credits, might look like this:

Our NEW BOOK ranked:

• #1 New release for Estimating
• Top 20 for Property Insurance

Project outcomes in the skilled trades are tied to the estimating process. Good estimating is marked by the thoroughness of data capture (site observation) and the accuracy of data input (bidding). Author Jon Isaacson, The Intentional Restorer, shares his two decades of professional experience to help anyone involved with, or interested in, the art of estimating to shorten their DANG learning curve for improvement. ​

Increased Clarity = Increased Consistency

Team members cannot consistently perform if they don’t understand what they are supposed to be doing. Communication needs to be clear to those who are receiving the information. Developing your team's leadership skills includes helping members of management to learn to understand how their team learns as well as how to best communicate with them to relay information. 

Clarity + Consistency = Accountability

As Anthony Nelson, President of Premier Restoration, learned, “Quite often our younger Millennial and Gen Z technicians will refuse to tackle a given task until they understand the ‘why.’” It follows that skills like empathy and communication are at a premium for aspiring managers and business owners. Those who can learn to help their team members understand what needs to be done as well as why it is important will reap the greatest (and most consistent) reward. 

Dumb By Design

Owners, managers, supervisors, and anyone in a leadership role will see elevated results when they dumb their processes down so that someone who has no industry experience can understand what they need to do and why it is important to the team. Your communication is affected by the company you keep. While it is important for you to challenge yourself by being around other leaders, it is also important for you to connect and communicate with those at the entry level of your organization. Build clarity and consistency from the bottom-up, so that you can practice accountability from the top-down.  

If you would like to learn more about this concept, read Module One of Jon Isaacson’s NEW book, How To Not Suck At Estimating: Habits For Better Project Outcomes. This book will also be a training course offered through Restoration Technical Institute. The book should be available by August of 2022. In the meantime you can subscribe to The DYOJO Podcast for more content that will help you shorten your DANG learning curve. ​

Jon Isaacson, The Intentional Restorer, is preparing to release his fourth book. This title, How Not To Suck At Estimating: Habits For Better Project Outcomes will also be a course that the author will distribute through the Restoration Technical Institute. Elements of the books have been peer reviewed by various property restoration contractors and insurance claims professionals. Rob MacPherson, Manager of National Estimating Services at DKI Canada says the following, 

The target audience for this construction estimating book and training course is fourfold:

• The aspiring professional who wants to advance in their career. This book will be helpful to you. But, if you are not committed to mastering your current role (DYOJO), you will struggle to climb any further than where you are now. You will see how the things you are doing now will prepare you for future responsibilities.  
• Estimators and project managers who want to level up their abilities in estimating, claims negotiations, and project outcomes. This book covers a lot of what I have discussed in articles and two of my prior three books (Book 1 and 3). There is a good deal of new content as well, including deeper dives into some technical aspects of estimating. 
• The new manager who has been thrown into a position without much training or direction. This book will be helpful to you in understanding some of the principles that go into creating clarity, consistency, and accountability for your team. All three of my prior books will be of use to you as you develop your leadership skills.
• The business owner who either needs some direction or another voice sharing these core principles. This book will be helpful to you and every member of your team as you build an interdependent organization. I am sure you will want to buy multiple copies so that you can hand them out like candy to every employee.   

Xactimate is a common estimating software used as a means of establishing a common language between restoration contractors and insurance claims professionals. According to Xactimate, general overhead (aka indirect costs) are,

Indirect costs are all of those necessary expenses that a contractor incurs but are not directly related to an individual project. If a contractor, or any business, does not account for their overhead expenditures in the costs of their goods and services, they will not be in business for long. Examples of general overhead, according to Xactimate, include but are not limited to:

• General and Administrative (G&A) expenses
• Office rent
• Utilities
• Office supplies
• Salaries for office personnel
• Depreciation on office equipment
• Licenses
• Advertising

Xactimate does not include consideration for these indirect or general overhead expenses in their unit pricing. Instead, they advise, that the contractor should add these costs to the estimate, "As a percentage of the total bid along with the appropriate profit margin. These two costs together constitute what is normally referred to in the insurance restoration industry as General Contractor’s O&P, or just O&P." While contractors and carriers have become comfortable with a 20% markup, this amount is not stipulated by the software. 

Supervision is common, i.e. industry standard, for construction projects. This role is often the responsibility of roles including project managers, site foremen, superintendents, departmental supervisors, safety managers, etc. Supervision is critical to successful project outcomes and is a real cost of the work being performed. Xactimate states that indirect costs or job-related (specific) overhead,  

Supervisory labor (aka project management time) is as much a real cost that should be accounted for an compensated for the work as temporary power or restroom facilities. It is common to either bid supervisory labor as a percentage of the estimated labor or submitted as a breakdown for billing at project intervals (i.e. bi-monthly).