Every estimator has their own spreadsheet
Standardize cost codes and markup rules so every estimate compares.
Each estimator has built a sheet over the years, with his own cost codes, his own markup, and his own way of handling contingency. Two bids for similar work come out with different numbers and no one can say why. When a job is won, someone in the office re-keys the estimate into the job budget, and errors creep in. You can't learn from your estimates because they don't line up with each other or with your job cost.
Three moves, in order
What CFOS does about it
CFOS takes an estimate in and uses it as the job budget by cost code, so no one re-keys it. There are three levels of cost code and seven cost types, which gives every estimator the same structure. The overhead calculator gives you the overhead number to put in your estimates, and the CEO Report grades your results against the industry average and the CFOS target for your trade and size. A bid pipeline keeps track of the value, bid date, chance of winning, and lost bids across all estimators.
Who owns this: Controller.
At $15M with three estimators, three sets of codes means you can't add up their bids or their jobs. One list of codes fixes that. It also fills the job budget.
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Step 04: Estimating system
The estimate maps one to one onto the job cost codes, so variance means something the day it appears.
Other problems step 04 solves
Other things that go wrong
What owners ask
Standardize construction estimating?
Standardize cost codes and markup rules so every estimate compares. Each estimator has built a sheet over the years, with his own cost codes, his own markup, and his own way of handling contingency. Two bids for similar work come out with different numbers and no one can say why. When a job is won, someone in the office re-keys the estimate into the job budget, and errors creep in. You can't learn from your estimates because they don't line up with each other or with your job cost.
Which part of the system fixes this?
The step is number 04, estimating system. The estimate maps one to one onto the job cost codes, so variance means something the day it appears. It's drawn from chapter 4 of CONTROL: C.F.O.S. Construction Financial Operating System.
Is this normal for my trade?
Across the 48 trades that publish a figure, net profit at $1M to $5M averages 7% before taxes. If you're well under that and this page describes your month, the two are usually the same story. The published average tells you where the pack is, and your own job costing tells you where you are, which is the number that pays payroll.
Where do I start?
Agree on one list of cost codes for estimating and job cost, and require every estimator to use it on every bid.
Will my estimators accept a standard format?
Most will if you build the codes with them and keep the format close to what they use now. Estimators resist changes that look like extra work. Show them how the job budget fills in on its own and that their numbers get tracked against actual cost.
Do I have to throw away my estimating software?
No. Keep it if your estimators like it. The point is that the cost codes line up with your job cost, and that the estimate can import as the job budget.
Can I fix this without touching anything else?
You can try, and it doesn't hold. Step 04 depends on step 01, job cost structure and step 03, overhead calculation. Install it ahead of those and it produces numbers the field won't trust, which is worse than the problem you started with.
Wrote CONTROL, the 8 step system behind these figures. More about the author.