Estimating and Bidding Strategies
that Drive Best Practices
Presenter:
Victor C. Tyler, P.E.
Victor C. Tyler, P.E.
• President/ owner of Tyler Construction Engineers, P.C.
• Licensed Professional Engineer in state of Tennessee
• Author “How To Estimate Road Construction Accurately”
• Cost and Pricing Specialist
• Management consultant to the engineering & construction industry
How Time In Construction is Spent
Opportunities for improvement
36%
other
activities
64%
Installation
 Planning makes actual
installation more efficient
 Other activities such as site
movement, material
logistics, general nonproductive time and
rework is minimized
The Average Construction Day
DESCRIPTION
%
HOURS/DAY
Study Plans
Material Procurement
3%
3%
0.24
0.24
Receiving & Storage
Mobilization
3%
5%
0.24
0.40
Site Movement
Layout & Marking
5%
8%
0.40
0.64
Actual Installation
Cleanup
64%
3%
5.12
0.24
Breaks – Non-Productive
6%
100%
0.48
8.00
TOTAL DAY
Where can we improve?
Look at 176 Man-hour Month
DESCRIPTION
%
HOURS/
MONTH
Study Plans
3%
5.28
Material Procurement
3%
5.28
Receiving & Storage
3%
5.28
Mobilization
5%
8.80
Site Movement
5%
8.80
Layout & Marking
8%
14.08
Actual Installation
64%
112.64
Cleanup
3%
5.28
Breaks – NonProductive
6%
10.56
TOTAL MONTH
100%
176.00
For one employee
approximately 63
hours per month is
spent on activities
other than actual
installation
…. approximately
760 hours per year
for that one
employee.
$45,619 per year
If you have 4 full-time field employees
paid at $15 per hour …
That’s why I talk about productivity in the
estimating processes for both
field employees and equipment.
Today’s Tip
Use accurate rates and reduce idle time.
Lunch ______
Breaks
Only _____
are 100% Productive!
Estimating Accurate Job Costs
Bidding on Profitable Jobs
Making Profits on Every Job Won
8
The job of every estimator is to help
his or her firm acquire profitable work.
Thus the top priority for the estimator
is to estimating accurate job costs.
Strategy
Tyler’s Cost Strategy 101
1. Organized and document data
2. Be detailed and factual
3. Base the estimate on historical data
4. Use a predictable, measurable and repeatable
processes (use checklists, templates, software)
5. Always monitor your progress and make
adjustments as required
Tyler’s Cost Strategy 101
6. Know and understand your costs
(Labor + Material + Equip + Subs + Job Site Overhead)
7. Make the estimate comparable to the P&L
Statement
(Revenue – Job Cost – Overhead = Profit)
8. Cost first,…then price
(Price = Direct Costs + Overhead + Profit)
Know Your …
Direct Job Cost
• Material
• Labor
• Equipment
• Subcontractors
• Other direct cost
Know Your …
Job Site Overhead Costs (General Conditions)
 Labor Burden
 Indirect Labor
 Job Supervision
 Tools & Consumables
 Insurances
 Travel
 Other
Cost First, then Price
Strategy
.
Accounting is BORING!
Bid Price Structure
Contract Price
Total Cost
Direct Cost
Work Item Cost
Profit
Gen & Admin. Profit
Jobsite OH
Markup
Mat l. Labor Equip Subs Jobsite OH
Markup
Estimate Summary
Company Income Statement
The Estimator’s View
The Accountant’s View
Direct Costs …………………….. $$$
Direct Labor
Equipment
Materials
Subcontractors
General Conditions
plus Labor Burden (%)
plus Job Site Overhead (%)
equals Total Direct Cost ……….. $$$
Contract Revenues
…………………… $$$
minus Direct Cost of Sales
Direct Labor
Equipment
Materials
Subcontractors
Other Direct Costs
minus Indirect Costs
.……………… $$$
Labor Burden
Benefits
Indirect Expense
plus General & Administrative (%)
plus Profit Rate (%)
equals Gross Profit
………………… $$$
plus Bond Rate (%)
minus General & Administrative Expenses
equals Total Contract Price ……… $$$
equals Income (Loss) Before Taxes …… $$$
Understanding Risk & Pricing
Project
A
Project
B
Project
C
Labor
Material
Equipment
Subcontractor
Other
$10,000
$20,000
$5,000
$169,000
$2,000
$50,000
$70,000
$7,000
$76,000
$3,000
$90,000
$90,000
$20,000
$2,000
$4,000
Total
$206,000
$206,000
$206,000
Overhead – 10%
$20,600
$20,600
$20,600
Profit – 12%
$24,720
$24,720
$24.720
$251,320
$251,320
$251,320
Total bid
Example from Book, “Managing a Construction Firm on just 24 hours a day”, by Matt Stevens
Understanding Risk & Pricing
Project
A
Project
B
Project
C
Labor
Material
Equipment
Subcontractor
Other
$10,000
$20,000
$5,000
$169,000
$2,000
$50,000
$70,000
$7,000
$76,000
$3,000
$90,000
$90,000
$20,000
$2,000
$4,000
Total
$206,000
$206,000
$206,000
Labor/Equipment – 15%
Material/Subs/other –5%
Office Overhead – 10%
$4,500
$9,550
$20,600
$8,550
$7,450
$20,600
$16,500
$4,800
$20,600
Profit – 5%
$12,033
$12,130
$12,395
$252,683
$254,730
$260,295
Dual Overhead Allocation
Total bid
Example from Book, “Managing a Construction Firm on just 24 hours a day”, by Matt Stevens
Margin vs. Markup
Job Profit and Loss Statement
Sales ……………. $
Less COGS …...
Gross Profit …….
Less OH ………..…
Net Profit ..……..
700,000
507,000
193,000
175,000
18,000
As a % of
Sales
Markup
As a % of
Direct Cost
100 %
138 %
72 %
100 %
28 %
38 %
25 %
34.5 %
2.6 %
3.6 %
Basic Cost Summary
Expanded Cost Summary
% of
Revenue
% of
Direct Costs
$ 700,000
136.72 %
Labor
120,000
23.44
Material
300,000
58.59
10.71
Equipment
75,000
14.64
1.71
Subs
12,000
2.34
Other Cost
5,000
0.98
Total Direct
$ 512,000
100.00
Labor Burden
$ 40,000
7.81
Supervision
75,000
14.65
Total Job Site
$ 115,000
22.46
$ 627,000
122.46
Gross Profit
73,000
14.26
Overhead
55,000
10.74
$ 18,000
3.52
$ 700,000
100.00
Labor
120,000
17.14
Material
300,000
42.86
Equipment
75,000
Subs
12,000
Revenue
Overhead
and Profit
193,000
Revenue
Direct Costs
27.58
Job Site OH
Total Cost Input
Profit
Quick Study Example:
Cost Multipliers
You are preparing a bid for Project XYZ and have estimated the direct costs as
follows:
Direct Costs
Labor - $ 75,000
Material - $150,000
Equipment - $ 75,000
Subcontractors - $ 50,000
Create an estimate summary utilizing the cost multipliers we calculated. Therefore,
the estimate summary becomes:
Direct Cost (labor, material, equipment, subcontractors)
Labor Burden:
$ 75,000 x (25.93 % )
Job Overhead: $ 350,000 x (14.53 %)
Office Overhead: $ 420,302.50 x (7.81 %)
Total Project Cost (without Profit)
= $ 350,000.00
=
19,447.50
=
50,855.00
$ 420,302.50
=
32,825.63
= $ 453,128.12
• Position (Market)
• Project
Strategy to winning
• People
more profitable work.
• Product / Service
• Price
• Production
• Profit
Best Practices …
• Know Your Cost (Estimating)
• Understand Your Cost (Project Management)
• Control Your Cost (Project Accounting)
• Continuous Improvement
(Always)
on each & every job
More Predictable
QUESTIONS?
Thank You!
810 Dominican Drive, 3rd Floor
Nashville, TN 37228
dbe_supportive_services@tyler-engineers.com
www.tyler-engineers.com
1.888.385.9022
615.469.5398