The goal in estimating is to estimate exactly what something is going to cost every time. The reality is that it doesn’t happen every time. The result of that is people start adding fudge factors to each of their estimates. Using the same logic on a different type of job could cause disastrous results. A lot of the time the estimate is just checked by the total amount of the estimate being checked against the total amount of the actual job at the completion of the job. This type of job costing is a start, but it needs to be broken down to know what part of the estimate failed.  

If you look at an estimate by the line items and job cost the actual cost against each line item, you will get what the cost is for each item. (Items such as Labor, Material, Subs, Other). Not only that, but you will also be able to see exactly what’s working or not working on each job. It will allow you to determine the part of the estimate that isn’t correct, where the job is going sideways thus showing the area that needs to be addressed. It will also give you information to develop an incentive program that will benefit all concerned in the job production and you will see job profitability increase. The end goal is not to find fault but to determine where improvement is needed and information that you can use to address how to improve the process in real-time.  

So, let me suggest seven steps that you might consider improving your estimating process to get your jobs more accurate, profitable and that will help develop a more positive approach to completing jobs on time and on budget.

Step One

The Estimator will generate an estimate in as clear a manner as they can. This will allow the rest of the individuals the opportunity to produce the job exactly as it was bid. This should also address the issue of not having to constantly touch base with the Estimator.

Step Two

The Estimator meets with the Production Manager on the proposed job site without anyone else being present. The goal of this meeting is to have both individuals discuss the estimate to allow both individuals to gain a complete understanding of the job required and they both agree on the written estimate both in time and scope.

Step Three

The Production Manager meets with the person that will be responsible for the job. The goal of this meeting is both individuals discuss the estimate to allow both individuals to gain a complete understanding of the job required and that they both agree on the written estimate both in time and scope.

Step Four

The Person responsible for the job is responsible for the DAILY Time Sheet to be properly allocated to the estimate FOR EACH LINE OF THE ESTIMATE and then turned in to be reviewed by the Production Manager. The Production Manager and Person responsible for the job will review, discuss and make adjustments to the production time frame of the job schedule based on what was done or not done on the jobsite that day.

Step Five

The Job progress will be reviewed WEEKLY with all individuals that attend the weekly status meeting of jobs in progress. Explanations, Adjustments and Additional Work Authorizations/Change Orders will be addressed and communicated to ALL involved with the job.

Step Six

Any deviations will be addressed, and appropriate actions will be addressed and executed as needed in the current Estimating Process to IMPROVE YOUR current system.

Step Seven

Begin to address the existing system and consider how you might be able to consider using YOUR DATA addressing an INCENTIVE System that might MOTIVATE EACH ENTITY to IMPROVE AND REWARD MORE PROFITABLE BEHAVIOR WITHIN THE COMPANY.

Here’s the issue with what I’ve said. It’s going to bring Accountability to the Production side of your company. The first thing people usually do in this situation is that they do not like change and this is a change to what they are currently doing. The goal here is to generate a Win-Win for all participants. If you want some help with this, I would be happy to work with you and your team to ease their resistance and to facilitate a discussion with the team about it needing to be a Win-Win for all concerned.

If you have ANY questions regarding implementing this idea within your company, please contact me to discuss the above process.

Les@BusinessNetworks.com, 800-525-1009 or 541-729-7272. I look forward to a discussion with you!