Bidding for jobs is one of the most important functions of any construction firm, big or small. Without lining up a steady stream of work, a contractor is unable to plan cash flow, grow the business, or develop a reputation as a reliable company that has a solid track record.
For that reason, the estimating process has become highly computerized, both as a way of speeding up the process, which used to take days or even weeks, and of avoiding costly mistakes, which were common before sophisticated estimating software entered the construction market.
Tom Webb, vice president of strategy and R&D at HCSS, a Texas-based construction management software firm that offers a suite of CMS modules, including a bidding and estimating component known as HeavyBid, says estimating software benefits estimators in four ways. In fact, he calls them “The Big Four.” They are:
- pricing the work,
- incorporating production data,
- managing subcontractors, and
- creating templates.
Pricing the work
Before the arrival of spreadsheets and computers, estimating was done by pencil and paper. Contractors would split the job into various phases of work, illustrate the phases on paper, and then break down their costs in longhand. Cumbersome as that may seem, the goals were the same as they are today: determine how much labour, equipment and materials are required, and then cost it out properly so that the job is profitable and competitive, and has a low risk of being completed at a loss.
While the move to spreadsheets in the 1980s was a seismic shift in the world of cost estimating, positioning data in rows and columns had its limitations. Without software to consolidate multiple data points, members of estimating teams worked on separate spreadsheets. The whole process was unruly, time consuming and prone to errors, especially when numbers were transposed from one sheet to another, or when last minute changes had to be made.
That capability to change information is crucial and software allows an estimator to make changes to costs throughout the bid process, rather than plugging the data into a static summary, says Webb.
“Equipment managers may think of an alternative way to deliver the equipment in a way that actually reduces the overall cost of the bid and really helps the contractor win that work,” says Webb. “But in order to do that, in that paper and pencil way or in a spreadsheet – when you’ve already started combining all those costs into your bid that you’re going to hand in – it’s almost impossible to go back and make changes at that level of detail.”
An example is lowering the bid costs by calculating how long a machine will sit idle on the site and deducting those hours, thereby lowering the charges the customer will be expected to pay for equipment usage. Or, using a portable piece of equipment, like an asphalt plant, to do multiple tasks, thereby shaving costs off the bid. “It’s a great way to be more aggressive with your pricing,” he says.
Production data
He said failing to account for production data is one of the most common mistakes that estimators make but can be prevented by using software. As an example, suppose an estimator needs to figure out how many feet he will pave per hour for a particular job. Most estimating software has the ability to integrate a company’s historical production data into the bid process.
“I might be thinking, ‘I’ve got something that’s going to pave 200 feet an hour.’ But when I look at the historical numbers, I see that on average, my crew has only been able to achieve about 160 feet an hour. So now, I can bid with more confidence on the production that I can actually achieve,” says Webb.
Subcontractors
Before the advent of estimating software, managing multiple subcontractors, including obtaining pricing data from them before the bid deadline, was an onerous process. The system was also inflexible, because last minute changes were difficult to incorporate into the final bid document.
“It’s not unusual in the construction industry for the day before the bid or the morning of the bid, a key subcontractor calls and makes an adjustment to their price,” says Webb. “Having the ability to quickly get back into your bid and make sure that your bid is accounting for the reduced price from the subcontractor is a tool to help you win that low-bid work.”
He gave the recent example of a contractor using HeavyBid who was able to accept a subcontractor’s price change three minutes before the deadline.
“They took a cut from the subcontractor, and absorbed it into the bid. That cut is what actually got them the bid.”
Templates speed decision making
But what if a contractor isn’t sure whether or not they want to even bid on a job? Why go through all the time and effort, only to learn that they aren’t competitive? According to Webb, this is where estimating software really shines, because it enables an estimator to employ templates, or what HCSS calls “codebooks.”
Suppose, for example, a utility contractor does a lot of culvert work. When a government authority asks them to bid on the job, they have a template already set up for similar types of culvert jobs they’ve done, so it’s possible to plug in the new numbers and make a quick calculation to see whether it’s worth putting in a bid.
“Ultimately, that’s where the big win is with software,” says Webb, noting that templates can allow an estimator to get 40 to 50 percent of the bid done in a very short time. “Within minutes they can know, ‘Okay, this is roughly how our costs are going to shape up. Should I even bid the job or not?’”
Software costs and benefits
Most cost-estimating software is sold as a per-license fee, which can include more than one user. Webb said a good range to budget is around $4,000 to $6,000 per person. There is also an annual maintenance fee. Initial training takes two to three days, at a cost of between $5,000 and $7,500, plus a few days a year so the contractor is able to keep up with changes to the software. Online and phone support is available.
Most estimating software is available either in the cloud or through a local server. Webb said many users prefer a cloud-based system because the security is actually tighter than an on-premise type of configuration.
“We’re in a very security-conscious situation and this just happens to be a really big issue for the world of estimating.”
Webb says he often hears two types of success stories from those who have taken the plunge into HeavyBid: either the software has allowed the company to bid more jobs, or it facilitated more accurate bids.
A typical statement he has heard, particularly from structural building contractors, is: “Because I knew my costs and because I was able to actually dial into my production a lot more, I was able to be more precise with my bids.
“It wasn’t necessarily that I won more work than I was expecting to win. But it was when I actually went and bid that work, it came in more consistently on budget. I was able to really make sure that my costs were covered properly in the bid, so that I made the profit I was expecting to make. The software basically took the risk out of it.”
