Software Solutions for Landscape Professionals “ Bidding and Estimating” Planning for...

Software Solutions for Landscape Professionals

“Bidding and Estimating” Planning for Profitability 2011 Webinar SeriesDecember 1st, 2011

Presenter:Marcus vandeVlietConsultant – MV

Enterprises marcusv@aol.com

Agenda Introduction What Should You Bid? Estimating Process

Preparation Build the Project in Your Mind – Materials, Labor & Equipment,

Subcontractor, Miscellaneous Kits General Conditions DS Manage|360 Demonstration Conclusion & Discussion

Bid vs.Estimate

Estimating is determining what a job cost: relating to Labor, Materials, Equipment and Subcontractors.

Bidding is taking the estimate and adding Overhead, Profit and Contingencies to determine, the price to be paid for that job

Bids can be lowered by reducing profit, but estimates should not be lowered, because costs are costs

Perfect Estimating System? There is no such thing as a perfect estimating

system. The system must recover all direct and indirect costs.

The system should allow for job costing.

The system must operate in the real-world.

The system must be flexible and allow for variables.

The system must provide a break even point.

Price

Costs

Overhead

“Hoped for profit”

Price

Costs

Overhead

“Determineprofit”

Pricing FormulaProject Costs

(Labor, Materials, Equipment & Subcontractors)+

Overhead Costs=

Breakeven+

Profit=

Selling Price

Profit Factors Size of Project

Risks Involved

The Marketplace

The Need for Crew/Company

Competitive Advantages/Disadvantages

Client Factors

What Should You Bid?

Do you have a niche?

Do you have a competitive advantage?

Do you have any unique expertise or experience?

What is your reputation in your marketplace?

Determining the sweet spot is an internal system.

Determining Your Sweet Spot What specific types of work are you best at?

Hardscape versus softscape. In-house versus subcontractor. Scope: Simple verses complex.

What a sized projects should you complete? Largest project size. Smallest project size. Ideal project range.

Determining Your Sweet Spot What is the project schedule?

Commencement or completion deadlines. Adequate project preparation time.

What is your ideal customer? Residential. Commercial. General contractor. Government.

Determining Your Sweet Spot Where should this work take place?

Distance from facility. Time from facility. Long-distance project criteria.

Where should the lead come from? Direct referral. Repeat business. Negotiated bid. Competitive low bid.

Determining Your Sweet Spot How competitive is the marketplace?

Number of competitive bids. Qualification of competitive bid companies.

How much profit should we make?

What type of customer relationship do we want?

Determining Your Sweet Spot How much control do we want?

In-house design. Project management function. Material purchasing. Customer contact.

Decision Criteria

No compromise. High quality, real service & exceptional customer

experience.

Value. Good quality, acceptable service & reasonable customer

experience.

Low price. Poor quality, zero service & no customer experience.

Sweet Spot Example

High-end residential design and build.

Complex projects requiring project management functions.

Direct referral or repeat customer.

Customer has referral potential.

Within 30 minutes of our facility.

Sweet Spot Example

Contains both hardscape and softscape.

Minimum profit 20%.

Project criteria based on high quality, service & experience.

Long-term customer relationship.

Minimum project preparation one month.

Sweet Spot Notes

Determine the criteria for the sweet spot grading based on sales pipeline and project backlog.

For example in the spring time the criteria would be stricter due to the number of estimates that need to be generated. Spring period could require 7/10 Summer period could require 5/10

Sweet Spot Notes

Certain sweet spot criteria should not be compromised. Profit margin Project preparation time High quality, service and customer experience.

The system will eliminate the emotion from the process of determining what to bid.

What Should You Bid? - Summary

When you lower your price without changing the scope of work, all you're doing is lowering your profit.

Selectively bid projects, using your Sweet Spot criteria.

Make sure you have enough time to bid each project properly.

The Estimating Process

Gather All the Information Required: Detailed plan to scale. Complete specifications and project requirements. Complete scope of work. Site Visit: This is critical!!!!!!!

▪ Site measurements and elevations.▪ Does the plan to match the site?▪ Do the specifications match the site?

▪ Project general conditions.▪ Photo or video documentation.

The Estimating Process

Initial Setup of the Estimate: Determine the work area breakdown. Determine price and cost breakdown. Create internal and external notes:

▪ Inclusions and exclusions▪ Scope of work▪ Crew notes and special instructions▪ Estimating notes and assumptions

▪ Production should build what was bid.

The Estimating Process

Build the Project In Your Mind: Outline the complete scope of work. What has to happen prior to project commencement?

▪ Ordering and staging of materials.▪ Subcontractor pricing and set up.▪ Utility mark out.▪ Preconstruction meeting.▪ Mobilization of materials and equipment.▪ Phase 1 layout.

The Estimating Process Project Starting Point:

Determine any site preparation work required.▪ Transplants, removal and demolition.▪ Excavation and rough grade.

Start at the furthest point, and work your way out. Start at the deepest point, and work your way up.

The Estimating Process Project Starting Point:

Other factors:▪ Work performed reduces access to work area, especially if

equipment is required.▪ Stage materials in the work area prior to limiting access.

▪ Specialty and subcontractor crew schedule.▪ Material maintenance, such as plant material.▪ Material damage, such as tile on flat surfaces.▪ Other trades that limit complete access.▪ Site factors such as low wet areas or elevation change.

Materials

Determine the quantity of materials required for each work area.

Use the same quantity units as the vendor. Build waste and shrinkage into the equation. Determine mobilization on-site to the work area. Determine delivery, staging and handling costs. Select vendor on price, quality and service. Materials are based on cost:

Add sales tax or use tax.

Labor and Equipment

Labor and equipment go hand-in-hand. The equipment used should reduce the labor

required for the project. Determine the site damage versus the labor

saved by using equipment. Determine standard production rates for each

material type. Labor is based on average crew wage.

Average Crew Wage

Set up standard crews for each division. Combine the hourly rate for each crew, by person

and divide by the number of persons on the crew. Add an overtime percentage based on projected

use. Add labor burden as required. For multiple crews that perform the same work,

use a higher crew average. Adjust for competitive projects by defining a

specific crew.

Equipment Cost

Determine the hourly cost for each piece of equipment including: Purchase. Operation. Maintenance and repair.

Base the cost of a piece of equipment on replacement cost, not what is owed.

Use sitting rate versus the actual rate per hour.

Calculate Equip/Vehicle Cost/Hr

Equipment/Vehicle: Typical 3/4 Ton Pickup - Two Wheel Drive

Usage Hours: 42 hrs/wk x 48 wk/yr 1,920 hrs

Purchase Price (New): $25,500.00

Inflation: 10 % $2,550.00

Interest: 4 yr @ 10 % $5,100.00

$33,150.00

Less Salvage: $6,375.00

$26,775.00

Life Expectancy: 1,920 hrs x 5 yr 9,600 hrs

Cost Per Hour: $26,775.00 / 9,600 hrs $2.80

Anticipated Lifetime Maintenance, Insurance & License Costs :

$18,388.00

Per Hr Maintenance Cost: $13,388.00 / 9,600 hrs $1.92

Gas & Oil Per Hour: $2.90

Total Cost Per Hour: $2.80 + $1.40 + $2.90 $7.62

Labor

This is the biggest variable on every project.

It is the biggest risk on every project.

It represents the greatest opportunity for improvement.

How are you holding your labor force accountable?

Do you have a performance based compensation system?

Subcontractor

Use multiple subcontractors for each type of work. Compare prices for different types of work. Select best sub for each project and customer.

Clearly define entire scope of work. Obtain a lump some price for the project. No

CO’s. Select subcontractors that are similar to your

company. Calculate cost for in-house completion of

subcontractor scope.

Miscellaneous Costs

These will typically vary from project to project. Usually set up with 0 % profit. Allows for the recovery of cost only:

Design fee Commission Permit costs Dumping fees Professional fees Insurance costs

Estimating Process - Summary

Build the project in your mind, on site. Determine the project starting point

through to final completion. Start with material takeoffs. Determine the labor and equipment

required. Focus on the labor, this is the biggest

variable and risk.

Kits

Kit: Standard repeatable set of steps for each function performed.

Used to dramatically speed up the estimating process.

Provides consistency in the estimate, so that the variable is in production for job costing.

Get consensus from sales and production. The kit is only the starting point, make sure

changes are made for each specific project. Set up the kit based on the estimate

requirement.

Kit Tips In some cases multiple kits need to be combined in one

work area. For example a retaining wall could be broken down into three

kits:▪ Footing, base course and cap by linear feet▪ Face feet of wall by square feet▪ Layers of Geo-grid by linear feet

The same retaining walls could be constructed by height and linear feet.▪ For example the kit is set up for a 2 foot high wall that includes

footing, base course, exposed wall face and Cap.▪ Another kit is then set up for a 3 foot high wall, and so on.

Separate kits are usually required if the unit is different from item to item.

General Conditions Key to determining real project costs. Job specific costs. Project variables based on each project. Costs only associated with that project. Critical that all specifications are studied

carefully. Critical that you visit the project site. Gather all project information possible. Communicate with all involved parties.

General Conditions - ExamplesMobilization (Equipment and labor)Clean up & Debris Removal/DumpingMaterial delivery, Load/Unload & StorageMeetings

Customer.Project.Inspections.Preconstruction.Milestone.

General Conditions - Examples

Permits, Bonds, Additional Insurance etc.Site Maintenance

During project construction.During warrantee phase.As specified.

Site RepairConstruction damage.Utility repairs.Property repairs.

General Conditions - Examples Project and site Supervision Traffic control and parking Warranty

Hardscaping.▪ Not responsible for sub base.▪ New construction and swimming pools.

Planting.▪ Hardiness and quality of plant material.▪ Irrigation system.▪ Professional maintenance.

General Conditions - Examples Warranty

Planting.▪ Site conditions including slope and exposure.▪ Drainage and soil conditions.▪ Warrantee period: 2yrs.▪ Outside damage.

Site Conditions Access to work area.

▪ No equipment due to weight or limited access.▪ Height: slope, stairs or elevator required.

General Conditions - ExamplesSite Conditions

Ground or soil conditions: underground obstacles and compaction.Utility locations requiring hand work.Weather and season.

Watering during the summer.Reduced work hours during the spring and fall.Factor into project deadlines.

Working with other trades in your work area.Full access to the site.

Kits/General Conditions - Summary

Kits will dramatically speed up the estimating process, and provide consistency.

Involve sales and production people when setting up the kits.

General conditions are unique for each project.

General conditions are accounted for while you are building the project in your mind.

DynaSCAPE Manage360

Demonstrate DS|Manage360: Show an example of a kit. Enter proposal notes to an estimate. Add kits and plants to an estimate. Add general conditions to an estimate. Generate a proposal from an estimate. Create a job from a won proposal.

Conclusion & Discussion

Thank you for attending DynaSCAPES“Bidding and Estimating” Webinar

Presented By : Marcus vandeVliet Organizer: Andrew WilsonConsultant – MV Enterprises Manage360 Account

Mngr/Sales RepPhone: (302) 239-6612 1 800 710 1900 x231marcusv@aol.com awilson@dynascape.comwww.mventerprises.biz www.dynascape.com