Mastering Job Estimating: Skills and Strategies for Success Part 2

Unlock the secrets to precise ICT project estimation and revolutionize your approach to competitive bidding with our latest episode. Discover how microestimating can transform your project management strategies and drive profitability. We break down the intricate process of estimating ICT projects into a clear, structured approach, from initiation to presentation. By mastering the art of crafting accurate bids, you position your company for consistent project wins and stronger client relationships. Our discussion provides clarity on vital industry documents such as RFB, RFP, and RFQ, ensuring you're equipped with the knowledge to excel in the procurement landscape.

Join us as we delve into effective techniques for preparing estimates, emphasizing the importance of understanding the client's needs, budget constraints, and competitive landscape. We share insights on the power of clear communication and documentation in preventing costly misunderstandings. Learn how to critically analyze client-provided designs to identify potential flaws, building trust and credibility along the way. Explore the distinction between direct and indirect project costs, and the critical need to track these for project success. Finally, we highlight the symbiotic relationship between microestimating and project management tasks, setting the foundation for successful ICT project execution.

Chapters

• 0:00 Estimating ICT Projects
• 9:43 Effective ICT Project Estimation Techniques

Transcript

Speaker 1: 0:00

Welcome to how to Estimate ICT Projects, part 2. Welcome to the show where we tackle the tough questions that are submitted by installers, project managers, estimators, it personnel and even customers. On this show, we connect at the human level so that we can connect the world. If you're watching this on YouTube, would you mind hitting the bell button and the subscribe button to be notified when new content is being published? If you're listening to this on one of the audio platforms, such as iTunes or Stitcher, would you mind leaving us a five-star rating? Those two simple little steps helps us take on the algorithm so that we can get this message out to more people, so we can educate, encourage and enrich the lives of more people in the ICT industry.

Speaker 1: 1:02

Thursday nights, 6 pm Eastern Standard Time. What are you doing Every Thursday night, 6 pm Eastern Standard Time. What are you doing Every Thursday night, 6 pm Eastern Standard Time? I do a live stream on TikTok, facebook and LinkedIn where I take your questions about the ICT industry, whether it's installation certification, estimation, project management and even sometimes career advice. But I hear you now. But, chuck, I'm driving a truck. I can't be watching the stream while getting in an accident. They're recorded and you can watch them at any time you want. Just go to our webpage at wwwletstalkcablingcom. By the way, those questions that are submitted first through questions at letstalkcablingcom by the way, those questions that are submitted first through questions at let's Talk Cablingcom get a preference. And finally, while we provide this content free of charge and we always will if you would like to support this channel and have access to additional information, check out the QR code. There you can find all of our social media presences. You can buy me a cup of coffee. You can even schedule a one-on-one 15-minute Zoom call with me after hours. You can also become a Patreon member and enjoy additional benefits, or visit our Amazon link on our page to see the products for ICT industry. And if you buy something, don't worry, you won't pay extra for it, but I will get a small stipend. Those couple little steps helps us support this channel and keep this channel going. I hope you consider it.

Speaker 1: 2:32

Last week, we began a two-part series on how to estimate ICT projects and covered what skills it takes to be a great estimator. I hope you enjoyed that content. This week, we focus on the mechanics of estimating ICT projects. Now keep in mind that this is a podcast or vlog and it can take months, sometimes even years, to truly learn about what it takes to become a good estimator and also how to estimate. So this episode is not meant to be an end-all, be-all inclusive how-to estimate, but hopefully by the end of the show you'll be able to take tidbits of information away to become a better estimator. If you would like me to create a class on estimating, let me know via the comment or send me an email, but I think I'm pretty much already decided I'm going to create an estimating class and I'll let you know when it's published.

Speaker 1: 3:27

There are many types of estimates, including macro and microestimating. A rough order of magnitude, elimination, top-down, bottom-up, just to name a few. No wonder people get confused with estimating. To streamline this episode, we're going to focus in on what's called microestimating. Microestimating is breaking the work down into work breakdown structures, which is basically a hierarchical system to organize many tasks. Those tasks can be organized and quickly turned into production units for your project manager to track. Now the goal with microestimating is to have 100% of your work breakdown structure in your estimate Today. This will be an exercise in a detailed cost estimate In our business of design and cable construction and profitability.

Speaker 1: 4:20

They're all linked directly to the ability to estimate accurately and completely. The better your project management tracking, the more accurate your bids will be. The more accurate your bids are, the more work you will win and the less money you will lose. It is a closed loop and estimating and project management are linked together. Your most successful companies understand this concept and embrace it. The estimating process can be broken down into four distinct phases. Those phases are initiation, research, assessment, analysis and presentation. First let's discuss what is estimating. Estimating is developing and forecasting the cost and schedule of a project. Once that is developed, then it is up to the management to decide their strategy based on the competitors, the market and ultimate the desired return that they want on that particular project. The estimator doesn't come up with the profit that is done by your senior level management. Doesn't come up with the profit that is done by your senior level management.

Speaker 1: 5:34

Some common terms that you're going to hear include RFB, rfp, rfq and RFI. Let's define those by looking at the Bixie ICT terminology handbook. The first one RFB. Rfb is request for bid. That's a type of procurement document and process used to select the best qualified response for goods, services and materials. The selection process need not be exclusively price-driven. Respondents may be evaluated on their technical qualifications and other factors, typically used when the requirements are well-defined and when there's a relatively large number of bidders is expected and or negotiations are not anticipated. You may also hear this called an ITB or invitation to bid RFP.

Speaker 1: 6:16

Rfp is another type of document and process used to solicit proposals from qualified respondents of products or services. The selection process need not be exclusively price-driven, so it's very similar to the RFB. The respondents may be pre-qualified and evaluated on technical qualifications and other factors, typically used for the less finalized project designs or when there's going to be fewer bidders being involved in the bid and the final terms will need to be negotiated. Then there's going to be fewer bidders being involved in the bid and the final terms will need to be negotiated. Then there's the RFQ. This type of document is generated by the owner or the owner's agent to solicit the request for quote information pertaining to the personnel, specialized equipment, qualification, skills, experience and special training, or certifications or licensing that may be desired for the project that they're trying to get done, use for the selection of professional and trade services, for example, architects, engineers, general contractors and subcontractors. Usually, with the RFQ you're going to be doing the design. Then there's the RFI. Now, rfi can stand for request for interpretation or request for information. It's a type of document or process that's generated either by the owner or the owner's agent, or maybe even the contractor, to obtain information or to clarify the capability of various project, services, processes or even requirements.

Speaker 1: 7:47

Now, getting back to our estimating, now that we have covered those terms, the first stage is initiation and research. This is the discovery phase of the project. You are learning about what the customer wants and, trust me, it may take you several readings or several meetings to achieve a clear enough picture to make you comfortable enough to provide a price when the projects are received for pricing. There are one of two types of pricing either informal or formal. Now, the informal could consist of something as simple as a phone call. The customer may call you and ask you to price a project and if you're a good estimator which I hope you are you will want to schedule a face-to-face meeting with the customer. This will help you to build that relationship with the customer and that's going to help them inspire confidence with you and allow you to get a better chance to win the project, because you don't want to be based just solely on price. You want them to be comfortable enough with you that they will select you over other estimators, even though your price might be a little bit more expensive. This will give you the ability to see the actual conditions that your crews will be working in, which is going to be a factor in your pricing in the estimate. If the request for a price is different location than where you meet the customer, then you should insist on seeing what that site looks like. Most informal requests will lack the formal process, documents and processes that we just talked about, for example, the RFP or the RFI, or maybe even prints. If you don't get prints, you will most likely be a very basic, and if you do get prints, they'll be very basic in nature. I once bid an informal project with no prints and a single 8x10 page with nine bullet points for the scope of work. These kinds of bids can be challenging, but they will certainly feed your desire for creativity as an estimator.

Speaker 1: 9:43

With this type of estimate, some great questions should include what is your budget for this job? What is your time frame for this job? Are there any special circumstances, such as day shift, midnight shift, that we will have to work around. Have you or are you seeking pricing from another contractor? Now, the reason for that last question is not so you can charge more for your job, but so that you may know who you're bidding against. Great estimators are going to know from experience where their price needs to be against their competition to win projects. We don't typically need practice estimating. That's why we want to win estimates. Nobody wants to go through the process of estimating something to lose.

Speaker 1: 10:28

When you're involved in this kind of bid process, documentation is even more critical. You will want to send some kind of email confirmation to the customer after the meeting of the document. With your understanding, it's better to clear up any misconceptions now rather than in the middle of the actual project. If by any chance you should happen to win, it is easier to fix something when it's on a piece of paper as opposed to when the crews are actually in the field installing. In a formal bid process, there is usually going to be an RFP or an RFQ generated, a set of prints and some kind of formal bid meeting. Any questions by the contractors participating in the bid process will have to submit questions formally, ie the RFI and then the answer generated by the customer will go out to all of the contractors involved in the bid process.

Speaker 1: 11:21

Just because you're in a formal bid process, though, does not mean that the information given to you will be accurate. Not mean that the information given to you will be accurate, will be complete or even coincide with what the customer actually wants. Remember the last episode? I mentioned to you that many RFPs will have to be copied and pasted from previous projects and contain all kinds of errors. It happens all the time.

Speaker 1: 11:44

During this phase, you may have to research on what to put in your bid or to understand what the customer asks you to build if they are providing the design. Be careful, though. Don't become complacent and think, just because the customer did the design, that you are off the hook for any mistakes in that design design. If there is a mistake, you can expect the customer to come back to you if you win the project and they find it in the actual operations portion of the project and come back and ask you well, you are the professional here. Why didn't you tell us about that flaw? Ask me how I know that one. I've called the design by the customer. With mistakes opportunities. You can then in a tactfully and respectfully way, educate the customer as to the flaws and potentially gain more respect with that customer and build trust with that customer. That could lead you to opportunities in the future where you might be able to provide pricing to the customer without having to compete against other contractors.

Speaker 1: 12:48

That's the best way to estimate projects because you have a 100% chance of winning, depending on the complexity of the RFP, I would read it a minimum of two times before I would even begin to put a pencil to paper. The first time you read a document like that, you're just getting a feel for the size and the complexity of the project. Trust me, there's going to be a lot of things that you're going to miss in that first reading. The second time you read it, you're going to start to get a better understanding of the smaller details and if you read it a third time, you're going to begin to be able to start to pick out the mistakes in that RFP. And that's the level of intimacy you want to be with that document. You want to be able to know what is missing so that way you can put it in the bid.

Speaker 1: 13:33

Now we begin the assessment stage. You will need a defined bill of material, defined schedule and other direct costs associated to have to complete the cost for the project. Project costs are typically going to be defined of one of two types either direct costs or indirect costs. A direct costs are going to be those costs that are clearly chargeable to the project number while it's being tracked. Some things like the cable, the jacks, the face plates, the racks, the patch panels, all of those are direct costs. They're not being used anywhere else. No-transcript. Again, this all falls back to the whole tracking thing that we talked about earlier. There should be a project number associated with all the projects that your firm has won. In that project number you're going to capture all of the labor hours, the materials, the consumables, the truck and tools so you know exactly how much that project cost you and, hopefully, if you made money. If your company is not tracking project costs, they're taking a huge chance and they will not know if they're losing money, often until it's way too late. Indirect costs are going to be those costs that are charged to the job number but that's not their entire cost. For example, a project manager Unless the RFP requires the project manager to be dedicated 100% to a job, which does happen, but the majority of the time a project manager is going to cover between 3 and 10 projects at the same time and the project manager will charge their hours to the projects they worked on during that time.

Speaker 1: 15:22

The hours are not all charged to just one project. In essence they're spreading it across multiple projects. The goal of any organization is typically going to be to keep the project managers 100% billable, but not to have them charge more hours on the project than was actually estimated in that project for a project manager. Again, it boils down to tracking. So let's get started with the estimating. Again, as stated before, there are multiple ways of estimating, but let's base this show on microestimating, as many companies will use this as a way to generate the estimate for projects that they work on. Microestimating will be estimating via a work breakdown structure. This will closely align with the tasks for the project manager to track.

Speaker 1: 16:11

Now, the first step has already been done, and that was to read the RFP and potentially meet with the customer and maybe do a site walkthrough and determine their needs. Now, based on those meetings, the next logical step is to perform what's called the rake-offs of the prints. This is where you count up all the different types of face plates and jack options that they have labeled on the prints. If they don't have prints, then the number should be determined during the meeting with the customer. To determine the amount of cable, one of two common methods are typically going to be used to generate pricing. One is averaging and the other is the actual measurements. With averaging, you're basically going to measure the longest run, the shortest run, and then you add in any slack that's going to be needed plus wastage, and you total divide that number by two to determine your average run length. You then need to multiply that average run length by the number of cables in the project.

Speaker 1: 17:12

While many estimators have used this method for years without any impact, you really need to be careful here. This type of method assumes that the drops are evenly dispersed across a floor. What if that's not the case? What if you have just a couple of drops that are going to be extremely long and the rest are very close to the telecom room? They're going to be way shorter. Your estimate could then have too much cable and too much labor into that project. Hence you would lose that project because your price is too high. If you make the mistake the other way. You're not going to have enough cable, you're not going to have enough labor and your project went in the red. So you've got to be super careful with using averaging. If you're using averaging, I would also track the actual test results to see how close that average was.

Speaker 1: 18:00

The other method is to measure each run using the pass that you designated on the prints. This method will take you longer but it will be more accurate. You will measure each and every run and add to slack and add to wastage for each drop. As an estimator, you will probably use both methods averaging and actual measuring over your estimating career. Sometimes customers just will not give you enough time to measure each drop, in which case you're going to have to do averaging to get the bid done by the response date. You will also have to put together the bill of material in your estimating package, which can be something as simple as a spreadsheet or a computer program estimating program. You should put each item from the bill of material on its own line, and this is also a good time to send out the bill of material for pricing to your distribution sources, a minimum of three. You will also need to associate labor to each one of those items on the bill of materials.

Speaker 1: 19:01

It takes time to terminate a jack. It takes time to pull cable. It takes time to terminate a jack. It takes time to pull cable. It takes time to install a faceplate.

Speaker 1: 19:09

I found that the best way is to use what's called a labor factor. You can use the long way and multiply by the number of minutes. Let's say, for example, you have 125 jacks and you assume it's going to take five minutes per jack. Well, 125 times five equals 625 minutes. So I take 625 and divide it by 60 minutes, because there's 60 minutes in an hour, that's 10.41 hours. The easier method is to use the labor factor. Again, 5 minutes is equal to 0.083 of an hour. So if you multiply 125 times 0.083, you'll get the same 10.41 without the extra steps. To find the labor factor of any minute, you take the number of minutes and you divide that by 60. In the comments section, tell me what is the labor factor for eight minutes. The first person to get it correctly. I'll send you a sticker and let's see who's going to be the first correct one.

Speaker 1: 20:01

Now you have to add up any tasks that do not have materials associated with it. Some examples might be travel, mobilization, demobilization and testing, just to name a few. You may also want to add in hours for project management, maybe some hours for a CAD operator, maybe even some hours for the warehouse people to drive the materials to your job site. Now, those last couple, though, could be argued as being overhead and not billable to the project. It just kind of depends on how your company wants to handle those charges. Either way, the overhead's in the project as well, so either way they're getting charged. You will want to total up all those hours. Multiply them either by your hourly sell rate or your hourly cruise sell rate, enter the pricing that you receive from distribution, put your markup on it, and some estimators will add a small amount of oh gosh, I missed it funds, but if you're good, that number should be very minimal, if anything at all. Then you're going to total up all your material costs with the markup. You're going to total all your labor hours with your sales rates and any other indirect costs with markup, such as lifts, maybe rental equipment and stuff like that. You'll add your general and administrative or your GNA, your overhead, and voila, you have the price.

Speaker 1: 21:22

Now, next you're going to want to do is what's called a sanity check on your overall price. You should know how much it takes to sell a drop for a cable in your market. Make sure that you are in that range. If you are high or low, you need to investigate and find out either find the mistake or understand why your price is your price. While creating this show, I decided just to go ahead and create that class on estimating. It'll take a few weeks, but I will notify everybody. I'll put it out on social media, I'll go ahead and submit it for continuing education credits for recognition by Bixie. Hopefully they'll pass it. And because I said, this is a very simplified explanation of estimating. There's so much more to estimating, so make sure you stay tuned for that release. If you have any tips about estimating, make sure to put them in the comment section below so that we can benefit from everybody's knowledge. So until next time, remember knowledge is power.

Speaker 2: 22:24

That's it for this episode of today's podcast. Remember, knowledge is power.