Construction Informer

I received a note from a construction management student who asked for an opinion on a case study where a subcontractor lost (is loosing) a boatload of money. This case reminded me of just how important those little details are when companies are in the early stages of bidding a project.

In this instance the subcontractor ran into a work stoppage because the union workers refused to do a portion of the job that didn’t fit their type of work. Electricians were being required to install wooden blocks for some of the light fixtures they would hang. On the surface many would ask, so what’s the big deal? After all, if you install the blocks yourself then you will know they are in the right place and your job will be more efficient in the long run. In many ways the strict division of labor that permeates construction contributes to its inefficiency. Others argue that division is necessary in order to develope highly skilled workers. In the end these kinds of issues often play themselves out in different ways from job site to job site, and with different results.

Since the GC had placed the installation of the blocks under the electrical subcontract it was necessary for the electrical subcontract bidders to figure out how to accomplish that. Nobody wants to go back and forth in the pre-bid stages trying to get these types of details pristine, so creativity must flourish and solutions have to be developed.

In this instance the estimators must have missed the requirements for the installation of the blocks, ignored them, or just assumed the electricians would do that work. Unfortunately, this was probably the first place where this issue could have been dealt with. By planning on hiring some carpenters to do that work the sub could have avoided all the headaches and lost money that resulted from the dispute with the union electricians.

Estimating is far more than just putting numbers to processes. There is a great amount of critical thinking that has to go into the effort. Considering the details is what leads to that critical thinking.

One thing I’ve noticed about estimating over the years is that general conditions are not always broken out per job by contractors. Insurance is one example as it will often be included in overhead. But, when it comes to figuring out job profitability it’s pretty tough to do when numbers like those are not broken out by the job. This is especially true when certain jobs require special insurances related to things like hazardous materials abatement.

Then too there are many things that fall under general conditions that if not tracked in that category may be just overlooked with their costs coming out of other items. When this happens the other items can all of a sudden show up running negative. Then someone has to investigate why that’s happening. For many small contractors that calls for time they don’t have so job profitability per job starts becoming less clear. Plus, because the item wasn’t budgeted for it wasn’t included in the cost to the owner and so it’s a cost that will just not be paid for.

You can get pretty detailed in general conditions. For example, have you ever considered the cost of job layout? On a foundation for example someone has to take the time to check elevations, dimensions and squareness and set things up so the actual work can begin. If there isn’t money allocated to that function then it just has to mysteriously appear from other categories. Another area is signage. Many times the owners, funding bank, architects and others require signs to be posted. Most times this falls to the GC because she has the people on site who can do that type of thing relatively quickly and easily. Still shouldn’t that cost be accounted for upfront so the GC can recover it?

It would probably be eye-opening to see the dollar amount of free work contractors regularly perform because they don’t adequately think through all of the potential general conditions and account for them in their bids.

This fictitious estimate for a $600,000 (8000 square foot) office building shows the myriad of items that can typically be allocated to general conditions. Other items include: equipment rental; concrete pumping; temporary enclosures; scaffold and personnel lifts and temporary structures and more.