17. February 2014 · Comments Off · Categories: Estimating

I’m in the process of writing an estimating handbook of sorts for Sigma Estimates, called “Sigma Academy”.  The objective is twofold: 1) to educate folks about the art and science of estimating, and 2) to educate folks about Sigma.  I thought I would post these writings a snippet at a time on the blog as well to get some feedback on the content.  So, without further adieu, here’s the first entry (of many) on “Labor and Equipment with Sigma”.  Replies and suggestions and constructive criticism are encouraged!

Introduction

In general, construction cost estimates are composed of five categories: labor, equipment, material, subcontractors, and “other” (for items that don’t fit in one of the other previous four).  Among those components of an estimate, few are as important as labor costs because it represents one of the highest risk variables in the estimating process.  In fact, depending on the project, the cost of labor can be 40% or more of the total estimate.  To help you control this critical resource in Sigma, we created this guide to illustrate ways to view, calculate, and adjust the labor costs in your estimate.

Additionally, equipment costs play a major role in estimating for the same reasons as mentioned above.  This is particularly true in heavy and civil construction projects, which are very equipment-intensive.

This handbook will cover the labor and equipment components of an estimate together, because the same principles apply to each- mainly, unit pricing and hourly production rates.

What is a production rate?

Production, or productivity, rates are widely available from industry resources like RS Means, Walker’s, and Craftsman (more on these later).  However, most contractors who self-perform certain scopes of work want to focus in on what their workers can do rather than rely on national averages.  Obviously, this makes for a much more accurate estimate when that level of detail is warranted.

Production rates can be somewhat confusing because some sources express it in units per hour (e.g. 80 square feet per hour), and other sources use hours per unit (e.g.  0.0125 hours per square foot).  To add to the confusion, many industry sources, estimators, and software programs express it in both terms and also add in a production rate for a crew, too (more to come on crews). The reason for using either format depends on numerous variables, but most of the time it boils down to personal, company, or client preference.  Either way, the total cost comes out the same if you’re consistent with the format.

Let’s do a quick example and calculate labor and equipment productivity both ways:

On the recent Jones Residence project, your carpenter installed 2,328 square feet of plywood decking in 3 days.  What was his productivity in hours per unit?  In units per hour?

Labor production in hours per unit:

 

Production rate      =  Total labor hours

Total quantity installed

 

Production rate      =  3 days * 8 hours

2,328 square feet

 

Production rate      =        24 hours

2,328 square feet

 

Production rate      =  0.0103 hours per sf

Labor production in units per hour:

 

Production rate = Total quantity installed

Total labor hours

 

Production rate      =  2,328 square feet

3 days * 8 hours

 

Production rate      =  2,328 square feet

24 hours

 

Production rate      =  97 sf per hour

 

Mrs. Jones wanted some landscaping done along with the construction of her new home.  Your skid steer loader was able to spread 400 cubic yards of topsoil in 2 days:

 

Equipment production in hours per unit:

 

Production rate      =  Total equip hours

Total quantity installed

 

Production rate      =  2 days * 8 hours

250 cubic yards

 

Production rate      =        16 hours

250 cubic yards

 

Production rate      =  0.064 hours per cy

Equipment production in units per hour:

 

Production rate = Total quantity installed

Total equip hours

 

Production rate      =  250 cubic yards

2 days * 8 hours

 

Production rate      =   250 cubic yards

16 hours

 

Production rate      =  15.63 cy per hour

 

The unit cost of labor and equipment

Although every estimator has his or her own unique way of calculating labor, we also have the benefit of industry standards and historical information to reference and use as a benchmark.  Often, a unit price for almost anything can be found in resources like RS Means.  So, how does the unit cost for an item of work become a fully priced estimate?  Typically, the total cost of this work is found by multiplying the total quantity of that work by its cost per unit of work.

In terms of labor, the unit cost for each item of work is calculated by dividing the cost per labor hour (hourly wage or rate) by the labor production rate in units per hour.  This cost is then multiplied by the quantity of that item of work (from the quantity takeoff- more on this topic in following chapters) to determine the total labor cost of the item.  For example,

The carpenter mentioned above on the Jones Residence is paid $44.90 per hour (including benefits).  We also remember that his production rate for installing plywood subflooring is 97 square feet per hour.  For estimating purposes, what is the unit cost for labor?

$44.90 per hour / 97 square feet = $0.46 per square foot

Now that the unit cost is known, we can use it to estimate labor costs for any quantity of plywood subfloor installation in the future.  For example, let’s say on your next project, Lenny’s Diner, your quantity takeoff shows that you have 4,250 square feet of plywood subfloor to install.  What is the total labor cost for that item of work?  Reusing the unit cost we just calculated (more on reusing information with Sigma Libraries later), we can price this part of the job:

$0.46 per square foot x 4,250 square feet = $1,955 total labor cost

 

Okay, that’s plenty of information for now!  For more information on how Sigma works, please take a look at our YouTube page: http://www.youtube.com/watch?v=Jt8E2rJGkig   Thanks for reading, and remember to give me some tough love!

04. February 2014 · Comments Off · Categories: Estimating

I once read a spot-on definition of “character” that I’ve always remembered, and to paraphrase, it’s what you do when you know no one’s looking.  Does your leadership team have it?  Kudos to Remodeling Magazine for the great [article].

As an estimator turned estimating teacher, I love assemblies.  In fact, next to knowing the basic fundamentals of estimating without the aid of software, I would venture that good, well-written assemblies are some of the most important tools an estimator can have in his/her toolbox.

An assembly is a group of items that are needed to create a component, such as a wall, and taken off in a single unit; in this case, lineal or square feet.  A typical interior partition wall assembly would have a certain unit price that includes labor, material, and equipment costs for metal studs and track, fiberglass insulation, drywall, screws, mud, tape, finishing, painting, etc.  It’s obvious why estimators would love this- it drastically reduces the amount of time it takes to do a quantity takeoff while significantly increasing accuracy by ensuring that nothing is accidentally left out.

Assemblies are commonly created or customized by estimators to fit their company’s particular processes.  Other “canned” assemblies are available through sources like RSMeans, and are usually very comprehensive.  They are also adaptable and can serve as a great starting point for further customization.

You might be wondering why I’d bother writing about something that most estimators already know intimately.  The answer is simple: I have an ulterior motive.  The software I work with, Sigma Estimates, is widely known for its user friendly Excel-like functionality.  While that’s certainly true, Sigma’s apparent simplicity can lead some to believe that it’s not capable of more complex operations like assemblies and cost libraries.  I’m here to tell you, as a previous estimator and assembly aficionado, that Sigma can handle anything that a Sage Timberline could spit out and more!  Here’s an example of how an RSMeans assembly could be used in Sigma: [click here]  You can also create your own assemblies from scratch, complete with pictures or models that you upload to illustrate, using a Sigma library.

Download Sigma’s open source Personal edition for free at: http://sigmaestimates.com/pricing.  Sigma’s Professional and Enterprise editions with library and assembly functionality are also available for a free trial.  Download it today and let me know what you think at ba@sigmaestimates.com!

15. January 2014 · Comments Off · Categories: Estimating

A Forbes column recently deemed Microsoft Excel the “most dangerous software on the planet”.  While an argument could be made to the contrary, the author’s tongue-in-cheek critique of sloppy spreadsheet practices in big investment firms is really eye opening (and true).  If you like living dangerously, read the article at: http://www.forbes.com/sites/timworstall/2013/02/13/microsofts-excel-might-be-the-most-dangerous-software-on-the-planet/

If for some reason you’re one of those weirdo’s who likes watching The Exorcist in the dark at midnight, you might enjoy reading some Excel horror stories right here: http://www.audinator.com/Horror_Stories.html#!

Does the thought of a formula error on your next estimate scare you to death?  If you can’t afford to lose money on your next bid, why not use the data from your Excel spreadsheet in Sigma instead?  Sigma’s import function makes it literally foolproof…and NO BROKEN FORMULAS!

See the Sigma Community Forum to learn how to quickly and easily import your rusty old spreadsheet!