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Since their introduction over 30 years ago, computerised estimating systems have come a long way. David Bell of Estimation explains how estimating systems increase competitive advantage and provide a springboard for a flow of information throughout a contracting business.
When our company first introduced computerised estimating systems to the UK in 1973 their role was simply to produce an estimate faster than manual methods, and that was it – job done! While many products still only operate at this level, there are systems that now go far beyond this basic functionality to include additional productivity tools to make estimating more efficient, as well as features that enable contractors to improve their competitive edge.
For contractors that are looking for more than just simple pricing from their estimating system, this article outlines the recent technical advances that make it really work for its living.
Clearly, an estimating system needs to help produce estimates accurately and quickly - the numbers game dictating that the more jobs you bid for the more you are likely to win. To that end, there have been major advances in take-off techniques.
For example, by using a combination of electronic measurement and no-coded entry, you will arrive at the prime cost by the time you’ve finished take-off – ready to apply mark-ups and commercial adjustments. And when it comes to producing the schedule of rates or bill of quantities you can be sure it will balance with the tender price every time, even after adjusting the selling rates of each item.
Live update
At the same time, the pricing data that the system works with is vital for accuracy and this is another area that has changed considerably in recent years. And the usefulness of pricing data is directly linked to its accuracy, so the more often it is updated, the more accurate it is. The industry norm has been to update weekly but now, with the introduction of ‘live update’ technology, data can be updated every time you connect to the Internet.
It is equally important that the data works in harmony with the software and is easy to deploy. Historically, this relationship between software and data has been a little strained, with contractors having to do a lot of work on the data to make it work the way they want it to. By introducing intelligence to the data, however, and giving the software the power to exploit that intelligence, it is possible to achieve a total harmony.
For example, with old-style dumb data, searching for a specific product or material required hours of mind-numbing activity. With intelligent data, locating the specific item you’re looking for becomes simplicity itself, while built-in cost heads provide instant integration with accounts software.
Another spin-off from in-built intelligence is the ability to control the content of your database much more tightly. Rather than trying to manage thousands of items you’ll never need, you can now choose either a standard library or adopt a pick and mix approach so you can choose just the items you want to work with.
More control
All of these are features that make the whole estimating process more accurate and efficient during the pricing of the job. Thanks to recent advances in computer technology, however, it is now possible to use the estimating system more productively – and increase your competitive edge.
Additional tools that work with the estimating system make the administration of suppliers' and sub-contractors' quotations quicker, simpler and more efficient. Suppliers, everyday materials, special items and sub-contract packages can be directly selected from the estimating system to generate a request for quotation, either electronically across the internet or via more traditional fax and postal methods. At the same time, an adjudication sheet is prepared, ready to receive the supplier responses and decide which prices and supplier to use in your estimate or purchase order.
And you may want to re-engineer the estimate to produce a breakdown of how the project will run. Again, with the dedicated tools that are now available, you can break the original estimate down into small packets of work reflecting how you see the job progressing on a day-to-day basis.
Honing your edge
Tools for quotation management and re-engineering give a real boost to productivity but there are also new tools that, again working with the estimate, will help to improve your competitive edge.
For example, you may want to evaluate the effect of replacing steel conduit with plastic or copper tube with steel - or similar tedious and time consuming chores. Using cost modelling techniques, you can now make these sorts of comparisons in seconds - either across the whole estimate or just within one section.
As a result, many contractors who are already using cost-modelling techniques are now routinely submitting two bids – one that is specification-compliant and another that shows the financial implications of changing elements of the specification. As a result, end users can make an informed decision about the final design based on meaningful information.
Beyond the estimate
As noted earlier, the estimate is just the starting point – the information generated in the estimate can also be used to good effect in other areas of the business, and without having to re-type all of the information into different systems.
When you win a job, for example, modern integrated software allows you to automatically assign items in the estimate to the correct cost heads, without them needing to be entered manually. Typically, these cost heads, which can be thought of as meaningful pots of information, would include steel pipe, copper pipe, fittings, valves, boilers, chillers, pumps, etc. These budgets form the basis for comparing estimated costs against actual costs as the job progresses.
In addition, there should be separate cost heads for materials, labour and sub-contract costs. Breaking it down this way ensures you can compare actual costs for each of these areas, with sufficient detail to be informative, while not overburdening yourself with extra administration.
Consequently, your analysis and reporting becomes a by-product of day to day operations, rather than an additional task.
Once the job is up and running, feeding information about variations and labour costs into the contract costing system helps you keep your finger on the pulse of each job. For example, if the client decides to move a radiator from one side of the room to the other there may well be a requirement for extra pipework and fittings, resulting in additional costs.
Clearly, any such changes need to be reflected in the contract costing software by sharing the information with the variations software. So, when changes are priced in the variations software, it needs to automatically identify the associated material and labour costs, as well as any change to the contract sales value and post these figures to contract costing to update the budgets. It can even identify anticipated costs arising from variations separately to those in the original budgets.
Committed costs
Particularly valuable is the ability to keep track of committed, accrued and actual costs – something that’s virtually impossible without the help of contract costing software.
For instance, once you start ordering materials for a contract this information can be put in place against the relevant cost heads. As soon as you raise a purchase order it will appear against the relevant job. If you wish, it’s then easy to track deliveries and part deliveries to build up a picture of committed, accrued and actual costs. This ability is vital for preserving cash-flow when raising applications for payment to ensure the application is based on committed costs rather than just materials that have already been delivered to site.
These same principles can also be applied to retentions, so you are always aware of how much money is being held, when it’s due and when you need to start chasing.
Of course, it’s not just materials that need to be monitored. By sharing information effectively you can also apply the same level of control to managing labour and sub-contractor costs on a project by project basis. In the case of sub-contractors, tools to help track CIS status perform a valuable risk management role as well.
These are just some of the more obvious ways in which an estimating system can be much more than a simple pricing tool. Armed with the tools that today’s information technology has to offer, the estimating system becomes an integral part of a business management system that allows you to provide a better service to your customers, as well as boosting your own productivity and profitability.
