Competitive estimating is an expensive business. For instance, if you have a success rate of one in four, you’re probably doing pretty well. But there’s no getting round the fact that the job you won has to cover the cost of preparing and submitting the three bids you didn’t win.

Add to this the shortage of experienced estimators in the industry, which has driven up the costs of employing estimators, and it’s clear why more contractors than ever are devoting time and energy to increasing their chances of winning work. Doing this necessitates being smarter and more creative during the estimating and bidding process.

Given the high cost of estimating, one of the obvious ways to bring down those costs is to reduce the time it takes to prepare the estimates. This is what computerised estimating has been doing since the 1980s, but today’s estimating systems have come a long way during those 25 years. Just like every other technology, software packages have evolved and advanced. Not only are they more sophisticated than their predecessors, they are also much easier to use and include a range of tools to enable smarter and more creative estimating.

Informed judgements to win

Clearly it’s essential that any estimating package will handle the mathematical donkey work of the estimating process. Beyond this very basic requirement, though, many contractors are also coming to expect their estimating system to perform as an enquiry management solution as well as calculating the estimates. This means the software has to be able to record, store, analyse and report information about every enquiry and sales opportunity for the contractor.

An estimating package that is fit for purpose, therefore, will need to be able to analyse and report success rates across a range of estimates, providing valuable statistical information on which contractors can make informed decisions. This would include which types of work are most successful, which clients they win most work from (as opposed to doing most estimates for as a price checking service) and even which estimators are most successful.

Furthermore, all this information and reporting should be available as a by-product of the estimating process, not as an additional chore.

Structuring to win

On many tenders, the enquiry will contain a Form of Tender that requires the contractor to break down their price into sections, or sub totals, such as heating, hot water services, etc. This is undoubtedly a useful breakdown for the client, in terms of understanding and comparing estimates from several contractors. Frequently, however, it is not suitable or detailed enough for the contractor when it comes to installing the job.

Perhaps more startling is the fact that the price breakdown required in the tender will often fail to provide the right information the contractor needs to make informed judgements when tendering.

Consider the example above, where the tender breakdown requires separate prices for the heating, hot water services etc. Clearly, each of these sections may contain many of the same materials, such as pipe and fittings. Here, the smart contractor will want to know the total quantities and values of pipe across all sections of the job to allow meaningful discussions with manufacturers or wholesalers about prices, buying discounts, etc.

To facilitate this analysis, the estimating software should have the in-built functionality to slice and dice the information from the estimate in different ways. This provides the information the contractor needs, as well as that required by the client.

Furthermore, engaging in dialogue with suppliers during the estimating process, about key factors such as materials prices and discounts, will help to gain competitive advantage. All too often, though, this dialogue only begins once the job has been won. This raises the whole subject of supplier and sub-contractors’ quotations.

Managing vendors to win

The whole process of tendering and preparing estimates is frequently driven by tight deadlines, which often means there is pressure to complete everything on time with little opportunity for ‘the niceties’. As a result, few contractors find time to involve their suppliers in the estimating process and going out for quotations on everyday materials such as pipe and fittings may not be practical in the time available.

Yet, despite this, some contractors have realised the benefits to be gained by involving suppliers during the estimating stage of a project. Obtaining alternative quotations when possible, with the intent of securing the best price and terms possible, can be of great assistance in winning the job. Again, the right software package can be of great assistance.

Powerful supplier quotation software can quickly generate multiple requests for quotations and send these requests electronically to suppliers, using common formats such as Microsoft Excel and Word. The latter point is important as it ensures that all suppliers are included, not just those with specialised computer systems.

The suppliers, in turn, can complete their information and return the priced quotations electronically to the contractor. The contractor’s software then provides the tools to allow quotations to be compared and adjudicated. Having selected their preferred quotations, the software will automatically populate the estimate with the relevant prices and information.

This ability to quickly generate quotation requests, submit and receive them electronically, then adjudicate quotes and integrate them directly into estimates makes it much more practical to involve suppliers earlier in the tendering process.

Customising mark-ups

Any estimating software should also be able to calculate the anticipated cost of material and labour for the project. Then, if the underlying pricing data is reliable and accurate - and if meaningful supplier quotation adjudication has been undertaken - this Prime Cost will be as accurate as the information available at tender stage.

Since construction projects and types of work are infinitely variable, though, does it really make sense to use the same method of applying commercial adjustments and mark-ups to all estimates? Contractors who are focussed on a ‘bid to win’ policy adopt a different approach in determining their tender price for each project.

However, while no two approaches adopted by contractors will be exactly the same, the principles remain consistent. Using the ability of the software to manipulate the information in a way that suits the contractor enables refined commercial judgements to be made. For example, this could be applying different adjustments to different commodities in the estimate - perhaps with a lower mark-up on large items of plant and a higher mark-up on everyday items like tube, fittings, valves etc.

Clearly there are many more examples, but the key point is that contractors who are focussed on modern estimating methods as part of a ‘bid to win’ or ‘targeted estimating’ are making use of the software tools now available to maximise their chance of success. 

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