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Although clients want the job done economically and swiftly, contractors know that when it comes to changing the landscape, profit is still a vital element. By Joseph Lynn Tilton
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After a fuel truck explosion severely damaged a bilevel six-lane bridge at a major exchange in Birmingham, AL, the United States Department of Transportation (DOT) quickly strove to have drawings for the $3 million, 90-day project made available to contractors by 3 p.m. on a Monday, with bid opening set for 10 a.m. the following Wednesday. Contractors had just 43 hours to work up a bid, which included a bonus of $25,000 per day for early completion and a similar fine for late completion. Brasfield & Gorrie General Construction in Birmingham won the contract—and by working 24/7 finished the job 63 days ahead of schedule, collecting $1.3 million in bonus payments. The firm credits its bidding software program for helping enter the bid on time and without the undue haste that could have resulted in profit-robbing error on the part of the estimator. "Because of the speed of our program and its interfacing with the DOT's estimating bid forms, we were able to smack that thing out really quickly," states John Chambliss, chief engineer for this industrial construction group that handles some $60 million a year, mostly in heavy-construction projects. Chambliss reports that Hard Dollar is Brasfield & Gorrie's estimating software of choice, enabling the company to save 10-15% of time needed for estimating. He adds, "But accuracy is the main point of using estimating software. With a spreadsheet there's the risk of having the wrong equations, accidentally erasing part of the equation, or just plain forgetting the total equation. The fail-safes on the program alert us when something gets neglected." Looking over the entire bidding process, he estimates that time actually spent on estimating a given project is 30% of the day, with cut and fill taking up to half his time. The rest is spent on such things as quotes from subcontractors and material pricing. "We're not sitting there punching a bunch of numbers, but spending more time analyzing the project for building a better mousetrap. I knew we could do that bridge in a lot less than 90 days, that we'd be on the winning side of the $25,000-per-day structure, and that was reflected in the bid." Chambliss says he had convinced the company to switch to its current program when he joined them less than five years ago. "The real trick is getting the database you're going to use established. That usually takes time and someone skilled in using the software program. Also, you want to be sure that the program you adopt is suited for what you're doing. Some are better suited for commercial types of construction while others are better suited for heavy types of construction." He also looks for how the bidding program interfaces with existing programs, such as accounting, Excel, and Word for Windows. "You want a program that is user-friendly, but you also want a program that has strong technical support." In the Beginning As with Chambliss, Don Gladden, estimator for Hazard Construction Companies in San Diego, CA, has been in the industry before electronic calculations. "Working up a bid then was very much like today, but it took longer and a lot more grind-it-out attitude as opposed to the technology we have now," Gladden recalls. "Then we used a columnar pad, lots of pencils and erasers, and an old-fashioned calculator. We also did some powerful rounding off to cope with the [large amount] of numbers, which is one reason that, with software, there's a great deal less chance for error." Gone too is the chance of misreading someone else's handwriting. He observes, "The important principle still is to bid the contract, not the job. You still need to first work on the big pieces, then price the little pieces of the project. I can always write down a number for a bid that will get us a job, and I can always write down a number for a bid that will be profitable. The hard part is doing that with the same number." In New Mexico, Albuquerque Underground does some $35 million-$40 million a year in underground utility work, roads, bridges, asphalt, pavement, earthwork, structural concrete, well houses, pump stations, and treatment plants. Chief Estimator Kevin Daly reports he went from a spreadsheet program to a bid estimating software program five years ago. He also points out that he was project manager with another firm about 12 years ago when he began estimating jobs. "I began estimating on my own time, and it was [on-the-job training]. A friend in estimating taught me the basics, but it was paper and pencil. It took me 120 hours of piecemeal work to prepare my first bid." Daly didn't get the $1 million job but came in an encouraging second, so he continued working on his estimating skills. Daly emphasizes, "Make sure you get the right numbers. Every project is unique. There are some jobs for $100,000 that are more complex than a $10 million project because of terrain, infrastructures, and other variables. For example, another company on a $12 million job didn't pay close attention to the trenching portion and inadvertently added $250,000 to their bid—which made us the lowest bidder." A Supplier's Counsel "The demands placed on estimators are making the whole process more and more complicated," reports Brad Barth, senior vice president of product management for Hard Dollar Corporation in Tempe, AZ. "It used to be the low bid always got the job. Now more owners are combining pricing and how long it's going to take." He cites a $20 million metro area highway project in New Mexico where the prime contractor was roughly 5% higher on price, but 10-15% shorter on duration, and won the job. Regarding the software technology, Barth adds, "It expands a contractor's opportunities. An estimator can now bid three or four times as many jobs as before. We're also hearing that another trend is estimators becoming project managers, which ties in directly with our Bid+Build software and its ability to move information through the entire project life cycle. Estimating software can help the general and subcontractors communicate better, to exchange project information that's critical for getting the right numbers into the bid. Oftentimes changes come up at the last minute, and users can update the entire bid proposal in a matter of seconds." He concludes, "It's no longer the iron you're running but how efficiently you manage information, and you've got to have the software to do that." Software Helps Contractors Focus on Other Details Brad Bowers, estimator for the highway division for Kokosing Construction in Columbus, OH, notes, "Bidding software gives us more time to concentrate on issues that really make a difference in a bid instead of worrying about mundane details such as the repetitive arithmetic required when bidding without software. We can spend more time thinking about crew makeup, what equipment is needed, how many people, and other cost/production concerns." The company's highway division completes approximately $150 million a year in projects, but he remembers a two-and-a-half-year, 11-mi., $70 million job in downtown Columbus on Interstate 70 that called for eight bridge-deck replacements, nine bridge widenings, 100% pavement removal and replacement, and 20 crews of workers totaling 180 people. "We spent two weeks working up the bid after we did the takeoff portion, but it would have been at least double had we gone manual. We were about 5% lower than the second bidder." Bowers emphasizes, "Bidding software is most definitely helpful with small projects. Smaller projects typically bring more competition, so accurate bidding is still very important." He then refers to a private job involving 80 ac. and the Waterford Energy Facility in Waterford, OH, which burns methane to create electricity. "Kokosing performed a site work project worth approximately $3 million. It took about eight months to complete. The challenging part was we had to do it through winter, plus we had to bid it as a lump-sum project. After we did the takeoff portion, it took another two weeks to work out the bid. One part of the job called for a 70-foot cut, with total excavation around 400,000 yards." When it comes to software, Bowers also is a believer in looking for responsive tech support, ease of use, flexibility, and compatibility. "What you're after are ways to bid jobs with detail for accuracy. When I first began using our current bidding software, I saved 50% on bid preparation time yet had fewer corrections and adjustments to make after final review. I've now tweaked that timesavings up another 20% to 30% overall. Where we're really saving time is with all the details we don't have to recreate each time, including equipment rates, labor rates, crew makeup, and a whole library of materials that can be reused or modified from bid to bid." Swiftness of Learning Perhaps Don Moore, estimator and project manager for Bannock Paving Company in Pocatello, ID, is a record holder when it comes to speed of learning how to use bidding software. "For the software side I had four hours' training down at company headquarters in Ogden, UT. After that it was learn on the fly." Bannock Paving began electronic bidding with another firm in 1994, then switched to BID2WIN in 1997. Moore frankly comments, "The old system was very cumbersome, and we felt this would be better suited for what we needed to do. Further, [BID2WIN President] Paul McKeon gave the three of us an early-morning personal presentation on how BID2WIN's software worked, while the other company did a telepresentation, which failed miserably. "We're so busy we don't have time to spend days evaluating stuff," he continues. "I estimated for 156 jobs last year, and they ranged from $500 to $3.2 million. We can't afford to pass up work; we take everything we can. And we're able to do it with the same software, which has cut my bid time with the old program by 75%. The only thing I use a yellow pad for nowadays is to write telephone numbers on." The old program also required him to key in the proposal; on two occasions while in WordPerfect he found errors of calculations. Moore adds that he's submitted more than 1,000 bids with his current program, with a bid capture rate running an impressive 47.9%. "The bottom line is [that] I bid a project with the idea that I'm bidding it tight to start with. On occasion customers will call and want to give us the job, but we were the second lowest. That's when we take another look. The phone isn't even cold and we've got a new, profitable bid down." McKeon sums up why a contractor should take on a software-bidding program, and what he should look for in that program. "Bidding software programs can remove the worry associated with spreadsheets and other estimating systems by providing a simplified bulletproof framework and built-in calculations." He also cautions that users should be sure the new software will integrate with existing systems. "Business software falls into different categories: accounting, project management, cost estimating, et cetera. Within each of these categories there is usually one software package that emerges as the leader of that category. You need to choose the best software tool from each category to meet your specific business needs." As a company grows, so does its needs for other tools, whether iron or electronic. Blueprint Ease Sometimes the need is to work up a bid directly from a set of prints, and this is where blueprint-measuring software comes into play as part of the bidding package. Brian Bremermann, president of Tally Systems Inc. in San Diego, states, "We have three products on the excavation side, and all three focus on blueprint takeoffs, utilizing digitizer technology." Bremermann adds that digitizer technology increases takeoff speed and accuracy. "Contractors can use the software to quantify off the blueprint in order to generate a bid, taking both stated and unstated measurements. A project that would take an estimator 10 hours by hand for the blueprint portion alone can be done in just an hour." He points out that an experienced estimator will need only a day's practice to become proficient in using the technology. Further, since digitizers have 2,540-lines-per-inch resolution, a high level of accuracy is possible, much higher than with any manual systems. "The clearest advantage with computerized bidding programs is improved accuracy," declares Spencer Fleury, copywriter for Quest Solutions Inc. in Sarasota, FL. "This technology also allows contractors to get speed at a quantum leap over the old manual systems. A lot of users have told me it takes them just 20% of the time to work out a bid compared with a spreadsheet or the back of a napkin. You still need to have the right numbers to start with, so the human element still is critical." As a member of the second-largest provider of construction estimating software, Fleury adds that any such program should be simple to use. "If it's not easy to use, then companies won't take advantage of all the powerful features a program has. A program should improve the speed, accuracy, and quality of information contractors are getting. They should be flexible and allow room for growth because companies and methods are always changing." He emphasizes that price alone should not be the determining factor. "It's something to consider, but it's an investment. We've had users tell us they've boosted profits 27% to 28% over a quarter or two." Fleury also recommends that estimators spend a day or two training on the new-to-them software. This helps ensure skillful use within a couple of weeks, all the while saving a lot of time over doing it by hand. "Training, by far, is the most important transitional item. No matter what brand they buy, users must be sure they take the training." Hard Facts on Software When looking at software programs, Erich Schoenkopf, president of Vertigraph Inc. in Dallas, TX, comments, "Contractors first need to look at the type of work they're doing. Are most of your bids lump sum or unit priced? Are you performing commercial, residential, or heavy/highway contracting? Are you often a prime contractor or a subcontractor? Must you generate the quantity takeoff in addition to estimating the cost of the project? The key to success in selecting bidding software is to match the software solution to your particular needs and resources." Schoenkopf, who offers takeoff and estimating programs, continues, "There are two options in selecting estimating and bidding software. You'll use either a database-driven program or an electronic spreadsheet, such as MS Excel. There are pluses and minuses for each type of program. Databases sometimes provide more structure. Database applications, however, often require more resources for training, implementation, and maintenance. Spreadsheets such as Excel, on the other hand, require less initial investment and tend to be more flexible. Virtually any estimating process can be successfully automated with a well-designed Excel template. By far, the number-one estimating program out there is Microsoft Excel." Keep It Fresh Greg LaPore, CEO for Trakware in Albuquerque, another cut-and-fill software supplier, adds that maintenance is an element to consider when buying any software program, including bidding software. "People have to be willing to maintain databases and keep them fresh and up to date. Unfortunately, some will buy large estimating systems, then be overrun by the program." He too offers some counsel on how to select the right program for your operation. "Be careful not to overbuy or underbuy your software. A small company purchasing a large program is not a good idea. It may be too complex to use, and it's better to stick with a simpler one. But if it's a big company, with many people working on a particular job, the best thing is to make the commitment to buy the appropriate large-scale software and spend training time to build a couple of specialists whose focus will be on the program and supporting other users internally." LaPore advises, "You want somebody in your business who knows your database, rather than calling for tech support from the outside. Again, you need to know what your company needs. That can be hard. You've got to kick the tires. The salesman can make the elephant dance, but you need to look to the practicality of your situation." He concludes, "Any system is much better than not having a system of some sort, but do spend time interviewing people who actually have the software. Attend training sessions ahead of time to make sure the program fits your needs." A good example of a contractor that did just this is P&H Construction LLC in Uncasville, CT. "If we get the job, we won't be losing our shirt, because the numbers are right," maintains Todd Willis, estimator for the firm, which handles 50-75 jobs per year, with a total value of some $3 million. "We are primarily an excavation and concrete contractor, subbing from the main contractor, and tend to bid on jobs within an hour of home base." Willis reports that he's been on software for two years, using Trakware's EarthWorks for Windows. "We looked on the Internet and found quite a few names of companies out there. I called Trakware and got information from them." Although Willlis felt he was up and running with that program after just three hours, he comments, "I am not a computer guru. I've used the program on 15 projects with a total value of about $1 million. I'm able to look at more work without spending so much time working on numbers. I can do the preliminary numbers quickly and determine whether to finish estimating or look for other work." He advises, "Don't be afraid of the technology. Take the time to do the research. Try to get references from manufacturers that you can call, and definitely make those phone calls. I had my supplier do a field demo for us, and that sealed the deal." For companies the size of his firm, Willis feels the process from manual to electronic takes three to four months, with whomever works the numbers spending perhaps 10-15 hours a week at some points. Willis claims the change has improved profitability, but one still has to pay attention when plugging in the numbers. "Errors still will be there, but they're easier to stop with a computerized program." Keeping a History Again and again, suppliers stress the need for contractors to maintain company databases in order to get the most out of their estimating software. "People in the company will change, but the historical data for all the jobs will be there," explains John Patridge, director of product development for Profitool Inc. of Denver, CO. Noting that the company's roots go back to the 1960s when estimating software was in the infancy of commercial use of computers, he adds, "Profitool now produces a whole suite of modules, including general ledger, job cost, payroll, human resources, equipment, accounts payable and accounts receivable, inventory, purchase orders, subcontracts, billings, administrative, and miscellaneous modules. "But the builder needs to look to his database history. For example, if he's going to install railing, he can check over his archived material and look at the data, estimate the hours for the new project, and be better prepared to submit a bid." He warns that the data are no good if you can't get to them. "You need an application that will archive [the data so they are] useful. You need to easily get to those historical data that match the criteria of the job you're planning to build. Zeroing in on the right data and analyzing without distortion are very important. You have to have good numbers; you have to be looking at the right numbers." Back to the Napkin While manual bidding generally involved much more than a napkin, Bradfield's Chambliss perhaps best sums up the difference going electronic has made in his life as an estimator and how he'd feel if he had to return to manual bidding procedures. "If I had to go back to bidding on spreadsheets, I'd just as soon be sleeping in a cardboard box, living under a bridge." Journalist Joseph Lynn Tilton specializes in land and building issues.
GEC - January/February 2003
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