3 tips to improve the accuracy of your construction estimate
What is your hit rate? Have you ever really sat down and tried to figure out why you aren’t winning more work? How about trying to figure out why some projects make a ton of money while others make you wonder why you got into this business in the first place? The average “hit rate” in commercial construction is about 10%. Only one out of every ten bids that you spend hours or days working on will pan out. It’s almost a bit like gambling. At least with Blackjack your odds are almost 50-50! Even crazier is that once you win the work, the real fun begins. Profit is never guaranteed. The only guarantee is that you and your team will run across an entire minefield full of obstacles, all of which are working to derail the profitability of your jobs. That’s the bad news. Now, for the good news. With modern technology and the right partner, you can even the playing field. In this blog, I’ll cover 3 tactics to use to win more work and, even more important, tip the scales in your favor to make it much more likely that your jobs are profitable.
1: Field Data Is The Key
Every day that your team is working on a project, you have the ability to collect critical data that is going to play a role in helping you win more work and earn more profits. The data that you can gather from the field is the key to all of this. Research indicates that over 90% of planned work does not get completed as it was originally scheduled. That means when you schedule a crew to install 500 ft of piping, 90% of the time they are going to have to re mobilize and work on a different task. This can be due to a number of issues like trade interference, material delays, you name it. If you aren’t collecting this data, and integrating it in easy to understand charts, you are missing a huge opportunity to improve bid accuracy and earn higher profits. Utilizing a tool like SIS® (Short Interval Scheduling), you can schedule your crews and have them report at the end of the day what tasks they were able to complete, most imporant, if they were unable to complete specific tasks, they are forced to enter the reason why. These reasons can then be used to begin to understand common causes that derail your projects allowing you to adjust on the fly and, ultimately, make more money on each project.
2: Measure Production and Productivity The Right Way
In construction there is a “correct” way to measure and improve productivity. In fact, there is a standard ASTM E2691 that was written for that specific purpose. In order to really begin to improve productivity, you must first understand the difference between production and productivity. Production is how fast materials get put in place. Productivity, on the other hand, is how WELL they are put in place. Think of it like this: There are 2 different car companies producing cars. One produces 100 cars per day and the other produces 75. Which one is better? The correct answer is you don’t know yet. There is a missing factor. What if I told you that the company that produces 100 cars per day has a 50% failure, meaning 50 cars have to have some sort of rework before they are available to sell and that company 2 only has a 1% fail rate meaning only 1 out of every 100 cars produced needs any rework. That is one of the main differences between production and productivity. You need to know what you are measuring and how to measure it and only JPAC® is an application of the ASTM standard.
3: Incorporate Prefab
There is a reason that modular construction and prefab has become such a hot topic lately. The reality is that the more tasks that you can move off a job site, the easier it is to control the outcomes of those tasks and the more predictable they become. That is why proper use of prefabrication can be such a game changer. It’s not that the task is done any faster, it’s that it is done in a controlled environment, thus reducing the risk of something to derail the task. Once a task is predictable, you can incorporate that knowledge into future bids and increase accuracy by a ton.