Certified Public Accountants

Overcoming Common Estimating Challenges in a Rapidly Changing Construction Industry

To the delight of company owners and managers, the construction industry is currently experiencing a period of growth and innovation. Government agencies, corporations, real estate companies and others are launching new construction projects which require skilled labor, strong project managers, and Building Information Modeling (BIM) specialists to complete. While growth and innovation are almost always welcome, regardless of the industry, it can come with unexpected challenges. The rise in demand has not only created a more competitive labor market which requires companies to re-assess their recruiting and human resource practices, it has also forced many companies to revisit their bidding process to ensure they are not rushing to bid new work, are pursuing optimal opportunities and properly communicating post bid. A quick review of these practices can help companies identify areas of weakness as well as opportunities for improvement. To help clients, prospects and others, Hanson & Co has summarized key tips for overcoming common challenges in the estimating process.

  • Selective Bidding – Often business owners and managers will submit bids for projects that are not exactly in their area of expertise, or do not have the skill sets in emerging technology to profitably perform the work. While it’s important to maintain a steady flow of projects, caution should be exercised when too many projects are being bid upon, especially when they fall outside the company’s “sweet spot”. Bidding is challenging enough but when it involves projects that the company or estimator has limited experience in, the door to unexpected and surprising profit loss can open. It’s essential to understand that mistakes made in the bidding process mean lost profit margin upon project completion. By becoming more selective in the bidding process, companies can do more of the work they enjoy and are set up to do, and often at higher margins than other projects.
  • Bidding More Profitable Work – The increase in projects means that companies will have the opportunity to bid on more work. Unfortunately, bidding on more opportunities doesn’t guarantee a consistent flow of profitable work. It’s important to recognize that estimators need time to understand the full scope of a project including required materials and supplies, labor, equipment needed, specific safety regulations which must be met and so on. Additionally, estimators need time to understand the project timeline and costs associated with each aspect of the project. If the bidding process is rushed because of an increase in the number of projects that must be bid on, the likelihood of an error increases. Industry companies need to be careful to take a balanced approach between bidding on projects and winning new work.
  • Effective Communication – Once the estimator hands off the job to the management team their work is not completed. The reality is that most projects rarely, if ever, go according to schedule. This means that materials and supplies could arrive to the jobsite later than planned, unexpected issues with equipment can occur or subcontractors arrive to the worksite late. The continued emergency of the Design – Build model of construction requires continuous input from estimating throughout the life cycle of the job. Whatever the issue, it’s important that the estimator stay in contact with their managers to ensure how work was bid to ensure the correct execution. Is there a special order in which the estimator bid the work? Were there specific requirements for how work should be performed? Poor communication will result in problems that will end up delaying the project or worse killing profit margin. Although effective and robust software will help to eliminate some of these problems, it’s essential to keep an open line of communication throughout the entire process.

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Growth opportunities for construction companies make it an exciting time to be in the industry. However, it’s essential to review your company’s bidding process and emerging technology skills to ensure that these challenges are not adversely impacting your company. If you have questions about refining your estimating process or need assistance with a tax, audit or accounting issue, Hanson & Co can help. For additional information please call us at 303-388-1010 or click here to contact us. We look forward to speaking with you soon.