I've been a carpenter for 21 years and have had my own general contracting business for the last 16 years. Recently I completed a $65,000 project that included a kitchen remodel, plus the addition of new dining and breakfast rooms and a new garage. In most respects this job went well. The work progressed as planned and the workmanship of my carpenters and subcontractors was excellent. Best of all, the customers are quite happy with both the product and the experience. However, mistakes I made before the job started left me with far less profit than I had expected for three months of my work. How did this happen? The mistakes I made were of two basic types - errors in estimating and errors in contract writing. In this article, I'll explain each mistake, how much it cost, why I think it happened, and how I plan to avoid making the same error in the future.
Pricing a job of this size was a lot of work. In addition to takeoff and pricing for the work my carpenters and I would do, I had to estimate or obtain prices for the work of ten subcontractors. I got prices for some of the subcontracted work by driving around to subcontractors offices and job sites, but to save time, I occasionally made do with a phone call. After describing the project briefly over the phone, I got ballpark quotes for roofing, hardwood flooring, and concrete sawing. But phone quotes aren't bids; subs who haven't seen the plans or inspected the site cannot be held to these quotes. Unfortunately, I plugged their numbers straight into my estimate. Here's how it compared with the actual cost:
The biggest overrun - $335 for flooring - reflects the extra cost of blending new flooring into old. My sub's square-foot prices for flooring are usually pretty good, but in describing the job to him I made one little mistake: I told him that the new flooring could be installed the easy way - running alongside the existing flooring (see illustration, right). Had he visited the site, however, he would have noticed immediately that the flooring had to be installed the hard way. Weaving new strip flooring into the butt ends of existing boards involves a lot more work, and the sub charged accordingly.
Altogether, I lost $513 on these three items. What's the lesson? I'd rather keep taking phone quotes, especially on relatively small parts of a project, because time will always be a factor in estimating. One solution is to add money to phone quotes to allow for contingencies, even if extra work is not apparent at the time of the project estimate. Actually, I did add a $400 contingency to the drywall bid of $2,354 on this project, to cover the extra cost of various patching I knew would have to be done. As it turned out, the drywall contractor didn't ask for anything extra, so I got to keep the $400. This was not the result of good estimating, just good luck.
Elevations for house additions often show new areas of roofing or siding in full detail; adjacent existing areas, however, appear as blank, undetailed surfaces. While this technique clearly distinguishes new work from old, in doing takeoffs it's easy to make the mistake of measuring only the new areas. This ignores the fact that existing areas are almost always disturbed and must be partially or completely redone.
On this job, I failed to account adequately for this work, which included roofing, siding, interior and exterior paint, gutters, flooring, and baseboards. I'd guess that at least some of the $150 roofing overrun mentioned above had to do with tying into the existing roof. My most serious failure in this respect was with siding, where I completely missed several sizable areas of existing siding that had to be removed and replaced to construct the addition. We were able to avoid additional materials costs by reusing salvaged siding. However, it took two carpenters nearly 16 man-hours to re-side these areas. At an average cost of just over $18 per hour, this error cost me almost $300. This happened because I failed to take the time to really think through how the work would be done. I was aware of the tie-in problem, but didn't foresee the extent of the work it would require. .
Another way I attempted to reduce the estimating time on this project was to use my own pricing for certain subcontract work, namely plumbing, gutters and downspouts, and excavation. I did pretty well with my plumbing estimate, which was low by only $46. And I was only off by $35 on my price for gutters and downspouts, which are billed to me by the linear foot, plus extra for unusual conditions. But I really blew it with the excavation estimate. I priced this work at $400, but the actual cost was $768 - almost twice what I had estimated. How could I have mispriced this so badly? My notes reveal that I looked at actual excavation costs for two recent jobs of similar size; those jobs cost $310 and $240, so I figured $400 would be safe. This was not so, for three reasons: First, the current job was only accessible from the short side of the long, narrow rectangle that had to be excavated, requiring a lot more time to move excavated materials to the truck. On both of the earlier jobs, backhoe access was easy. The operator was able to approach the work from several angles, enabling him to remove material and load it into the dump truck quickly. Second, the current site turned out to be a rat's nest of pipes and wires, requiring slow and careful work by the operator. Despite precautions, I still had to make several repairs. The two previous sites had been free of underground utilities in the work area. Third, the current job involved excavating for a driveway. It looked so small on the plans - about 12x18 feet - I figured the operator would excavate for it at the same time as the foundation. When construction started, however, it became clear that we would need the area where the new concrete driveway was to go as a work and storage area. This meant that the driveway excavation had to take place later on, adding a $65 move-in/move-out fee to the cost. The cure for this problem is to have the excavator give me an estimate beforehand. They generally give me a number that will be safe, and since they charge me for actual time and materials, the final bill often comes in lower than their estimate. This gives me a nice cushion at the start of the job, which is much better than being in the hole - financially as well as physically - from day one. Had I asked the excavator to visit the site, the access problem would have been obvious to him. I could have caught the need to postpone the driveway excavation with more time and effort devoted to thinking about the sequencing of the work during estimating.