In this age of information overabundance, keeping things simple is critical. One of the simplest estimating methods is the stick method, which many contractors use when they first get started — me included. I used to make a list of the materials I needed, then go to the hardware store and lumberyard to find out what everything cost. To determine a project's price, I doubled the cost of the materials — thinking that would also cover my labor — added a bit for Murphy, then added overhead and profit. While I rarely lost money on materials, I often didn't make what I wanted to on labor. Plus, doing the material takeoff and pricing that way was about as efficient as watching paint dry. (On the bright side, I didn't need to maintain a material database, since I used whatever prices were marked on the materials at the lumberyard.)
Though today I generally use a unit-price estimating system (more on that in a future column), I still use the stick method for any task I have never attempted before. I've made a few upgrades, however, to my original process. To get a labor number, I look at job histories or consult with my production team and subcontractors. And trips to the lumberyard are now unnecessary because I can find pricing on the Internet or through email with my favorite suppliers. But possibly the biggest difference — the subject of this column — is a form I designed that serves as a checklist of materials and labor steps required to complete a task, and also converts labor hours into labor dollars and calculates material costs — for instance, the cost of studs per linear foot of wall from the purchase price of a single 2x4x8.
Occasionally, a custom task becomes popular. Because my experiences with it are well-documented on this form, I can easily add the task to my unit-pricing database as a new unit. The fact is, this form applied to any task can be a building block for a unit-price system. For an example, I've put together a form that lists all the costs for replacing 100 square feet of decking. As you read through it, it's important to keep a few assumptions in mind.
Interactive: Mouseover the numbers for more information
Unit of measure (UOM). To be useful, the unit of measure should make it easy to think through the project. In the case of decking, it would make no sense to estimate costs per square inch. And although one square foot may be the ideal unit of measure, the best way to approach this project is on a slightly larger scale. Here I've based the estimate on a 100-square-foot decking job; if I need a square-foot price, I can divide the worksheet results by 100.
Labor. The amount of time allotted to each task is the most difficult item on this worksheet to forecast. Not only is every company different, but every worker has different abilities. Initially, you could use estimating manuals for these numbers, but your goal should be to use labor figures based on the actual results of completed projects. This involves good labor tracking (see "Using a Simple Timecard to Collect Labor History," 6/13) and regular updating of labor items in your estimates to reflect your crew's productivity.
Crew type/size. Match your field crew's abilities to the requirements of the job. In a small company, it might be best to enter specific employees by name; for a larger company, the main thing is to decide how many people will be needed at what level of skill for each task.
Cost of crew/hr. Add up the average hourly wages of the crew members. In this example, the $50/hr. total is the sum of $30/hr. for the average lead carpenter and $20/hr. for the average helper.
Labor burden. An employee's hourly wage is only part of the cost for labor. You also need to include the employer's Social Security contribution (FICA), state and federal unemployment tax (SUTA and FUTA), workers' comp insurance, and any benefits your company provides, such as health care, vacations, tool allowance, and uniforms. The total of these additional costs is called "labor burden" and is usually calculated as a percentage of the hourly wage (see "The True Cost of Labor," 3/08).
Bill of materials. This is a simple quantity takeoff based on the "Estimating UOM," which in this case is 100 square feet. The "Purchase UOM" matches the units in which each material line item is typically purchased — for example, nails by the box or decking by a particular length.
Subcontractors. If you have a subcontractor quote, you won't need to convert it to Project UOM. But many contractors estimate with flat rates without asking trade contractors for pricing. If that's the case, make sure to use the "Quantity" column to convert to the project UOM — multiplying by 100, for example, to convert a square-foot price.
Notes. Use this field to explain anything that could be useful if someone asks, "Where did you come up with that?" For example, if you inflated labor estimates to reflect difficult site access, you can note it here to jog your memory.
In my next article, I'll look at how to use unit-price estimating for larger projects.
