Before beginning an estimate, you should make a thorough inspection of the property, which means going through all areas that might be affected by the remodeling at least twice. The purpose of the second trip is to help you relate the causes and effects of conditions such as: a bad ceiling that might be due to either a roof leak or a plumbing leak, but going through twice is the only way to check it out properly. Or water in the basement might be caused by a high water table, but it is much more likely to be due to poor control of roof and surface water.

When you are inspecting a property, prepare a layout of each room involved, and of the overall dimensions of the house if necessary. One-quarter-inch graph paper is handy to keep the job simple but accurate. Note the location of all windows and doors, indicating the swing of doors, and the location of electrical outlets, ducts and radiators, as well as ceiling height. This layout not only will help you as you prepare the estimate, it will provide the raw data from which someone else can check your calculations.

Particularly in repair or rehab work, where there are existing conditions to be corrected, it is important to note the location of the problem on your layout, to describe the problem, and quantify it on the spot. If a ceiling plaster patch is necessary, a more accurate dimension can be determined during on-the-job inspection than at any later time. All quantities and dimensions should be determined and written down when you are on the job site.

It is more efficient and more accurate to estimate one job at a time, soon after the sales call or the on-site inspection, while it is fresh in your mind and not confused with some other job. Not only are errors almost certain to creep in if you save up all your estimates to work up on the weekend, it is harder for you to evaluate the judgement factors the longer you wait to prepare the estimate.

It is a very good idea for take-offs and quantities to be clearly shown in your estimate, so that a second person can easily check it. One of the benefits of the unit cost method is that a person does not need extensive construction knowledge in order to check an estimate for errors in quantity, extensions or calculation. If there is no one available to check your estimates, let them sit 24 hours and work them through again yourself.

Every single element of a job must be included in your estimate, with a cost assigned. Leaving anything out, even as little as 2-3% of the job, can seriously affect your net profit on other items. If all the items are included, then even if a minor item is misfigured the overall effect will be insignificant compared to leaving something out.

If there is some element on which a final decision has not been made, include that element with an allowance, preferably at contractor’s cost rather than retail price. For example, if a kitchen is being figured and the range has not been chosen, a contractor’s cost allowance of $600 might be used. This would go into the total cost figure and be marked up by whatever percentage the company uses, with the specification written into the contract as no specific appliance, but a $600 contractor’s cost allowance. If the customer selects a range costing $700, an additional $100 would be charged. If a $500 range is selected, a $100 credit would be given, but the mark-up on the original $600 would remain intact.

When you use allowances, be sure the amount is realistic for what you think the customer will actually select. If you are figuring an $15,000-$20,000 kitchen job, it is foolish to include only a $400 allowance for a refrigerator. In most such cases, the customer is much more likely to choose a $1,000 refrigerator, which means that you have lost both the overhead and the profit on $600. An allowance of $10 to $12 per sheet for paneling on a $300,000 house would have similar consequences.

When you use a unit pricing system, there will occasionally be items for which you do not have a unit cost, and sometimes your experience will not help you. In such cases, the best approach is to find out the cost for materials, add an equal amount for labor, and then add the mark-up. Of course, you must use good judgement, and if the materials cost is very low then you will increase the labor, but the 1-to-1 formula will be adequate in most of these instances.

Your estimating system must work for change orders as well as for the original bid. Contractors do not like change orders during a job because they interrupt the rhythm of the work and are likely to take more administrative overhead than they are worth to coordinate. Some contractors tell customers at the beginning that there will be a $50 or $100 extra charge for any change order plus the price of the change.

When a change order is needed, it should be written up on the spot by the job superintendent if possible, then priced, and signed by the customer before the work is begun. Change orders should NOT be done on a time and materials basis unless absolutely necessary, and even then the customer should be given some idea of what the total cost will be.

Try to have a place where you can prepare your estimates without interruption, with all the references and materials that you need at hand. It is especially important to have a calculator which prints on paper so that you can check the arithmetic for errors and omissions.

You should go over all the information you have about the project, and then begin the estimate, which should be done in an organized fashion, probably in the same order in which the job will be built. When your first take-off is completed, go over the plans and specifications again to be sure that you have included all the details.

Checklist of Basic Principles
1. Decide on exact specifications and write them up.

2. Make a site inspection, identifying and quantifying every specific step in the project.

3. Use a pre-determined unit costing/pricing system to derive the total for each specific item performed by your own crews.

4. Where a unit price is not available, determine the materials cost and labor estimate as accurately as possible.

5. Use a pre-determined unit costing/pricing system to derive the total for every subcontract item.

6. Where a unit price is not available on subcontract work, contact the appropriate subcontractor or supplier to provide the necessary information.

7. Where the final decision has not been made on a specification, use an allowance figure based on contractor’s cost, or delete the item from your bid.

8. Review the entire project and make a judgement on all unusual job conditions, including at least:
access to work location
materials storage requirements
geographic factors including travel, parking, jurisdictional licensing requirements
time requirements for starting or completion
crew’s familiarity with the type of job, materials
customer requirements, including: negotiation stance, standards of performance, talkativeness, neatness expectations, other idiosyncrasies
payment schedule and its effect on cash flow
availability of crews and subcontractors, current and short term work load
availability of materials, special order items
presence of a third party supervisor such as an architect, adjuster or rehab specialist
… then convert your judgement into a quantitative adjustment to the cost of the job.
9. Mark up the job cost to obtain the price, based upon your company’s net profit goals and overhead requirements.

10. Have a second person in your company review the specifications and the estimate, checking for completeness, mathematical accuracy and review of judgement factors (if no second person is available, wait 24 hours and do it yourself).

11. Refine any specifications which the estimating process showed needed change, and dictate or type up the final specifications into a bid proposal or contract.

12. If appropriate, draw the accompanying plan for the project.

13. Submit the bid in proper form to the customer, and be sure to include:
payment schedule
approximate starting and completion dates
license number
time limit on acceptance of the proposal
company acceptance clause
other qualifying requirements

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