presenter: victor c. tyler, p.e
Post on 03-Jan-2016
95 Views
Preview:
DESCRIPTION
TRANSCRIPT
Victor C. Tyler, P.E.
•President/ owner of Tyler Construction Engineers, P.C.
•Licensed Professional Engineer in state of Tennessee
•Author “How To Estimate Road Construction Accurately”
•Cost and Pricing Specialist
•Management consultant to the engineering & construction industry
How Time In Construction is Spent
Opportunities for improvement
Planning makes actual installation more efficient
Other activities such as site movement, material logistics, general non-productive time and rework is minimized
64% Installation
36% other activities
The Average Construction DayDESCRIPTION % HOURS/DAY
Study Plans 3% 0.24Material Procurement 3% 0.24Receiving & Storage 3% 0.24Mobilization 5% 0.40Site Movement 5% 0.40Layout & Marking 8% 0.64Actual Installation 64% 5.12Cleanup 3% 0.24Breaks – Non-Productive 6% 0.48TOTAL DAY 100% 8.00
Look at 176 Man-hour Month
Where can we improve?
DESCRIPTION % HOURS/ MONTH
Study Plans 3% 5.28
Material Procurement 3% 5.28
Receiving & Storage 3% 5.28
Mobilization 5% 8.80
Site Movement 5% 8.80
Layout & Marking 8% 14.08
Actual Installation 64% 112.64
Cleanup 3% 5.28
Breaks – Non-Productive
6% 10.56
TOTAL MONTH 100% 176.00
For one employee approximately 63 hours per month is spent on activities other than actual installation
…. approximately 760 hours per year for that one employee.
$45,619 per yearIf you have 4 full-time field employees
paid at $15 per hour …
That’s why I talk about productivity in the estimating processes for both
field employees and equipment.
Today’s TipUse accurate rates and reduce idle time.
Thus the top priority for the estimator is to estimating accurate job costs.
The job of every estimator is to help his or her firm acquire profitable work.
Tyler’s Cost Strategy 101
1. Organized and document data
2. Be detailed and factual
3. Base the estimate on historical data
4. Use a predictable, measurable and repeatable
processes (use checklists, templates, software)
5. Always monitor your progress and make
adjustments as required
Tyler’s Cost Strategy 101
6. Know and understand your costs
(Labor + Material + Equip + Subs + Job Site Overhead)
7. Make the estimate comparable to the P&L
Statement
(Revenue – Job Cost – Overhead = Profit)
8. Cost first,…then price
(Price = Direct Costs + Overhead + Profit)
Know Your … Job Site Overhead Costs (General Conditions)
Labor Burden
Indirect Labor
Job Supervision
Tools & Consumables
Insurances
Travel
Other
Bid Price Structure
Contract Price
Total CostTotal Cost
Direct CostDirect Cost
LaborLaborMat l.Mat l.
Jobsite OHJobsite OH MarkupMarkupWork Item CostWork Item Cost
Gen & Admin.Gen & Admin.
ProfitProfit
ProfitProfit
MarkupMarkupJobsite OHJobsite OHSubsSubsEquipEquip
Estimate Summary
The Estimator’s View
Direct Costs …………………….. $$$Direct LaborEquipmentMaterialsSubcontractors General Conditions
plus Labor Burden (%)
plus Job Site Overhead (%)
equals Total Direct Cost ……….. $$$
plus General & Administrative (%)
plus Profit Rate (%)
plus Bond Rate (%)
equals Total Contract Price ……… $$$
Company Income Statement
The Accountant’s View
Contract Revenues …………………… $$$
minus Direct Cost of SalesDirect LaborEquipmentMaterialsSubcontractorsOther Direct Costs
minus Indirect Costs .……………… $$$Labor BurdenBenefitsIndirect Expense
equals Gross Profit ………………… $$$
minus General & Administrative Expenses
equals Income (Loss) Before Taxes …… $$$
Understanding Risk & Pricing
Project A
Project B
Project C
LaborMaterialEquipmentSubcontractorOther
$10,000$20,000
$5,000$169,000
$2,000
$50,000$70,000
$7,000$76,000
$3,000
$90,000$90,000$20,000
$2,000$4,000
Total $206,000 $206,000 $206,000
Overhead – 10% $20,600 $20,600 $20,600
Profit – 12% $24,720 $24,720 $24.720
Total bid$251,320 $251,320 $251,320
Example from Book, “Managing a Construction Firm on just 24 hours a day”, by Matt Stevens
Understanding Risk & PricingProject
AProject
BProject
CLaborMaterialEquipmentSubcontractorOther
$10,000$20,000
$5,000$169,000
$2,000
$50,000$70,000
$7,000$76,000
$3,000
$90,000$90,000$20,000
$2,000$4,000
Total $206,000 $206,000 $206,000
Dual Overhead AllocationLabor/Equipment – 15%Material/Subs/other –5%Office Overhead – 10%
$4,500$9,550
$20,600
$8,550$7,450
$20,600
$16,500$4,800
$20,600
Profit – 5% $12,033 $12,130 $12,395
Total bid $252,683 $254,730 $260,295
Example from Book, “Managing a Construction Firm on just 24 hours a day”, by Matt Stevens
Margin vs. Markup
Job Profit and Loss Statement
Sales ……………. $ 700,000 Less COGS …... 507,000Gross Profit ……. 193,000Less OH ………..… 175,000Net Profit ..…….. 18,000
As a % of
Sales
100 %
72 %
28 %
25 %
2.6 %
MarkupAs a % of
Direct Cost
138 %
100 %
38 %
34.5 %
3.6 %
Basic Cost Summary % of
Revenue
Revenue $ 700,000 100.00
Labor 120,000 17.14
Material 300,000 42.86
Equipment 75,000 10.71
Subs 12,000 1.71
Overhead and Profit
193,000 27.58
Expanded Cost Summary % of
Direct Costs
Revenue $ 700,000 136.72 %
Direct Costs
Labor 120,000 23.44
Material 300,000 58.59
Equipment 75,000 14.64
Subs 12,000 2.34
Other Cost 5,000 0.98
Total Direct $ 512,000 100.00
Job Site OH
Labor Burden $ 40,000 7.81
Supervision 75,000 14.65
Total Job Site $ 115,000 22.46
Total Cost Input $ 627,000 122.46
Gross Profit 73,000 14.26
Overhead 55,000 10.74
Profit $ 18,000 3.52
Quick Study Example:Cost Multipliers
You are preparing a bid for Project XYZ and have estimated the direct costs as follows: Direct CostsLabor - $ 75,000Material - $150,000Equipment - $ 75,000Subcontractors - $ 50,000 Create an estimate summary utilizing the cost multipliers we calculated. Therefore, the estimate summary becomes: Direct Cost (labor, material, equipment, subcontractors) = $ 350,000.00Labor Burden: $ 75,000 x (25.93 % ) = 19,447.50 Job Overhead: $ 350,000 x (14.53 %) = 50,855.00
$ 420,302.50 Office Overhead: $ 420,302.50 x (7.81 %) = 32,825.63
Total Project Cost (without Profit) = $ 453,128.12
Strategy to winning more profitable work.
• Position (Market)
• Project
• People
• Product / Service
• Price
• Production
• Profit
Best Practices …
• Know Your Cost (Estimating)
• Understand Your Cost (Project Management)
• Control Your Cost (Project Accounting)
• Continuous Improvement (Always)
top related