If you want to build a profitable business and advance your career, you need to use methods and techniques that are VASTLY DIFFERENT than what you’re doing now.
Generally, the 7 Electrical Estimating Methods Are:
An electrical guesstimate is a quantitative approximation NOT based on previously observed data – and is rather based on gut-feel and a guess. Naturally this will attract a higher level of uncertainty.
According to Oxford Dictionary, “a guesstimation is an estimation based on a combination of calculations and guesswork”.
In the electrical business world, guesstimation is a quantitative approximation, not backed by any previous data. In dynamic environments such as electrical construction, the scope is a moving target, therefore guesstimating the scope implies significant flexibility.
An “electrical budget quotation” is a rough estimate of the costs of construction which is prepared without a lot of detailed information on the quality or type of materials.
Generally, you break down the budgetary quotation by providing a Design Brief for the requirements for Electrical Supply, Power, Lighting, Communications etc, and show assumptions and their associated costs. Now you have a fairly good idea of the cost of the project and can begin to make some intelligent decisions about the feasibility, scope or specifications of the project.
One reason to complete a budget is to obtain full funding for the project and to provide a cost-control mechanism for the electrical construction process. Developers can minimize exposure to cost overruns by accurately developing “real” costs. By developing an accurate scope of work for the project, customers can avoid disputes that almost always result in cost overruns.
Pricing per-point where each fixture such as a power point, light, fan, switch, sensor etc is classed as a point with a common dollar value is added and multiplied for each point.
Where the total number of fixtures (points) are tallied and multiplied by an amount resulting in the project price (e.g. 150 points x $100.00 = $15,000.00). This method of pricing is quick and easy but are thwart with danger as they don’t take into consideration the different requirements of each project.
This method commonly leaves you out of pocket, due to travel time eating into your profits. Problems may also occur which could impact the cost of the job with inaccurate take offs and therefore take longer than stated.
PRE-BUILDS OR ASSEMBLIES (SCHEDULE OF RATES)
Pre-build or assembly estimating is a simple way to create take-offs. It also manages the material costs, quotes, and ordering because each assembly includes all the necessary materials and labour to complete a unit price of the work.
For example, a power point assembly might include; power point, mounting bracket, 10 metres of 2.5mm twin and earth cable necessary to complete the work. When creating take-offs, you can insert the power point assembly instead of each of the individual parts needed. You only need to then enter the quantity of the power point assemblies needed in the project. When you compute the take-off with a common dollar value is added and multiplied for each pre-build or assembly unit rate.
Uses a flat rate for their services, you can Create a flat rate price pre-build or assembly and apply this to work orders instead of manually defining the labour and materials. This can be a fixed price for the sum total of the labour and materials provided, or a chargeable rate.
Pre-builds or Assemblies can combine materials and labour, materials only, or labour only as a single billable item to appear on jobs, quotes and invoices.
Schedule of rates Contracts are also called unit price Contracts, item rate Contracts, piece rates, or with such other names.
Tenderers are required to quote unit rates using pre-builds or assemblies in a schedule, for each item of work (potentially) required under the Contract. Schedule of rates Contracts can also have quantities, but these are mere estimates and are subject to adjustment as work gets completed.
Quantities are included for a Tenderer to make their own assessment of the extent and accordingly take calculated risks in case of early termination.
In this type of a Contract there is no guarantee that any given quantity of work is executed, each pre-build or assembly unit rate item could carry a higher overhead cost.
Similar to the per-point method this pre-build or assembly method commonly leaves you out of pocket, due to travel time eating into your profits. Problems may also occur which could impact the cost of the job with inaccurate take offs or in the schedule of rates removing the pre-build or assembly unit rate items during the project and therefore take longer than stated.
LABOUR UNIT METHOD
The basic principle is establishing labour units, is to provide a separate unit of labour for the installation of each item of material for the conditions under which it is being installed.
The more completely the overall operation can be broken down into individual units, the more accurately the total estimate labour can be determined for any given job.
A basic unit is defined as the unit amount of total performance time expressed in hours determined to be consumed under favourable conditions, normal productivity and no lost time, applicable to given times of material.
The basic units therefore include pro-rata coverage of the intimately related labour functions as follows:
- Normal job installations related activity
- Normal installation layout
- Normal incidental material handling
- Normal actual installation work.
PROVEN LABOUR UNIT METHOD
In Electrical Estimating as a starting point the human resource function requires basic labour units that have been proven on past projects over time on the productivity of human resource for different functions (e.g. installing a light).
Each organisation has different efficiency levels depending on the make-up and experience of the human resource on the particular functional outcome at the time of execution; the basic labour units will need to be updated regularly through a feedback loop from current projects as the make up the human resource changes over time in organisations.
The efficiency level depends on the number of workers having the required skill level for each particular task.
This is most accurate form of estimating as it creates a consistent benchmark for each individual component of the project.
The advantage is that each labour unit rate can be easily modified (if required) to suit the different installation conditions. This type of pricing is quick, accurate, flexible and completely transparent.
DESIGN AND CONSTRUCT
A Design Brief is provided spelling out the parameters of what the Customer wants for the requirements for the Electrical Construction.
A design and construct project approach requires the team to be responsible for taking a concept that is developed with the owner, complete the detailed design, and then proceed with the electrical construction.
This is different than the conventional process, whereby contractors bid on a design that has been completed before their involvement. If they are the successful contractor, they will execute the project.
A Design and Construct estimation can utilise the Proven Labour Unit Method for accuracy, simplicity and flexibility.
Design and construct estimates are often confused with budgets, but they are not the same. Because most owners have fiscal restraints that affect their capital investment, they depend heavily on the estimator to develop accurate cost forecasts at every stage of the project.
Therefore, an estimator must have a comprehensive understanding of the costs of labour, materials and equipment, not to mention the means and methods of both design and construction in order to accomplish the design and construct task.
In the Beer Mug Image Analogy shows in simple terms (kVA Apparent Power = KW Active Power + kVAR Reactive Power)
The power supplied is called apparent power (kVA).
Apparent power is broken down into active power (kW), and reactive power (kVAR) (inductive) is used to create magnetic fields necessary to drive rotating equipment such as motors, compressors, etc.
In electric power transmission and distribution, volt-ampere reactive (kVAR) is a unit by which reactive power is expressed in an AC electric power system. Reactive power exists in an AC circuit when the current and voltage are not in phase.
Active power provides energy for motion, heat, light and sound.
CUSTOMERS CUT COSTS BY RAISING POWER FACTOR
A low power factor causes voltage drops and energy losses on the system, by improving power factor you can reduce your demand charge and improve equipment efficiency.
Power factor is the ratio between active power and apparent power.
Power factor = Active power (kW) X 100 / Apparent power (kVA)
By installing capacitors, the reactive power component (kVAR) by the Supply Authority will decrease causing the apparent power component (kVA) to decrease thereby improving the power factor to cut costs.