Change You Can Believe In
October 2009A foolish consistency is the hobgoblin of little minds.
—Ralph Waldo Emerson>
Regardless of whether or not a commercial drywall estimator doubles as a project manager, chances are he’ll be called upon to price and pen a proposal on a major change order to an ongoing project. At first brush, this makes perfect sense. Who would be more familiar or better qualified to quantify a change than the estimator who performed the original estimate?
Well, what may seem to be a no-brainer may not be, as is often the case. Consider that the quantifier who did the base-bid may be more inclined to fall into the easy trap of duplicating—that is, producing nothing more than a microcosm of the original bid—thus ignoring the various benefits and knowledge of variations and conditions that distinguish change pricing from base-bid estimating.
Of course, the take-off method—measuring the job for assembly and material quantities—can be the same as the original, but that is where the similarity should end. Rather than relying on the base-bid method of applying the same formulaic "X square feet (or linear feet) per man day” to the issue of labor, intervening circumstances now allow a less conceptual and more holistic approach. It is now possible to ask the question, "How many days will it take a crew of X to complete this change?” and arrive at an answer in a more certain context.
Two very obvious intervening circumstances stand out as prevailing factors in distinguishing change pricing from the base bid: the elimination of competition from the equation, and a firsthand knowledge of the real, "on-the-ground” conditions at the job site—a pair of game-changers that lend a real advantage over replication of the bid. While these circumstances may be, as stated, quite obvious, it is amazing how many estimators overlook the obvious, or, just as frequently, assign too much weight to the former and not enough to the latter.
With the absence of the pre-award factor of competition, many change-order estimators are lulled into a sense that they’ve been handed a blank check. Not so. In most cases, the project manager for the general contractor, knowing he will have to justify his own combined pricing to the owner, will rightfully make his subs account for every dime of change pricing. And it’s only fair that, absent competition, the GC plays watchdog and assures that an opportunity to maximize profits does not degenerate into something just short of grand theft. But the unexpected challenge of an aggressive PM can and often does drive a subcontractor-change-estimator back to the blind comfort of replicating the bid, consistency being the rationale ("I used the same unit pricing I used to get the job”). That’s retreating too far.
And there’s really no need to retreat at all. A stalwart change estimator who is confident and able to justify his numbers does not need to resort to unit pricing and rote formulas as a consequence of intimidation. This is where the other game-changer comes in—background information that is unique to the particular job—knowledge newly gained through actual jobsite experience. Some of this experience will be reflected in the numbers. If you are tracking the labor returns each week (as you should be), you’ll have a pretty good sense of whether your labor prognostications fell anywhere close to reality. Simple enough.
But if not (or, if so, why?), then the newly known conditions can emerge, as if by magic, from the invocation of a simple question: What were the unknowns that you wanted to control during the bid process but could not for fear of losing the job to some foolhardy upstart? With a minimum of effort, one can conjure up the same simple list of unpredictable conditions that I have:
• Is the GC’s coordination of the job good, fair or poor?
• Are there chronic trade-related delays?
• Is there a steady flow of work, or is there trade-stacking?
• Is the job behind schedule, and is the schedule now accelerated?
• Do you have the right personnel in place to perform the work effectively?
• Are there unexpected weather-related issues?
And what (or who) is the best source to provide a detailed answer to each of these job-specific questions? Well, in these cases I usually invite an ally, my job foreman, into the office for a sit-down chat. I familiarize him with all the change documents, and he shares what existing conditions from the list above may impact his performance of the change. Now, together, we can confidently generate an answer to the previously presented question: "How many days will it take a crew of X to complete this change?” having now factored in the previously unknown on-the-ground conditions.
So, my sage advice for this month boils down to this: In pricing changes, arm yourself with all the developing information from the job, and you won’t have to feel bullied into a blind and small-minded consistency.
Next month: Convert change into cha-ching!
Vince Bailey is an estimator/operations manager for San Juan Insulation and Drywall, Durango, Colo.