Living in a Material World
April 2007If a man’s best friend is his dog, then an estimator’s best friend may well be his material supplier. Oh, don’t get me wrong; I’m not trying to make a statement about the status of "material men” in the genetic order, although you’ll have to admit, there are some fair comparisons.
Seriously, though, virtually every successful estimator recognizes that the development of solid relationships with a number of material suppliers is vital. I emphasize the plural, because clean and hard-fought competition remains the lifeblood of our industry. And just as general contractors and construction managers demand quality, productivity, timeliness and fiscal responsibility from their subcontractors by engendering competition, so must we pass those demands on to those who support us with their goods and services.
The bottom line: first, but not necessarily foremost. Most wall and ceiling subcontractors realize, at least intellectually, that the material side of their estimate averages roughly 40 percent. Yet the number of estimators who plug cloudy numbers from past projects into their current bids never ceases to amaze me. While I must agree that the labor side of the equation is the greatest unknown factor, tightening the numbers on the material side is nearly as important as nailing down those production rates.
Determining the supplier with the most competitive quote for each particular project is a fairly easy task once you have a "brass tacks” system in place. First, compile a list of material components to be used and quantities for each from the estimate. Send this out to solicit quotes from qualified suppliers for comparison. Include project-specific details such as schedule, building configuration and access.
For my own use, I have generated a simple spreadsheet in Excel that multiplies the quantities I have taken from my estimate for the most commonly used, high-volume material items that I will use on my projects, multiplied by the price. As I receive incoming quotes from the different suppliers, I simply plug in the numbers and compare the totals.
Okay, I know that for some or most of you this stuff is pretty elementary, but I think that the number of estimators who still plug material numbers that "feel right” into their bids would shock you. In any case, there are still some fine-tuning tips that go along with the cost/comparison approach from which many of us can benefit.
Define the field. First, never solicit quotes from fewer than three or more than five suppliers. Remember, competition thrives in a fair climate. Limiting the field to two candidates gives the appearance of an "exclusive club” atmosphere to outsiders, and signals unintended favoritism to insiders. Conversely, a place on your spreadsheet should be reserved for serious, established competitors only. Guard against cluttering the field with promise-making upstarts who may not be able to deliver—literally and figuratively.
Value-added approach. Next, try to figure the true value of additional considerations into the bottom line. Dependability and service are paramount with me. I may give as much as a 5 percent edge to a supplier who has a history of good service to me. Price durations should be considered here as well. You’ll need to factor in project schedule if one supplier has included quarterly escalations in his quote, while another has promised to hold his price, say, through the end of the year. Logistics could be another consideration. Does your low-number supplier have the equipment to stock the top floor of your five-story project?
Be honest and open. Finally, when you’ve made your pick, give constructive feedback to all contenders so they know how to approach the next quote. This helps keep all the players competing. Most importantly, make a commitment to the supplier you have selected that he will be awarded the project if you are given the nod, and keep that commitment. Don’t tempt a good material man to bite the hand that feeds him.
About the Author
Vince Bailey is a project manager/estimator for MKB Construction, a commercial drywall/plaster/paint contractor in Phoenix, Ariz.