Software Solutions for Landscape Professionals

“Bidding and Estimating” • Planning for Profitability 2011 Webinar Series • December 1st, 2011 Software Solutions for Landscape Professionals • Presenter: Marcus vandeVliet • Consultant – MV Enterprises • marcusv@aol.com

Agenda • Introduction • What Should You Bid? • Estimating Process • Preparation • Build the Project in Your Mind – Materials, Labor & Equipment, Subcontractor, Miscellaneous • Kits • General Conditions • DS Manage|360 Demonstration • Conclusion & Discussion

Bid vs.Estimate • Estimating is determining what a job cost: relating to Labor, Materials, Equipment and Subcontractors. • Bidding is taking the estimate and adding Overhead, Profit and Contingencies to determine, the price to be paid for that job • Bids can be lowered by reducing profit, but estimates should not be lowered, because costs are costs

Perfect Estimating System? • There is no such thing as a perfect estimating system. • The system must recover all direct and indirect costs. • The system should allow for job costing. • The system must operate in the real-world. • The system must be flexible and allow for variables. • The system must provide a break even point.

Price Costs Overhead “Hoped for profit”

Price “Determine profit” Overhead Costs

Pricing Formula Project Costs (Labor, Materials, Equipment & Subcontractors) + Overhead Costs = Breakeven + Profit = Selling Price

Profit Factors • Size of Project • Risks Involved • The Marketplace • The Need for Crew/Company • Competitive Advantages/Disadvantages • Client Factors

What Should You Bid? • Do you have a niche? • Do you have a competitive advantage? • Do you have any unique expertise or experience? • What is your reputation in your marketplace? • Determining the sweet spot is an internal system.

Determining Your Sweet Spot • What specific types of work are you best at? • Hardscape versus softscape. • In-house versus subcontractor. • Scope: Simple verses complex. • What a sized projects should you complete? • Largest project size. • Smallest project size. • Ideal project range.

Determining Your Sweet Spot • What is the project schedule? • Commencement or completion deadlines. • Adequate project preparation time. • What is your ideal customer? • Residential. • Commercial. • General contractor. • Government.

Determining Your Sweet Spot • Where should this work take place? • Distance from facility. • Time from facility. • Long-distance project criteria. • Where should the lead come from? • Direct referral. • Repeat business. • Negotiated bid. • Competitive low bid.

Determining Your Sweet Spot • How competitive is the marketplace? • Number of competitive bids. • Qualification of competitive bid companies. • How much profit should we make? • What type of customer relationship do we want?

Determining Your Sweet Spot • How much control do we want? • In-house design. • Project management function. • Material purchasing. • Customer contact.

Decision Criteria • No compromise. • High quality, real service & exceptional customer experience. • Value. • Good quality, acceptable service & reasonable customer experience. • Low price. • Poor quality, zero service & no customer experience.

Sweet Spot Example • High-end residential design and build. • Complex projects requiring project management functions. • Direct referral or repeat customer. • Customer has referral potential. • Within 30 minutes of our facility.

Sweet Spot Example • Contains both hardscape and softscape. • Minimum profit 20%. • Project criteria based on high quality, service & experience. • Long-term customer relationship. • Minimum project preparation one month.

Sweet Spot Notes • Determine the criteria for the sweet spot grading based on sales pipeline and project backlog. • For example in the spring time the criteria would be stricter due to the number of estimates that need to be generated. • Spring period could require 7/10 • Summer period could require 5/10

Sweet Spot Notes • Certain sweet spot criteria should not be compromised. • Profit margin • Project preparation time • High quality, service and customer experience. • The system will eliminate the emotion from the process of determining what to bid.

What Should You Bid? - Summary • When you lower your price without changing the scope of work, all you're doing is lowering your profit. • Selectively bid projects, using your Sweet Spot criteria. • Make sure you have enough time to bid each project properly.

The Estimating Process • Gather All the Information Required: • Detailed plan to scale. • Complete specifications and project requirements. • Complete scope of work. • Site Visit: This is critical!!!!!!! • Site measurements and elevations. • Does the plan to match the site? • Do the specifications match the site? • Project general conditions. • Photo or video documentation.

The Estimating Process • Initial Setup of the Estimate: • Determine the work area breakdown. • Determine price and cost breakdown. • Create internal and external notes: • Inclusions and exclusions • Scope of work • Crew notes and special instructions • Estimating notes and assumptions • Production should build what was bid.

The Estimating Process • Build the Project In Your Mind: • Outline the complete scope of work. • What has to happen prior to project commencement? • Ordering and staging of materials. • Subcontractor pricing and set up. • Utility mark out. • Preconstruction meeting. • Mobilization of materials and equipment. • Phase 1 layout.

The Estimating Process • Project Starting Point: • Determine any site preparation work required. • Transplants, removal and demolition. • Excavation and rough grade. • Start at the furthest point, and work your way out. • Start at the deepest point, and work your way up.

The Estimating Process • Project Starting Point: • Other factors: • Work performed reduces access to work area, especially if equipment is required. • Stage materials in the work area prior to limiting access. • Specialty and subcontractor crew schedule. • Material maintenance, such as plant material. • Material damage, such as tile on flat surfaces. • Other trades that limit complete access. • Site factors such as low wet areas or elevation change.

Materials • Determine the quantity of materials required for each work area. • Use the same quantity units as the vendor. • Build waste and shrinkage into the equation. • Determine mobilization on-site to the work area. • Determine delivery, staging and handling costs. • Select vendor on price, quality and service. • Materials are based on cost: • Add sales tax or use tax.

Labor and Equipment • Labor and equipment go hand-in-hand. • The equipment used should reduce the labor required for the project. • Determine the site damage versus the labor saved by using equipment. • Determine standard production rates for each material type. • Labor is based on average crew wage.

Average Crew Wage • Set up standard crews for each division. • Combine the hourly rate for each crew, by person and divide by the number of persons on the crew. • Add an overtime percentage based on projected use. • Add labor burden as required. • For multiple crews that perform the same work, use a higher crew average. • Adjust for competitive projects by defining a specific crew.

Equipment Cost • Determine the hourly cost for each piece of equipment including: • Purchase. • Operation. • Maintenance and repair. • Base the cost of a piece of equipment on replacement cost, not what is owed. • Use sitting rate versus the actual rate per hour.

Calculate Equip/Vehicle Cost/Hr

Labor • This is the biggest variable on every project. • It is the biggest risk on every project. • It represents the greatest opportunity for improvement. • How are you holding your labor force accountable? • Do you have a performance based compensation system?

Subcontractor • Use multiple subcontractors for each type of work. • Compare prices for different types of work. • Select best sub for each project and customer. • Clearly define entire scope of work. • Obtain a lump some price for the project. No CO’s. • Select subcontractors that are similar to your company. • Calculate cost for in-house completion of subcontractor scope.

Miscellaneous Costs • These will typically vary from project to project. • Usually set up with 0 % profit. • Allows for the recovery of cost only: • Design fee • Commission • Permit costs • Dumping fees • Professional fees • Insurance costs

Estimating Process - Summary • Build the project in your mind, on site. • Determine the project starting point through to final completion. • Start with material takeoffs. • Determine the labor and equipment required. • Focus on the labor, this is the biggest variable and risk.

Kits • Kit: Standard repeatable set of steps for each function performed. • Used to dramatically speed up the estimating process. • Provides consistency in the estimate, so that the variable is in production for job costing. • Get consensus from sales and production. • The kit is only the starting point, make sure changes are made for each specific project. • Set up the kit based on the estimate requirement.

Kit Tips • In some cases multiple kits need to be combined in one work area. • For example a retaining wall could be broken down into three kits: • Footing, base course and cap by linear feet • Face feet of wall by square feet • Layers of Geo-grid by linear feet • The same retaining walls could be constructed by height and linear feet. • For example the kit is set up for a 2 foot high wall that includes footing, base course, exposed wall face and Cap. • Another kit is then set up for a 3 foot high wall, and so on. • Separate kits are usually required if the unit is different from item to item.

General Conditions • Key to determining real project costs. • Job specific costs. • Project variables based on each project. • Costs only associated with that project. • Critical that all specifications are studied carefully. • Critical that you visit the project site. • Gather all project information possible. • Communicate with all involved parties.

General Conditions - Examples • Mobilization (Equipment and labor) • Clean up & Debris Removal/Dumping • Material delivery, Load/Unload & Storage • Meetings • Customer. • Project. • Inspections. • Preconstruction. • Milestone.

General Conditions - Examples • Permits, Bonds, Additional Insurance etc. • Site Maintenance • During project construction. • During warrantee phase. • As specified. • Site Repair • Construction damage. • Utility repairs. • Property repairs.

General Conditions - Examples • Project and site Supervision • Traffic control and parking • Warranty • Hardscaping. • Not responsible for sub base. • New construction and swimming pools. • Planting. • Hardiness and quality of plant material. • Irrigation system. • Professional maintenance.

General Conditions - Examples • Warranty • Planting. • Site conditions including slope and exposure. • Drainage and soil conditions. • Warrantee period: 2yrs. • Outside damage. • Site Conditions • Access to work area. • No equipment due to weight or limited access. • Height: slope, stairs or elevator required.

General Conditions - Examples • Site Conditions • Ground or soil conditions: underground obstacles and compaction. • Utility locations requiring hand work. • Weather and season. • Watering during the summer. • Reduced work hours during the spring and fall. • Factor into project deadlines. • Working with other trades in your work area. • Full access to the site.

Kits/General Conditions - Summary • Kits will dramatically speed up the estimating process, and provide consistency. • Involve sales and production people when setting up the kits. • General conditions are unique for each project. • General conditions are accounted for while you are building the project in your mind.

DynaSCAPE Manage360 • Demonstrate DS|Manage360: • Show an example of a kit. • Enter proposal notes to an estimate. • Add kits and plants to an estimate. • Add general conditions to an estimate. • Generate a proposal from an estimate. • Create a job from a won proposal.

Conclusion & Discussion Thank you for attending DynaSCAPES “Bidding and Estimating” Webinar Presented By : Marcus vandeVliet Organizer: Andrew Wilson Consultant – MV Enterprises Manage360 Account Mngr/Sales Rep Phone: (302) 239-6612 1 800 710 1900 x231 marcusv@aol.com awilson@dynascape.com www.mventerprises.biz www.dynascape.com

Software Solutions for Landscape Professionals