| Tricks of the Trade© |
Morning edition Tuesday August 8, 2000 |
UNIT PRICING
In the context of a painting company, the two primary expenses are labor and materials. An estimate is essentially a prediction of the labor and material costs, with overhead (such as rent, insurance, advertising, etc.) and profit added. Since this prediction must be made prior to performing a specific job, using historical figures provides a reasonable degree of certainty.
All things being equal, a painter should always be able to perform a specific task in approximately the same amount of time. If he can paint two French doors an hour at Mr. Brown's, he should be able to paint two French doors an hour at Mr. Smith's. If the estimator knows how long it takes his crew to perform each task, the process of producing an estimate simply requires quantifying each of these tasks.
Of course, each job will not be exactly the same. Different levels of prep will be required, different application methods will be used, access or masking situations will differ. But the principle remains the same-- know how long each step takes, and how much of each step is required for a particular job. A more detailed discussion for calculating production rates can be found in "Statistics and Analysis".
Clearly identifying how individuals and crews perform is a vital part of estimating. An estimator must know what kind of performance to expect from his workers, just as a coach must know what kind of performance to expect from his players. In the context of a painting company, performance is crucial to profitability.
In its simplest form, an estimated price is the sum of labor costs, material costs, overhead, and profit. Overhead and profit can vary widely among contractors, and are not the subject of this pamphlet.
Material costs are a function of the surface area to be painted, the application method, and the spread rate of the paint. For example, if a gallon of flat latex will cover 350 square feet, the quantity of material required can be calculated by dividing the surface area by this spread rate. This same approach can be used to determine labor costs.
However, labor costs involve significantly more variables than material costs. The hourly wage paid, the task being performed, the skills of the worker, the equipment being used, etc.-- each affects the time required to perform a specific task. By identifying and quantifying each of these tasks, the estimating process is reduced to a simple mathematical formula.
Production rates can be calculated by quantifying (measuring or counting) each task and then recording the time required to perform that task. By doing this for each task performed, the estimator has historical data which can be used to project future performance.
The estimating system described is based on three factors: labor rate, production rate, and material costs. A specific production rate for normal conditions (such as 45 minutes to paint a French door) is assigned to each type of work. The total quantity for each type of surface on a job is multiplied by the production rate to determine the time required for each surface type. The total hours for each surface are then multiplied by the desired labor rate to obtain the labor costs for the job. Material costs are then added to obtain the final price. By using this method of pricing, the estimating process involves little more than determining the number of units and any unusual conditions or potential problems associated with the work.
This method of pricing also permits easy adjustment of prices (either by changing the labor rate or the production rate), as well as an effective means for monitoring profitability for performing each type of work. For example, if the production rate used is 45 minutes for a French door, but actual production is 1 hour for a French door, an adjustment can be made.
Production rates are intended to be averages for normal conditions, rather than numbers which will precisely apply to every job. Many factors, such as ease of accessibility, equipment, the skills of workers, supervision, etc. influence actual production rates. Accurate pricing involves more than simply quantifying the surface area to be painted; the estimator must also identify, and when possible, quantify other variables which will influence production.
The more accurately the estimator identifies these variables, the more accurately the estimate will reflect the actual labor and material costs required to complete the work. It is unrealistic to expect every estimate to exactly match actual costs; however, monitoring actual production rates will allow the estimator to adjust the rates used in calculating a price. Consequently, estimated production rates can be fine tuned to reflect what actually occurs.
The accuracy of the estimate is determined by three factors: estimated production rates, actual production rates, and the accuracy of the measurements and identifications made by the estimator. Ultimately, two of these factors are within the control of the estimator. Estimated production rates can be modified by monitoring actual production rates; the measurements and identifications required for each estimate are dependent upon the attentiveness and precision of the estimator.
An estimating system should allow for some margin of error, such as ± 5%. On a $3,000 job, this will result in a price variation of ± $150 or less. Because most consumers are not price driven, this margin of error allows for competitive pricing without placing excessive demands for accuracy on the estimator.
By breaking down the job into each of its components, and assigning a production rate to these components, this process eliminates the guesswork often associated with estimating. In addition, it provides a systematic approach to the estimating process.
Looking at a job in its entirety can be overwhelming. A multitude of variables and facts must be considered. This system allows the estimator to divide the job into individual components and consider each variable individually.
While experience will aid in the process-- particularly jobs with high levels of preparation, access problems, or unusual problems-- the estimating system is designed to produce accurate estimates with minimal estimating experience.
MEASURING
Each surface to be painted or prepared should be carefully examined and then measured or counted. These numbers are then entered onto the appropriate Field Estimating Form.
The unit of measure is determined by the type of surface. Large surfaces such as walls and siding are measured in terms of square feet. Square feet is calculated by multiplying height by width, or length by width. Narrow surfaces, such as downspouts, are measured in terms of linear feet. Items such as doors and windows are simply counted. (It should be noted that all surfaces could be measured in terms of square feet, so long as the proper adjustments are made when the price is calculated.)
Surface area can be measured many different ways, with varying degrees of accuracy. The crudest method, and least accurate, is to step off the area, i.e., to take carefully spaced steps. The length of each step is multiplied by the number of steps to determine the total length. This method requires consistency in the length of each step and should be used only in emergency situations when no other method is available.
A tape measure can be used and produces accurate measurements. For small areas, this method is fairly easy. However, for large rooms or exterior measurements, a tape measure may require two people, meaning that it can be difficult to use and/ or result in some inaccuracy.
A measuring wheel is easier to use than a tape measure, produces accurate measurements, and requires only one person. A measuring wheel is operated by rolling the device along the surface to be measured. For example, if measuring a wall, the measuring wheel is rolled on the floor along the length of the wall.
Electronic devices which utilize a light beam permit measurements to be taken while stationary. These devices require a solid surface at the most distance point being measured, making them difficult to use in certain situations.
Determining the height of some surfaces can present a challenge. Running a measuring wheel up a wall will not be tolerated by most customers, and can result in damage to the surface. On the exterior, measuring the height of some surfaces may be impossible without a ladder and/ or an assistant. In such instances, several methods can be used. If the surface has siding, the number of boards (or sheets) can be counted. The height can then be determined by multiplying the number of boards or sheets by the width of each board or sheet.
The estimator can also rely on standard building practices to obtain measurements of reasonable accuracy-- each floor on a multi-story house is generally 10' or 12' tall on the exterior. Because the estimator can measure the length of a particular wall, these heights can be used to obtain the surface area. Interior walls are generally either 8' or 10' high.
While precision is necessary for accurate estimating, some margin of error is permissible. The time required to obtain exact measurements is prohibitive, and usually counter-productive. The purpose of measuring is to obtain the information needed to generate an estimate which will accurately reflect the work to be performed.
On a typical house there will be hundreds, or even thousands, of square feet of surface area to be painted. If the estimator records the total surface area as 870 square feet, and it is actually 900 square feet, the additional 30 square feet will not add significantly to the materials or labor required. In fact, the material costs will be the same-- in calculating material requirements the computer automatically adds 1 gallon to provide a margin of error.
Measurements should be rounded to the nearest foot. Again, absolute precision is not necessary. The goal of measuring is to identify the quantity of labor and materials required to perform the job, and the estimator must balance between absolute precision and the time required to achieve it. For example, if a room measures 12' 6" by 10' 3", the surface area of the ceiling is 128.125 square feet. If the estimator records the ceiling size as 13' by 10' , the difference will be less than 2 square feet, or an error less than 1.5%. A margin of error of this size can and should be accepted.
Rectangles The most common shape to be measured is a rectangle. Virtually all interior walls and ceilings are rectangular in shape. The area of a rectangle is determined by multiplying height (or width) by length.
Triangles The second most common shape to be measured is a triangle. Usually, two sides of the triangle will be of the same length (such as a gable); however, this is not always the case. The area of a triangle is determined by multiplying the height by half of the length of the longest side. The height of second story gables can be determined by counting the number of boards and multiplying by the board width, or by physically measuring (this will require a ladder).
Odd Shapes On rare occasions a surface to be painted is neither a triangle nor a rectangle. Measuring the area of such surfaces can be difficult. Generally, treating the area as a rectangle, a triangle, or a combination of the two, is sufficient.
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