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Developing Your Electrical Cost Estimate
Chapter Four

Developing Your Electrical Cost Estimate

Now that we’ve covered takeoff quantities in the previous chapter, we’ll focus this chapter on how to price out your electrical cost estimate. We’ll show you how to determine direct costs like material, labor, equipment, subcontractors and indirect costs like office and administrative expenses required to complete the project scope of work.

You should have your takeoffs laid out in tabular format like the example below, so you can adjust the task quantity, cost, and labor unit of each systematically. You also want to be able to extend those quantities out to arrive at your total cost and labor per task. And finally, summarize those totals to arrive at your estimated project costs to complete the project scope of work.

 

9 Steps Required to Determine Break Even Project Cost

1 Adjust your takeoff quantities to the purchase minimums and account for waste. For example, 97 linear feet of conduit would be rounded to 100’ as you cannot purchase partials. In addition, for certain items like wire and conduit, you’ll need to add a waste percentage.
2 Create a bill of material that you can send to your supplier to get a firm quote for the project. At a minimum, create a bill of material for lighting fixtures and switch gear that you can send out for a firm quote as this fluctuates from project to project.
3 Add labor units in man hours for each task/activity using past production history and/or national cost data for standard installations and extend out by multiplying the labor unit by the quantity to come up with your labor total in man hours for the task.
4 Adjust labor factors for difficulty by percentage of the task. So, for example, installing a lighting fixture at 20 feet versus 10 feet requires a 30% increased labor adjustment according to NECA.
5 Determine your crew average “Burdened Labor Cost” for the project, taking into consideration any prevailing wage requirements, after-hours work, overtime, etc. Multiply this number by the total labor hours to arrive at your labor cost.
6 Add lost time percentage for non-productive time. On every project, there will be some degree of lost time or non-productive time where your workers are waiting on other trades, going to pick up missing supplies, etc. You’ll want to include some continency on your labor budget to account for this based on the risk of the project.
7 Extend out material quantities and multiply by cost. You should have a firm material quote by now to get your material totals per task. Once you have this, add the totals from each to arrive at your material project totals.
8 Add your “Project Overhead” expenses, i.e., permit, onsite storage, dumpsters, temporary electric, lifts, etc. Note: This overhead is different than the indirect overhead expenses required to run your business.
9 Add your labor, material and project overhead totals up, and move to an estimate summary sheet to arrive at your direct costs to complete the project.

With the above data tabulated and summarized, you can determine the total project cost (estimate) in summary format and determine the detailed unit cost per task. This is possible because you have the data broken down to the task level for the entire project. This is very helpful if you need to add and/or deduct tasks during the estimating process or after the project has been awarded by a project manager creating change orders using the unit cost of a task. Cost estimators can compare between two estimate costs using the detailed unit cost to decide which option is a better value when a customer has requested value engineering to reduce overall construction project costs.

Adjust Overhead and Profit

Finally, take the summary data from your estimate summary sheet and add profit margin to the direct cost of the project. Once you’ve added profit margin, you need to add a percentage to the project to account for your indirect expenses or overhead costs, and this is traditionally a percentage markup of the project after profit has been added.

 

In the next chapter, we'll cover adjusting for profit, overhead and taxes.

Continue to Chapter 5

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