Construction estimating is a critical activity that determines the chance of success, competitiveness, and expansion. Unfortunately, estimators seldom have access to such information, but by using key metrics and KPIs, estimators would be able to identify key areas that would enhance the overall estimating system. This allows them to offer dependable budgets, so they can secure more work at the right margins.
Here are the top metrics and KPIs construction estimators should focus on:
Win/Loss Ratio
The win/loss ratio calculates the ratio of the number of successful tender bids to the total number of bids made by an organization within a given period. Measuring this over time depicts the shift in the win rates hence the competitiveness of the bids made.
A good victory rate should lie within the 10-20% range. A win rate that is higher than what is expected implies that one is getting paid too little, or perhaps they are overcharging by underestimating the amount of work involved. A lower win rate suggests that the prices charged are too low or that the estimating methodology used is not accurate enough. Calculating why you have won or lost bids remains important when trying to make improvements.
Estimate Accuracy
Lumber Takeoff Services accuracy can be described as a comparison of the cost estimate that was provided initially and the total cost of the project in its final phase. It shows how exact your estimates are and to what extent the budget varies as the project unfolds.
Validation of research findings for different phases – initial estimate vs final estimate. In particular, some professionals maintain that the target range of estimate accuracy for the initial to final budget should not exceed ±10%. To improve cost estimating, review reasons for actual results by the cost type to explain the variances.
Rework Percentage
In the Construction Estimating Companies, an addition to the main plans that was not foreseen before the commencement of work is referred to as rework. Reporting on rework as a percentage of total project cost shows how well the extent of work was defined as well as estimated at the beginning of a project.
Rework percent best practice is more than 5 percent. If higher, enhance the checklists and procedural practices for managing scope reviews, estimating, and change orders.
Cost vs Billings
Earning is measured in intervals, enabling you to determine the profitability of any project at a particular time. Check the difference between the budgeted cost and bills sent to the client to ensure that the cash flow milestones are met and that your collections team is efficient.
Any significant differences could be indicative of incorrect estimations poor management of budgetary control, or lack of timely issuance of bills and recovery of amounts due. Explain the seasonality of your business and external factors when setting targets.
Labor Cost Percentage
Some of the operational costs are the salaries of the workers, their benefits, their training, the overheads, and the equipment used by the workers. Being one of the largest costs in construction which is more than 50 percent, managing the labor cost percentage is essential.
Guarantee that the current project percentages are in line with past average percentages to identify skew as soon as possible. Total overhead costs: It is preferable that out of the total cost, 40-50% should be about labor. If so, try to enhance the flow of labor and its efficiency.
Overhead Costs
Overheads are the indirect costs that are incurred in a project such as office rent, taxes, insurance, and security among others Overhead costs can be divided into fixed and variable where fixed overheads remain constant, and small changes in discretionary overhead costs will have bigger effects on profit.
Never allow your overheads to exceed 10-15% of the total costs you have incurred. It will be vital to analyze the administrative costs, equipment rentals, move costs, etc., and cut down on these costs if needed. Other factors that do assist in such circumstances include the sharing of overheads across various projects.
Gross and Net profit margins The gross operating profit margin (GOPM) and the net profit margin (NPM) are two measures that show how much profit a firm generates on each dollar of sales.
Of course, the increasing number of winning bids and overall revenues is positive, but one should remember that profit margins are the key to success. This should be monitored in terms of gross margins on materials and labor, as well as net margins by the project.
When calculating the gross margin, try to aim for 20-25%, and for net margins, it will be 5-10% depending on the business model. If it is lagging, adjust the pricing strategy, supply agreements, and staff expenses for optimization. It is recommended that you savor the victories while steadily working on widening the gaps.
ALSO READ: Revolutionizing Business Collaboration with HDIntranet
Conclusion
In addition to these, other means through which estimators can challenge themselves include a comparison of industrial costs per square foot, records, competitor data, and organizational objectives. However, other factors such as; levels of client satisfaction, feedback from teams involved in the projects, and skill enhancement among estimators also play an important role. When it comes to tracking and analyzing estimators’ performance, the use of both tangible KPIs and soft signs is helpful because it provides estimators with accurate standards that can help hone their judgment. This creates an ability to forecast efficiently, to operate at a profit, and to enhance an Electrical Estimating Services competitive position.
