Breaking Down T&M In Estimates

dirt diggler

It's coffee time ...

I keep seeing posts about pros & cons of breaking down the time and materials for estimates ...

SO FAR (and I stress "SO FAR") I have not found a major problem with doing this.... I'm sure I will though --- and mind you all, I am no genius here, I'm in my sophomore year and feel like a bumbling idiot most days

however, I used to just give a written estimate that listed the scope of work -- and then KABAAMMM!! -- the number. I could "feel" the gasp from people ... this happened approximately 17 times before I said "ok, I need to change my approach"

I started breaking every single item down. Showing the quantity and markup. I would clearly explain why each line item was vital to the entire project. If someone challenged a particular item, I would explain what would happen if this item were to be excluded.

Now, this didn't work at first: because I'd come in and give the total cost first. I'd still get a gasp --- and even after going through each item, it didn't matter --- because their attention was focused on that single lump sum number.

So THEN, what I did was not even mention the cost first. I'd start by going through the list. After they understood the importance of each material & time item --- only then did would I produce the "summary" which contained, TA DA --- the lump sum cost. They could see how everything added up. That number wasn't a psychological issue anymore.

SO FAR ... I've noticed a couple problems with this (that could be huge issues in the hands of notorious HOs):

1) It does open the door --- no, actually it invites them into your living room for tea and crumpets to wheeling and dealing. I don't consider this a huge deal --- because you can still stick to your guns here

2) It literally publishes you. This can come back to haunt you if your client's neighbors/friends want to get an estimate from you (you can COUNT on your client to have already shown them their estimate).
This almost forces you to provide the same rates for the neighbor/friend. SO FAR, I have felt this to be the biggest problem.



However, I think that it also instills some type of trust in you by your clients. They see you laying your cards on the table (or as many as you're willing to) and that seems to establish some kind of trust.

Alright, coffee times over. Gotta long day aheada me

Mike Finley

If it works for you then there is nothing really to change.

But really the only thing I see you doing in regard to not seeing such a "KABAAMMM!! " from them on the final figure is you are building value before you get to that figure.

To me, the customer is still writing a check for the total amount no matter how you want to break it out. The only differnce is you are probably now taking much more time with your line item system and building value as you go, the same thing can be done without showing line item pricing.

Before when you were listing the scope of work was it more like this -

Install tile floor

or more like this

Flooring
Current flooring to be removed (carpet& padding, all staples and carpet strips to be removed. Sub-floor to be exposed and evaluated and the proper tile underlayment to be installed. A tile floor to be installed, the size of the tile to be approximately 18”x18” material will be ceramic or porcelain, installed in a block pattern with 1/8” grout lines, tile installation to be grouted and sealed using a Teflon grout sealer, color matched caulking will be applied where required, Schluter transition strips in brass color will be installed at all door thresholds/transitions. Additional costs are associated with materials other than ceramic or porcelain. Base pricing includes all labor and materials including under-layment, with the exception of the tile itself, since at this time we do not know the costs of the actual tile you will be selecting. Tile to be installed in main floor in master bathroom itself and into adjacent toilet room. No tile to be installed in adjacent walk in closet.

dirt diggler

yep --

it was like

Get Permit
Dig
Install this or that

maybe I not sound like caveman as much --- but it was somewhat primitive.

maj

I do like Mike explained. I list WHAT is to be done, Not how much each "what" costs. The total price is still the total price, but at least they know exactly "what" and "what not".

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Grumpy

I almost always give fixed price but on strange things or repairs I will give T&M. On fixed price, the price is the price and I don't break it apart. On T&M I give an hourly rate plus the cost of materials. I might give an estimated number of how much time and how much material might be used but it's obviously not firm. At the same time I don't break it apart like "13 sheets of plywood at $13.99 each." I would say something like "Plywood...$200"

Peladu

The only time I break down T&M on an estimate is if it's a T&M job.

If it's an open bid job, they get one set price stated on the contract.

I have done work for enough 'number crunchers' that they don't need to know/figure out when I make $5 and hour, or $95 an hour.

Peladu

Not only do my contracts contain work to be done information, but also NIC (Not In Contract) information. I have customers whom do not want a permit pulled for a basement, so under the NIC I will add, "Homeowner required to pull any permits needed by their village."

It's good to see that I am not the only one who is writing detailed contracts up, Finley's wording sounds like something that I come up with, and I thought I was being 'over the top'. For example I had a full page contract for a kitchen remod. After winning the bid, the customer showed me the contract from another contractor. Basically his contract said, "Remodel Kitchen". I also noticed that the guy was way under my price.

My extensive wording has protected my ass in the past, and hopefully will continue into the future. I am not quite as descriptive as Finley, but defiantly a very close second to his descriptions.

maj

[QUOTE=dirt diggler]

I keep seeing posts about pros & cons of breaking down the time and materials for estimates ...

however, I used to just give a written estimate that listed the scope of work -- and then KABAAMMM!! -- the number. I could "feel" the gasp from people ... this happened approximately 17 times before I said "ok, I need to change my approach"

I started breaking every single item down. Showing the quantity and markup. I would clearly explain why each line item was vital to the entire project. If someone challenged a particular item, I would explain what would happen if this item were to be excluded.[qoute]



Remember, we're talking about T & M jobs. Contracts (proposals) should be worded differently and have other things included, than estimates. Estimates should be just that...... an estimate. List & describe what is to be done AND what is to be NOT done, and approximately how much TOTAL labor & how much TOTAL material.

For the final billing it can be broken down if you like. But for estimates only, they don't need to know the price of each piece, nor your hourly rate.



DD......I almost always try to figure my estimates on the high end. So I get the "gasp" from homeowners alot. Yes, I have lost work because my "estimate" was high. But 95% of the time, the job ended up costing equal, if not more, than my estimate. The reason I estimate high? I would rather have the reputation of billing what my estimate was, or even less than my estimate, than having word around town that I somehow screwed so and so for charging more than what I said it would cost. I would rather have the client thinking it will cost $20,000 and then bill for $18,000, then telling them it will cost $18,000 then billing for $20,000.

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PipeGuy

There's NO REASON to work T&M unless you don't know how to accurately estimate the job cost. And I don't think there's any reason to give a detailed itemized estimate if you're not working T&M. That being said...
I show TOTAL estimated hours worked by labor classification; hourly wage rate by labor classification; payroll burden cost (W/C, G/L, medical benefits, leave expenses, etc.) as a percentage of the total hourly wages; TOTAL estimated hours for each major equipment/tool item; hourly rate for each major equipment/tool/vehicle item; lump sum cost item for each anticipated subcontractor; OH&P fee (markup) for labor; OH&P fee (markup) for equipment/tools/vehicles; OH&P fee (markup) for subcontract work; TOTAL ALL COSTS AND FEES.
Rates are based on local prevailing labor and equipment rental costs, actual subcontract costs, 'typical' published construction costs (Means, Green Book, etc.).
I do not negotiate hourly rates. I may show flexibility in the manner in which the 'time' is kept or the extent to which various items may or may not be charged for.

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MattCoops

I use a Job Invoice that breaks down every material (fasteners, spacers, caulk, transitions, everything). The price next to it, with my markup built-in. I have a price list taped inside my clipboard.
I go through each material, verbalize the importance, and build the sale.
I get them nodding, then add up all the materials and labor, and cirlcle the total project cost. We don't do estimates, we make promises. The price is what the project will cost, we promise.
If they like the price and sign the acceptance, then we write out a proposal that goes over everything within the scope of project. Basically a hand-written account of what the job entails. Then I read it back to the customer and ask if I'm missing anything or if they have any questions. Great, then when would you like to schedule the start of the project, and I break out the calendar.
Both the Invoice and Proposal are carbon-copied.
If they have to think about it, or want to shop around, I leave a business card with the Invoice and tell them we also do repair work, so keep our card next to your lowest bidder.

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Matt with Cupan Custom Tile & Paint of Lowell, Massachusetts
Design and installation of ceramic tile and natural stone for floor, wall, and countertops
(978) 601-8774 | cupantile@gmail.com | view tile pictures and more