How to Bid an Electrical Job?
According to statistics from the United States, the electrical services industry is worth $100 Billion in 2023. And surprisingly, every 1 out of 4 electrical contractors fail in this huge market. There are many reasons for this failure but one of the prime reasons is that they don’t bid for the potential electrical projects.
Bidding is the process that enables businesses or organizations to find external contractors for a specific job while allowing external contractors to earn their partake for the job. Being an electrical contractor, if you bid too low, then you may lose money or have to cut corners to meet the budget.
On the contrary, if your bid is too high then you may lose your potential clients as they prefer affordable solutions over you. An accurate bid is essential for the electrical business’s success and profitability.
Are you an electric contractor? Don’t know how to bid for an electric project then you have landed at the right place. In this blog, we will guide you on how you can make an electric bid for an electric job. Let’s get started.
Why Are Estimates Important?
There is no such thing as absolute value in the world. You can only estimate what is worth to you. Estimation is an integral part of everyone’s success.
Consider you want to make a budget for your home. You have to set the cost including fixed expenses (utility bills, electricity bills, loans) and variable expenses (grocery bills, order out bills). You cannot get a fixed budget for these expenses, can you? Here, estimation comes into play.
Likewise, electrical estimates play an integral role in the electrical business. An electrical contractor wants an estimation at each stage of his project as he cannot get the exact cost. Have a look at some of the reasons why estimates are important.
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Helps in Accurate Budgeting
Accurate budgeting is the only aspect that determines whether an electrical project is successful or not. An accurate budget is only achievable by accurate cost estimates. According to reports, more than 50% of electrical projects fail due to inaccurate cost estimates.
Imagine you want to renovate your house. You have $1500 and you think that is more than enough for your home renovation so, you fix the budget for renovation to just $1000, and the remaining $500 you spent on your car service.
And when you start the renovation of your home, the total renovation expenses are $1450. So, eventually, your home renovation goes out of your budget. If you get an estimate before setting the budget then you would certainly not go out of money.
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Efficient Resources Allocation
Estimation plays a crucial role in resource allocation effectively. Resources include the materials, equipment, and tools. Estimation allows electrical contractors to optimize the resources, avoid cost overruns, and minimize material wastage.
Suppose without getting any estimation you order 400 pieces of 2×4 wood board for your home renovation but your home remodeling just needs 267 wood board pieces. This plentiful supply of wood boards certainly disturbs your project budget and leads to budget overruns.
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Make Insightful Decisions
Estimation helps you to make insightful decisions for potential projects. For instance, you can do a complete cost-benefit analysis of a project with the help of accurate cost estimation. This helps you to know whether your investment is worth spending on this project or not. When you get the estimation for an electrical project, it will help you to know if the project is profitable, and if yes then it further costs overruns.
In the same way, some projects are profitable for you but they do not synchronize with your timeline. So, with the estimate you can decide whether you should take this project or not.
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Increase the Profitability of Your Business
Unexpected events, inflation, and insufficiently scoped work can impact the project’s ability to be completed on time, and lead to budget overruns that eventually badly impact your business profitability.
By getting estimates for any project, you can take into account both anticipated and unplanned costs and increase your profit margin. According to reports, an accurate cost estimate can increase your profit margin by 15%-18%.
After knowing the importance of estimates, now it is time to get to know how you can bid for an electrical job.
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How to Bid on an Electrical Job?
The electrical industry is the fastest-growing industry in the United States. According to statistics, there is a high projection in electrical employment percentage of 6% from 2022 to 2028. And the average growth rate of the electrical industry is higher as compared to other industries which is 3%.
The global electrical business is expected to grow by 67% by 2027. So, with this growth, it is obvious that there is a high influx of electricians in the electrical industry. This high influx sparked the high competition among electrical contractors and more contractors are bidding for the same job.
To outshine in the electrical industry, you have to win as many projects as possible. For this, you should revamp your bidding process, and make it more precise, quick, and lucrative. Have a look at how you can bid an electrical job effectively.
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Choosing the Right Job
Bidding is not like gambling. Being an electrical contractor, you have to be picky while selecting the right job for electrical bidding. Randomly agreeing on every project that you come across is not good for your business success.
Bidding for a project that offers less-than-ideal terms may give you ease to secure a job. But when you visit a job site and start working, you’ll know that you’re not going to make any money out of this project as you have already bid by cutting your profits corners. It would be better to take time and bid wisely rather than a random quick bid.
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Reviewing The Bid Documents
A bid documentation includes the specifications, drawings, bid addenda, and other essential instructions. If you’re considering a project, then you should review thoroughly the bid document that outlines what work needs to be done and how it is to be done.
Generally, business owners divide this document into various divisions and each division elaborates on the specifications of the project.
For instance, division 1 clarifies the payment terms, bonding, and insurance requirements, whereas, division 26 specifies the material type, installment method, and what task needs what cost. To grasp the full scope of the project, also review the electrical drawings that elaborate the technical details of the project.
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Perform A Material Takeoff
A material takeoff counts all the materials like length of wire, number of fixtures, amount of conduit, etc. that are required for the project completion. This complete list of materials with their cost eventually helps you to estimate the overall project expenses.
Moreover, you can perform the material takeoff manually as well as use takeoff software, each of these ways is feasible. Regardless of the method, the takeoff should be as accurate as possible.
However, it is better to overestimate than underestimate. Because if there is a material shortage at the work site that eventually leads to project delays and affects the overall efficiency of your project.
Suppose you want to quantify the electric wiring lengths for your client’s house. You would measure the total wiring length that needs to be installed. Say for a 3000 square foot house it would take 3000 ft wire of 14/2 and its cost is $2300.
This is the quantity takeoff of installing electric wire, in a similar way you can perform the electric quantity takeoff of each task one by one.
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Request Quotes From The Suppliers
After you have compiled the list of all materials, send this to the electric supplier to get the quotation. Start this process as quickly as possible as the supplier takes a while to send a quote.
Make sure that you have done in-depth research about the current market pricing of the materials that you add to the list. Prices depend on the manufacturers, brands, or quantity purchased and can fluctuate.
Additionally, get quotes for the key electrical components such as MC cable, gear, large wire, and lighting. With this, consider requesting quotes for two or three suppliers whom you trust more. This would save you from bidding in the final minutes.
In case of any delay from one supplier, you have backup. Moreover, you can compare the quotations of all the suppliers and choose the affordable one.
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Estimate The Labor Cost According To The Material Takeoff
Once you have done with the supplier quotation, now it’s time to assess the labor requirements and costs. No bid is complete without accurate labor costs. Labor costs are not just the number of hours required to complete a project. There is much to consider for the precise labor estimate for any project.
To calculate the labor cost, follow the below-mentioned steps;
- First, evaluate the labor amount for each material
- Multiply the labor amount of the material with the total labor hours needed to install it
- After that multiply the fully burdened labor rate for a worker by the number of hours required
- Add labor cost for each task to get the total labor cost
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Adding Overhead And Profits Margins
Some contractors wrongly believe that they will not have overhead costs in their projects and don’t add them to their estimates. But the fact is that every electrical job has some overhead costs of some kind, and should be added for each job to make their business profitable.
To calculate the overhead cost you have to add total monthly expenses and indirect costs.
Overhead = (fixed monthly expenses) + (indirect costs)
Don’t mix profit with the profit margin. Profit is the all earnings from the project after subtracting overhead and direct costs. The profit margin is the percentage that is obtained by deducting the total cost from expected revenue and dividing it by the projected revenue.
Profit Margin = Expected Revenue of the Project – Total Cost
Projected Revenue of the Project
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Build Your Bid Proposal
To create your bid proposal, first calculate the total sale price of your project by adding labor costs, material costs, overhead costs, and profit margins. You have to compile this data similarly to the project specifications and drawings provided by your client.
It is better to create a bid sheet which is also known as a bid form that includes project schedules, contractor responsibilities, bid price, scope of work, payment terms, and a complete breakdown of material, labor, and equipment costs. If you don’t want to create your bid form, then you can use a bid template, that will save you time.
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Re-Check And Submit the Bid
Now you have a detailed and accurate bid proposal on which you have spent a considerable amount of time. At this stage, don’t make it a hassle to submit your bids to the project owner. Take time and review your electrical bid proposal.
It is a good idea to get a second set of eyes to re-check your bid to ensure that you didn’t miss anything. This rechecking may involve the counterpart taking off of the project and ensuring that not a single beat is missing during the original takeoff.
Once you’ve re-checked the bid, now is the perfect time to submit the bid. Nowadays, everyone is submitting bids electronically via email or website. But it is better to read the Division 1 specifications and make sure you’re sending bids in the right format on the right platform.
Methods For Electrical Estimating
An estimating process defines how accurately and easily an Electrical Estimator can create the estimate. Here, we have mentioned some of the methods of electrical estimating, each has its pros and setbacks. So, let’s discuss these one by one.
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Per-point Method
In this method, each fixture -such as a switch, light, fan, power point, or sensor- is considered a point, assigned to a common dollar value. For instance, if you are estimating an electrical system with 80 points. And the dollar value you’ve chosen is $70. So, your quote for the project will be (80*70 = $4200).
This method is the best to estimate quickly and easily, but the cons of this method is that there is a high possibility of inaccuracy in these estimates. Moreover, labor cost is not included in this estimate, which is the greatest pitfall of this method.
Without adding labor costs you can easily go over budget overruns. You can say that the per-point method is an averaging method in which the highest and lowest are not included.
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Pre-build
This method is also known as the assembly estimating method. This is the finest way to perform accurate takeoff by making a package of various materials and creating a unit cost for it.
In bidding electrical jobs, many electrical parts include several components like an electric outlet consisting of metal strips, electric wire, and switchboard. By pre-build estimating, you can cost the whole package as one unit.
In the pre-build method, you can add a combination of materials and labor, or material only, or labor only, as a single billable item. The pre-build estimating method carries the same level of inaccuracy as the per-point does.
You can understand it as the more complex version of per-point. This process also leaves you out of your pocket due to travel costs or labor miscalculations that can eat up your profit.
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Labour Unit Method
Unlike the per-point estimation, where a unit cost is assigned to hardware, the labor-unit method assigns the unit cost to human labor that is needed to complete the job. In this method, a separate unit of labor for the installment of specific electric material is created, and calculates the labor cost for per unit output production.
Consider your labor unit cost is $95. Installing an automation system in your office building requires 54 labor units, so your estimated cost is (95*54 = $5076).
This method is more accurate than the per-point and pre-build estimates but still, there are some pitfalls like labor burdened costs – costs that are related to the workforce but not to the work – are not included in this estimation method.
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Design and Construct
In the design and construction estimating method, the electrical estimator is involved from the designing phase to the actual project implementation. The client provides design instructions that elaborate his requirements for the project and electrical contractors will complete a detailed design before starting the electrical job.
To execute the design and construction method effectively, an electrical estimator should have a comprehensive understanding of all the aspects of the project including labor costs, material costs, equipment requirements, and method of design.
This is an intricate estimating method, in which an estimator has to provide accurate forecasting cost for a project from the designing phase to the execution phase.
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Guesstimate
This method of estimation is very prone to error, we don’t recommend this estimation to a newbie in the estimating industry. Carry this estimation process only if you’re the master of the thin slice or you’ve completed numerous similar projects.
In general, in the guesstimate, there is a greater possibility of inaccuracy because this estimate is based on gut feelings rather than a thorough analysis of the project.
However, if you hire some expert for Electrical Estimating Services then the professional estimators can guesstimate as they have years of experience handling complex electrical projects.
Conclusion
Crafting a successful bid is an intricate process and needs some strategic approach. Precise estimates and delivering transparent information to clients are the key to successful bidding. Being an electrical contractor, to grow your electrical business you must know some effective ways of winning bids.
In this blog, we have thoroughly discussed how you can effectively bid for an electrical job. Your bid should not merely be just numbers, but it should address the client’s concerns, offer tailored solutions, and ultimately outshine the competitive electrical industry.
