Luciano Cunha
Modern AEC software can help you prepare profitable estimates and win more bids
Construction companies run a risky, complex business where margins are typically in the low single digits and four percent is considered high. They are in heated competition to win projects that may take many years to complete. Creating reliable, profitable estimates to win bids is as challenging for most construction firms as it is business-critical.
When estimators prepare a bid for such complex undertakings as a suspension bridge, an alpine tunnel, or a seawall, they do their best to consider site conditions and protect the company and its clients against unforeseen events. Even so, many larger construction projects run late or over budget. Stakeholder companies end up suing each other, and construction margins can largely erode.
Manual processes and expert systems still prominent in estimate creation
Best practices, elements of successful projects in the past, materials science, and decades of expert knowledge feed into construction estimates. Companies save successful past estimates or parts of them as reusable templates to make estimating more efficient and reliable.
Common estimating tools include Excel spreadsheets, proven calculations, or specialized software. In many construction companies, the steps for creating an estimate are the same, even if the data sources feeding into it are different. In smaller companies, experienced project leads and or sales consultants may have their own ways of building estimates.
In the somewhat conservative construction industry, modern ERP systems or software specifically designed for architecture, engineering, and construction (AEC) purposes are not universally adopted. Software tools are not always integrated, and expert knowledge may not have been captured anywhere at all. Poor version tracking of estimates can introduce errors and ambiguities that may make winning a bid less likely or that can complicate negotiations.
Putting construction software to work for your bids
To simplify estimate generation and make it more likely that bids are successful and the resulting projects profitable, estimators need to be able to access their libraries and import financial and operational information from past projects. In the best case, their AEC-optimized ERP system integrates with those resources and data sources, so they don’t have to rekey information.
Many estimates incorporate a bill-of-quantity (BoQ), where you work with an established cost of labor and materials, for instance, per building floor or per meter of a subway tunnel. You need to be able to easily reuse these standardized costs and margins, but your construction software should also make it possible to review the sources and conditions, so you don’t prepare a bid based on outdated assumptions.
Just as important, the ability to model the impact of cost and margin changes on the overall estimate and the company’s financial performance can be important in presenting a successful bid.
Implementing consistent subcontractor bidding and tracking
Subcontractors provide essential labor and services on construction projects. Their costs have to figure into your estimates without inflating the figures so they become unreasonable or compromising your skinny margins.
Many times, you will need to specifically request a bid from subcontractors, but you should also have subcontractor-specific cost and quality tracking in your ERP system. That will help you engage with the reliable, efficient subcontractor companies that can align with your business interests.
Integrating technologies and improving workflows
Specialized construction software tools such as building information modeling (BIM) systems should integrate with your ERP, or different teams will work with various systems as their main references and it becomes next to impossible to create estimates based on reliable information. If you use an ERP-integrated BIM to design your building, generate the estimate, and track the progress of construction, project milestones and financials can immediately appear in the finance and project management modules of the ERP solution for your project leads and finance team.
As a best practice, some highly successful construction companies gather the insights from each bid and project, successful or not, to improve their approach to generating estimates and building the business. Modern ERP can be enhanced with the tools to improve construction processes and mitigate the risk of pursuing and performing challenging, years-long projects.
The right ERP solution, tailored to the unique requirements of the construction industry, can make it easier to create solid estimates and win bids. To learn more, download our whitepaper:
Luciano Cunha