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Costing Out an Irrigation System

| Irrigation

Gone are the days when there was so much work out there that if you didn’t get one job, you got another. Also gone are the times when you made an appointment for a potential project, came in looking like you just finished digging some trenches, checked out the project and took out your business card to write on the back: install new irrigation system— $1,900.

In today’s competitive environment, it’s unlikely that you’re the only company whom the customer is calling.

We’re entering a time of more professionalism; you’re going to have to act and look like a businessman. You’ll have to make sure you return calls in a timely manner; you’ll want to show your company as a professional and successful one. Like an actor seeking a role, you’re going to have to have to audition for the job.

That’s half the battle. The other half is what you do for each individual customer, based on that customer’s circumstances and needs, and based on your own circumstances and needs. That is, make a bid for the job.

The bid is all-important, especially when you know that other irrigation professionals are also going to be bidding, and they make as good a professional impression as you do. Bid too high, and you may not get the job. Bid too low and you won’t see much profit—or even lose money.

It is worth noting that what constitutes “high” or “low” can vary from contractor to contractor, even for the same job. If you’re swamped with work, you might bid high on a job just to make it worth your while logistically to take on the project. If you’re in the opposite situation, where you really need the work, there’s intense incentive to win the job. Frankly, you need it.

“High” and “low” have everything to do with profit margins—whatever you can charge over your materials, personnel, and other costs. What you don’t want is to err in assessing those costs. In order to come up with a price for a project you want to bid on, you need to know exactly what your costs are. Without true numbers, you’re shooting in the dark. If you do err, you will end up paying those costs out of your anticipated profit margin. Too many mistakes can take your bottom line from black to red in no time flat.

For decades, irrigation contractors have been assessing costs and estimating projects by using “take-off sheets.” Whether done manually or with the assistance of computer software like Irrisoft’s Quik-Irr or Software Republic’s Pro Contractor Studio, the take-off sheet can be your best friend in preparing a bid, or your worst nightmare.

A well-prepared take-off sheet accounts for every cost that’s associated with a particular project. There are “hard” costs, like the cost of piping, valves, and sprinkler heads, and “soft” costs, like the cost of your overhead, gasoline, and insurances.

Let’s start with figuring your hard costs. If you’re not working with a set of plans, you’ll want to find out what the client would like to see in a system. Then you can decide what will best suit their needs. Before deciding on a single specific piece of equipment, you should become familiar with the property and its specific features. Determine its water pressure. Note if there are any trouble spots around the property, such as areas beside walls, driveways, and sidewalks. Evaluate the soil so you can determine trenching conditions. And probably the most important tool in your tool box should be a digital camera. Using a digital camera to document what you find can be helpful, especially if a client questions your bid.

After you’ve taken your measurements and done your irrigation design—don’t forget that your supply house can assist you with that part of the operation—you’ll know how many feet of PVC pipe—and what kind—you need to list. Your design will dictate sprinkler heads and their placement, drip irrigation and lowvolume irrigation piping and emitters, and the like.

Along with sprinklers, you also need valves and couplers, rain sensors, possibly a backflow prevention device, etc. In fact, just about every piece of equipment you install will have some additional attachments. Ventura, California irrigation consultant Jess Striker offers the examples of valves and valve boxes: “A typical valve needs short lengths of pipe leading to the valve, inlet and outlet fittings, a valve box, some gravel to line the bottom of the box, and wire connectors for making waterproof wire splices.”

Whether you’re using a take-off sheet where you have to pencil in the data, or you’re using a softwarebased take-off program, what do you list on your take-off sheet? Well, everything. The take-off form will help you track each component you need, how many, the make/model/ part numbers, and the cost of each item.

To be accurate in your bid, all these items should be listed on your takeoff sheet. Also on the take-off sheet will be information-management equipment, like your controller. This is one area where you might be able to flex your bid.

Granted, there are smart controllers on the market now that can meet just about any irrigation challenge, whether it’s capricious weather or the ability to modify the controller halfway around the world, making adjustments to the irrigation schedule with a Smartphone. It’s possible, though, that your client can get by with a less sophisticated, “dumb” controller.

Same thing for in-ground moisture sensors. These devices provide continuous feedback to a smart controller about soil conditions, and can prevent an irrigation system from engaging when the soil doesn’t need it.

In-ground sensors have come down in price and can help protect the precious resource of water. They need to be accounted for on your take-off sheet.

With all this equipment, don’t be surprised if your take-off sheet is several pages long. The list can get longer with tools purchased or rented, and miscellaneous supplies like tape and glue. Similarly, there may be supplies that you already have on hand that you will put to use on the project. Forgetting any of these in your estimate will cut into your profit. Many contractors work with a materials checklist to help remember all these items.

The last hard cost is permitting.

Permitting can be expensive, but it can be even more expensive in the long run to do a project without the right authorizations and permissions. Permit costs need to be included in your estimate.

Those are the “hard” costs that will go on your take-off sheet or into your estimating program. Then, there are “soft” costs. More contractors make mistakes in this arena than in any other. It’s easy to figure out the price of a valve. How does one determine the cost of on-the-job training for a new crew member, or the percentage of liability insurance payments that should be attributed to a particular job or jobs? That’s trickier.

The easy part is man hours. That is, how many able bodies will you need on your crew to finish the job in a timely manner? How long will the job take, and how much will you pay your crew members? These are fairly obvious but what many fail to consider is the labor burden. You’ll need to account for social security, workman’s compensation, and health insurance for your employees. There’s also sick days, vacation pay, and any government-mandated leaves to consider.

Don’t forget subcontractors. You may need to hire outside people to work on the project . . . or at least a part of it.

Next to people, your largest “soft” cost is your vehicle or vehicles, as well as any other transportation expense. You’ll need to know the distance you’ll be driving to the job, as well as the distance from your irrigation supply outlet. (If your supplier delivers for free, so much the better.) This information will help you to calculate the gas, maintenance, and insurance that your vehicles require, so you can include these figures in making your estimate.

Lastly, it’s easy to overlook the soft cost of running your company. How you factor in your office rent or mortgage, office help (or lack thereof!), utilities, insurances, and depreciation is up to you, but it needs to be factored in. Ditto operating licenses and business taxes.

Be prepared for unexpected costs. Jobs may take longer than expected, or vehicles might break down. Existing pipes may need to be replaced.

Budget in a little “wiggle room” for yourself. You will be less likely to lose money if you are prepared for the unknowns in your bidding process.

Once you’ve calculated the costs of doing the job and accounted for all the costs that affect your company, you need to decide what you’re going to charge your potential clients. If your bid is too high, you run the risk of losing the job. But if you bid too low, then you might not see any profit for your company. Unfortunately, there are no reliable industry guidelines here. You simply have to think about what kind of profit you need to make for your company to prosper.

Preparing your bid for a job is time-consuming and the costs can be devastating if not done properly. Take your time and be as accurate as possible. If more than one person in your company is preparing take-offs, then develop a company standard so that everyone is doing them the same way. Incorporate a system of “double checks” as well, in order to catch errors.

Most actors will tell you that they hate auditioning for a role. It’s tedious and time-consuming. There’s hours of preparation for an audition that might just take a minute, and there’s an absurd amount of competition.

Welcome to our world. Just like the actor and the role, there’s no alternative to costing out an irrigation job.

Both you and the actor want the prep to pay off. He gets the role and (hopefully) a standing ovation. You get the job and a healthy profit.

Go break a leg.

 
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07.23.2012 at 11:46 Reply

This is a terrific article - and applicable not only to irrigation contractors.  Good advice to all landscape contractors as they calculate and estimate projects. Good work, Jeff Gottesfeld.

 

08.18.2012 at 10:56 Reply

I the subject matter is important but the information offered was incomplete and rudamentary. What about the labor cost of over time wiht most of us pay each week? When looking at OH, no mention was made of allocating some factor in for the owners management cost. Is the owner just trying to buy himself a job, or does he want actually manage a profitable endeavoer, one that has resale value at some point down the line.

 

 
 
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