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No matter what our occupation, there are some tasks within it that we enjoy, and some we don’t. The tasks we like are usually the things we’re good at. We find them easy. If you’re an experienced contractor, you could probably install an irrigation system with your eyes closed and one hand tied behind your back. But the tedious calculations involved in costing out such a system? Well, that’s the kind of thing that can keep a person up at night. It can make the hard, backbreaking work of digging, trenching, installing pipe and sprinkler heads and wiring controllers seem like child’s play.
Let’s face it—you chose this profession because you like being outdoors and working with real things. If you wanted to be an accountant, you would have become one. As much as you may dislike it, estimating jobs and bidding based on those estimates is essential to what you do. And how well you do it may very well mean the difference between success and failure.
If you were awarded the job and installed the best system for that site, but missed some areas in your estimate, you probably would have lost money. Costing out a job is extremely important—this is where the mistakes can cost you a lot of money.
Whether you do the estimating manually on a take-off sheet, or you’re using computer software (there are a number of irrigation software programs on the market that include estimating), the important thing is to make sure you input the right data.
There are many things to take into account. You have to know exactly how much and what size pipe you’ll be using. How many elbows and tees will be needed? Will you have to dig around hardscape? How many heads and valves are you going to install?
Will you be installing moisture sensors? What kind of controller will you be using? And how much will all these things cost?
You have to figure out how many vehicles will be used—don’t forget to pro-rate their wear and tear and depreciation. What about fuel costs? Oh, and remember to factor in your overhead—rent, utilities, insurance, advertising, salaries and wages, worker’s comp, bonds and permits— everything it costs every day to keep the doors open.
You also need to make sure that you factor in the value of your own time and your own salary. And finally, how much profit your company needs to make. You have to be careful to make sure you don’t leave anything out. Whatever you forget to put down on your take-off sheet is money you’re leaving on the table.
However, the area where most of the money is lost is in costing out labor. You need to determine how many people you will need to do the job, and how much time it will take them to do it. Here is where things can get out of control.
For example, you figure you can do a job with five men and complete the project in three days. But it really took those five men five days to complete the job. If you were paying them ten dollars an hour, that’s 16 additional hours per crew member, or a total of 80 additional hours that was not figured into the job. At ten bucks an hour, that adds up to $800. Then, factor in all the additional costs included in the labor burden and that easily could add up to another $500. This miscalculation just cost your company $1,300.
You should review and see where you went wrong in your calculations. Perhaps you thought the men would work a little faster, or you ran into other unforeseen problems that held up the job.
Of course, as every contractor knows, no matter how carefully and precisely you estimate, there’s always that ‘X’ factor that can rear up and bite you. “If there is a ledge or rock under the ground, that makes everything more difficult,” said Dennis Hoffman, president and owner of Grasshopper Irrigation in Reading, Massachusetts. “The pipe won’t go under the ground as far. You have to talk to the homeowners, and see how they want to proceed.” Hoffman’s been lucky in that most of his customers, while not pleased at a change in the estimate, have been understanding.
The “rock clause”
“The slang term for Waukesha is ‘Rockesha,’” said Mike Todd, president and owner of Milwaukee Lawn Sprinkler Corporation in Menomonee Falls, Wisconsin. His state lies in the path of a receding glacier. So how does he protect himself? “If we’re going to be working in an area that’s known to be rocky, we’ll put a ‘rock clause’ into the contract.” This clause simply states that if a sprinkler system can’t be installed with conventional equipment, the condition will be brought to the attention of the owner and additional compensation will be determined. In 38 years, he’s only had to invoke the clause three times.
“Estimating is the art of defining what a job will cost in the future, at the level it costs your company,” says Charles Vander Kooi, a business consultant with Vander Kooi and Associates in Littleton, Colorado. “Estimates should be based on how productive you are, the kind of equipment and people you have, and what you’re paying those people.”
If you talk to seven different irrigation contractors, you’ll get seven different opinions about the best way to come up with estimates. Everyone has his own idea of what’s most important, based on his own experience.
“The three biggest things I look for in costing out a job are: what’s the water pressure, how many zones are there, and how many heads am I going to need?” said Hoffman. Bronson Patterson, owner of Four Seasons Landscape and Irrigation in Huntsville, Alabama, agrees that water pressure is crucial. “You have to test the water pressure at the meter. That dictates the size of your valves and the pipe.”
It also determines how many heads can be put into a zone. Hoffman, who has 20 years of experience installing irrigation systems, concurs. “After I survey the area, I always take a water pressure test, to see what the flow rate is in gallons per minute.”
Different parts of a city can have different water pressure. Hoffman says it’s even more variable than that. “Everybody’s house is different. It’s always different.” He says that even though you may have installed an irrigation system for the lady next door, you can’t assume that her neighbor will have the same pressure.
After figuring that out, Hoffman asks a series of questions. Does the homeowner want different zones for different beds? Does he want rotary heads for bed areas, or drip irrigation? What are the sunny and shady areas? How long will the job take and what is the cost of the materials?
When all is said and done, after you’ve gone over the estimated bid a few times—checking and double checking to make sure you’ve added in all the costs—you should always add some percentage to the project, just in case you missed something, or miscalculated. Call this the ‘fudge factor.’
There is some controversy over the practice of unit pricing—counting the number of heads, for instance, then assigning a multiplier. Some contractors do it, and some others think it’s a good way to go broke. If you ask Vander Kooi about unit pricing, he’ll give you his very strong opinion against it. “It shouldn’t ever be done,” he says. “I’ve bid over a billion dollars worth of business in my lifetime, and I can tell you that I’ve never seen two jobs alike.” According to him, when you unit price, you’re going under the presumption that every job is the same—the same head spacing, the same soil conditions, and that the trenching and everything else moves along at the same speed.
But what about beating the guy with the cheaper bid? Vander Kooi says that if you can’t do the job at that price, that doesn’t necessarily mean your price is wrong—it means you’d better investigate your costs. You may be paying your people too much, giving them too much in benefits, or overspending in some other area.
“I used to price out my jobs per head, especially when I started out,” said Hoffman. “But I learned that you’ve got to take into consideration whether or not you have to go under a walkway or a driveway—some hardscape—that’s the biggest thing.” He tells new contractors to avoid the mistakes he’s made. “But there are still guys in my area that price out by the head. Those are the low-ballers. They don’t get enough for their jobs, so they have to take shortcuts.”
You should also account for the unexpected, as Patterson does. Once he’s finished the estimate, he goes back over the list to see if he’s missed anything. And then he adds five to ten percent to all his estimates, just in case the unexpected does happen.
Residential vs. commercial
If you’re working in the commercial area, there’s a little more involved. Commercial work is more detail-oriented, with many more pitfalls.
They’re more encumbered with paperwork, jobsite meetings, safety issues and coordination with other trades.
“Commercial can get a little tricky,” says Patterson, who does both commercial and residential work. “They may specify a certain type of valve or sprinkler head. Even with all my experience, sometimes I miss something.”
And then there’s the issue of when you get paid. Unlike residential work, commercial work typically has no down payments. There are bonds you may have to buy (bid bonds just to bid on a job, and performance bonds once you get the job). Special insurance may also be required.
One tool that can save you time— and therefore, money—is estimating software. “When you do irrigation design, there are a lot of calculations that have to occur,” said John DeCell, president of Software Republic in Hockley, Texas. Manually, this can be an extremely time-consuming process. It’s much easier when a computer can calculate all of that with the click of a button.
A former irrigation contractor, De- Cell found himself spending three to five hours manually drawing out and adding up proposals. (He says that his software cuts that time down to about 45 minutes.) He began developing the software back in the 1980s. His company’s programs will do calculations like distribution analysis, pipe-sizing and hydraulics, as well as materials takeoff.
Another available program is PRO Landscape, from Drafix Software in Kansas City, Missouri. Although mainly geared toward landscape design and lighting, it can also be used for costing out an irrigation system, and includes databases for irrigation components.
According to company president and CEO Pete Lord, “When estimating with a by-hand drawing, a contractor may start guessing about how much pipe he needs. Our software can take out the guesswork. Let’s say you run pipe down a property line and over to the driveway. It’ll tell you that it’s exactly 63 feet, 7 inches of pipe, just by drawing the line. You can then specify that it’s one-inch PVC and how much it costs per foot.”
The original computer-aided design (CAD) program was introduced many years ago by AutoCAD. But its drafting software was developed for architects and engineers, not landscape professionals, and it’s pricey. There are a number of other companies that market software tailored to our industry, in addition to the two mentioned above. Some other irrigation estimating software programs include IDA from Water Management Specialists in Moody, Texas, and ProLand Estimate from Sunwest Landscape Software in Surprise, Arizona.
Having a computer-drawn design and all the accompanying calculations shows a potential client what they’re actually getting with the system you would install. This separates you from the competition, according to DeCell. It’s especially true if your competitors are bidding based solely on price.
But as with any computer program, remember it’s ‘garbage in, garbage out.’ You have to input the right data first.
Don’t forget your profit
Last but not least, after everything else, comes your net profit. Todd reminds new contractors that there’s no sin in making one. (Just try staying in business without it!) Patterson adds 35 percent to the top of all his estimates for his profit.
Believe it or not, profit can get overlooked, especially when you’re trying to underbid the competition. You may think you’ve built in a profit margin when you really haven’t. Keep in mind, everything you miss will come out of that bottom line.
Nobody can tell you how much profit you should make on each job, or how much you can ‘fudge’ on a particular proposal. That’s something you’ll have to decide for yourself.
Costing out irrigation jobs should get easier with experience. It’s important to be flexible so you can “roll with the punches,” but not so pliant that you lose perspective. List your expenses—all of them, account for the “X” factor, and don’t neglect to add a decent profit. It should be a recipe for success.