‘Performance-based' estimating can help profits
The sheet metal industry has always needed comprehensive estimating software that is consistently accurate within 2 percent (plus or minus) on shop and field labor. Considering that a 10 percent labor variance can affect profit by 50 percent, this need is urgent.
The historic methods of estimating HVAC and industrial sheet metal labor have been, at best, inconsistent and at worst, potentially disastrous.
There are currently many different approaches to estimating, many of which have been developed by the shop owners themselves. These have sufficed primarily because of the many years of hands-on experience and "gut" feelings these owners possess.
Unfortunately, these improvisers are being made less and less available. There is no question that the individually created estimating system has been reasonably effective for those users. It is my belief that the historic effectiveness of those owner-designed systems was primarily due to the same "performance-based estimating" concept that this initiative is based on.
The owners, many of whom started out working in their own shops, clearly understood the equipment, communications, products and market forces that affect productivity and estimating values.
They really do not feel comfortable with average numbers that reflect other operations; they only have confidence in the performance of their individual and unique shop and field operations. The majority of these so-called old timers are reluctant to invest in computer-run software that use productivity values that are difficult to adopt to their way of estimating.
MethodsThe most widely used HVAC estimating system in North America is the traditional "pounds method." For decades, this system was the accepted and widely used conventional method of estimating HVAC and blowpipe work.
It had the ability to produce reasonably accurate estimates, if adjusted to reflect the uniqueness of each shop's operation. But the potential accuracy was dependant on users knowing their shop and field productivity numbers and putting them into their own system.
This long-used method became seriously flawed when the Sheet Metal and Air Conditioning Contractors' National Association published the fifth edition of its duct-construction manual in 1975. The guidelines reduced the weight of ducts and fittings substantially, but not necessarily the labor. In effect, a duct or fitting that weighed 75 pounds in 1974 may weigh 60 pounds in 1975, when constructed with lighter metal, but require the same labor as the 1974 version.
Using the pounds-per-hour method, the estimate would indicate fewer pounds and fewer hours using the revised SMACNA guidelines. But this was misleading, because the hours would actually be the same. This continues to be a very substantial problem for HVAC estimators.
Almost all computerized estimating systems currently available use productivity numbers based on pounds per man-hour, either as a primary method or as a cross reference to another, such as the piece method.
Problems developSoon after SMACNA's duct guide was published, estimators, recognizing the incompatibility of pounds method estimating with the new book, began adopting what is now commonly known as the "piece" estimating method. It is not based on the weight of the ductwork, but on the shape and size of each individual piece.
This method identifies more labor-intensive fittings, such as compound-radius offsets, from less labor-intense ones, such as simple transitions or short straight joints, which the pounds method may have no way of identifying. Piece estimating has become the system of choice for many, but not all, estimators across the country.
Why doesn't everyone use the piece method? Its accuracy is highly dependant on the individual shop's productivity, so most shops are more comfortable using the more generic pounds method. They cannot make the sizeable commitment to do the extensive productivity studies in their own shop, and are not comfortable with published averages of shops, construction standards and market forces that may or may not be similar to their own.
The piece method is a natural for computerized estimating and is used by several major vendors. It is simple and quick to update and maintain, and is a natural for adopting performance-based estimating factors.
TodayFor more than 25 years, sheet metal contractors have purchased computerized estimating systems, shipped complete with shop fabrication, field erection and accessories productivity values included.
However, walk into any estimator's office using such a system today and the odds are that the system is being used only for the materials and accessories totals without the labor.
Why? Because the resident productivity values have never been adjusted to reflect the performance of their unique shop and field operations.
The solution to these problems? Performance-based estimating. How will it work and benefit your shop? The key will lie in two areas: First, it will organize the labor-unit data associations have collected in recognition of this serious industry-wide problem into a format more specifically related to individual shop profiles, including equipment, information systems and perhaps most importantly, management styles. Second, to accurately collect new data and relate it to the traditional labor units used in numerous publications.
It would take a lifetime of travel and time studies to properly collect the massive amount of productivity data this project will require. That's why many individual shops are reluctant to embark on such an involved undertaking. And who in any company is available to dedicate countless hours of their time to such a project in addition to their normal assigned duties?
But through SNIPS magazine and the Internet, we will make it happen.
In an effort to standardize and improve sheet metal estimating, SNIPS will host this project through these articles and a link on its Web site, www.snipsmag.com. This research project is the key to getting your new or existing computerized estimating software efficient and accurate in the shortest possible time.
How your shop can participate1. Go to Snips' Web site and click on the
performance-based estimating project icon.
2. Select the group (or groups) of time-study items you need.
3. Print out your selections along with the shop-information page and mail to the address indicated. Also include the appropriate time-study processing, shipping and handling fees for each group selected.
You will receive a specific time-study packet for each group of items selected. The packet will include simple and exact instructions on how to do the time study in your shop. Most of the studies will take less than two hours to
Your time studies will be averaged with shops having similar profiles, including equipment, information format and procedures.
You will be provided with comparative productivity time-study data that indicates how you can bring your productivity up to optimum level, if improvement is needed.
This performance-based estimating project, hosted by Snips magazine, is coordinated by Jim Segroves Consulting and made possible by the following:C.L. Ward and Family Inc. Sheet metal duct connectors and accessories
1460 Delbert's Drive
Monongahela, PA 15063
Hardcast - Carlisle Coatings and Waterproofing Inc. Hardware and adhesives
John Guthrie, product manager
900 Hensley Lane
Wylie, TX 75098
Precision Adhesives Inc. HVAC adhesives and sealants Pat Pietrefesa, president
51 Washington St.
Perth Amboy, NJ 08861
Fax: (732) 442-9568
Red River Machinery Inc. Fabricating equipment
Eddie Richardson Sr., president
Eddie Richardson Jr., national sales manager
2601 N.W. Interstate 45
Ennis, TX 75119
Quote Software Inc. HVAC estimating programs Todd Liebbe, sales manager