If you have been estimating construction projects, then you are already familiar with using a quantity figure to calculate the cost of any bid item. Multiplying the quantity by the unit cost generates the total cost of any item.
But did you know that dual-quantity estimating using two quantity figures can help you win more bids, and improve your profit margins?
Let’s explore why.
When you are estimating and pricing a bid, you normally have a list of pay items, each with a quantity figure provided by the client in the bid document (or Bill of Quantity). You are likely using these quantity figures to estimate the cost of the project. The quantity figures are what the client determined was needed based on their assessment.
Estimating with the client’s quantity figures remains important for several reasons:
While estimating with the quantity figures is still very important, it is not enough to make an informed pricing decision. You can increase your likelihood of winning bids and improve your profit margins by also using estimated quantity figures.
The estimated quantity figures are the quantities you measure based on your own assessment as an estimator, or with the help of the quantity surveyor at your company. Your estimated quantity figures might match the client’s quantity figures, or they may be different depending on the item. Instead of solely relying on the client’s quantity figures, you use your own measurement based on the drawings and your understanding of the project. For indirect items that tend to be duration-based, the estimated quantity is based on your estimated duration of the project rather than the client’s expectation.
Estimating with your estimated quantity figures has key benefits:
When you have estimated your project based on both the quantity figures and estimated quantity figures, you get two magic numbers: a competitiveness indicator and a profitability indicator.
Competitiveness indicator = Direct Cost based on quantities + Indirect Cost based on quantities
Profitability indicator = Direct Cost based on estimated quantities + Indirect Cost based on estimated quantities
The competitiveness and profitability indicators provide you with the insight you need to determine your target bid price. Without both indicators, you risk overpricing and losing the bid, or winning the bid but executing it at a loss. Having visibility of both indicators provides you a competitive advantage, and enables you to make smart pricing decisions for your business.
The good news is that with the right tools in place, dual-quantity estimating can be very simple.
We hear from our users that BidBow is the only construction estimating software that makes dual-quantity estimating easy, empowering you to determine the right target price for your bid. Try a dual-quantity approach to estimating with BidBow to experience the difference.