How to estimate general conditions with transparency – Bleuwave Live Ep. 8

Audio transcript may not be 100% accurate:

Hi, everyone. It’s JJ Levenske back for another edition of Bleuwave Live. And today I’d like to start with what I call one of a three part in our last step. So we kind of approached the estimating philosophy, if you will. And now I want to get into the, the meat of it. And it’s probably going to be a three-part series. So bear with me and follow along. And I want to, preface this by saying that there is no science to this, and there’s no specific art to this. It’s kind of a combination. And I’m going to tell you about this process through the eyes of myself and blue wave and where we are in our maturation in that process. So it might not be befitting to everyone, but hopefully it’s educational and, maybe sparks dialogue in your organization, either as a general contractor or a subcontractor, or even from an owner’s perspective.

So with that, I’d like to dive into what is the estimate? What does it look like? What does it represent? And more importantly, how is it communicated? And so let’s break it into three parts and try to visualize a spreadsheet or some sort of tabulation. The middle part is what we would call the hard construction cost. So imagine a typical project might have, let’s just throw out a number, let’s say 30 lines of actual construction, like concrete steel, some sort of framing, drywall paint, you get it. That will be part two. The above the line stuff is what we call the general conditions. That’s what I’d like to talk about today. And then the third element is on the bottom. What we call below the line things which is taxes, insurance, bonding, fees, things of that nature. So we’ll touch on that in our final episode, in this series.

So let’s talk about general conditions. This probably has the most, I wouldn’t say controversy, but the most subjective communication surrounding it. And I don’t know why that is, but I, I have some theories and some speculation. So let me talk around that. What is in the general conditions? This can be everything from dumpsters to temporary toilets, to temporary fencing, signage, safety, equipment, anything that is a direct construction cost, but it’s kind of in under the general contractor or the construction managers expenses. If you will, that go directly to the expense of the project. Now here’s where it kind of gets awkward. So where we, meaning Bleuwave, what we do is like our project manager or superintendent that’s directly tied to that project. That’s where that expense goes now, where different delivery methods, depending on if it’s a hard bid GC construction management at risk construction management at agency, this is where the unit rate gets a little bit subjective and where I think gamesmanship comes in and is played in our industry.

So I encourage transparency in this regard. So let’s use easy numbers. Let’s say a project manager is worth a hundred thousand dollars of salary. That’s a burden rate by the way. Not you know, and what that means is that includes benefits and everything. So if that project managers on that project for 50% of the time during the course of that project, and let’s say it’s a year long project, then $50,000 is a direct expense to that project. So you can see how that math works, where it gets awkward is that if you were to break that down into unit costs over 2080 man hours and do that math, but yet you’re charging the client maybe 20% more than that. That’s where this, this, um, disparity and kind of salesmanship happens in the general conditions. So imagine that there’s an owner, that’s looking at 20 different bids or proposals and he sees 20, or he, and she sees 20 different numbers related to that project manager.

You can see why there so much confusion and acrimony in that because what does it really representing? So it’s very important that you communicate that now I’m not here to be judge and jury on which way is, is better or, or, or whatever. However we choose. We choose to choose to treat that in a very transparent manner. In other words, we don’t treat it as a separate revenue stream. I treat and Bleuwave treats that our fee is our only revenue stream. Okay. No matter what the delivery method, we just feel that it’s an easier and more transparent way to explain and educate our customer our end user. So that, that way, that’s the only thing that there for a fee, in other words, up there in the concrete item or in the dumpster item, we’re not marking that up a second time.

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