Omar (00:34):
You guys today, we're going to talk about project estimating and when you need a professional for your team, let's get started. So project estimating is something that you can do yourself. If you're a project engineer, you can do it yourself. If you're a project manager, but it becomes kind of like whether you want to do certain tasks around the house, like I can do some types of car repair work myself, but I'm definitely not the best person to do certain types of car repair work. Especially if I'm starting to get into the engine, I don't have some of that skill set. So I will contract somebody. Who's a specialist to do those things. Now, if you are an expert in estimating which some project engineers are, then feel free to do it yourself, it becomes an issue of managing your time. Especially when you have large organizations that have hundreds, thousands of people, you need to have somebody that's actually just going through and making sure the estimates are done the same way for each project.
Omar (01:32):
And you're running contingency and you're running your budgets the same exact way. That's very critical to make sure you're tracking it. And everybody's comparing apples apples. Now, if you've got a smaller team, you've got less than a hundred people, you could have the people that are managing your projects, do this for you, and they could run the estimates themselves. Now, there are a couple of caveats to this where I will say, when you start getting into specialty engineering projects, where there a you've never done the thing before, like it's a new type of construction that let's say a lot of things are going on in the space industry right now, a lot of what's happening with some of these companies they've just never done before. They've never tried to build some of the rockets or building. I would recommend highly to try and get some sort of project estimator on your team to complete these types of tasks, because you're going to have to actually do a grounds up estimate from the raw material to the labor, to the estimates.
Omar (02:24):
And you're going to have to tweak it because you really don't have a good benchmark. So there's two ways that they do estimates in the project space, especially around engineering. One is you can do a material takeoff, which means give me a Mount of all of the materials that you have on your project. And I can estimate based off of industry practice, how much labor it's going to take per the material. Now that's called unit rates. So say you have a hundred feet of linear pipe. I know that based off that a hundred feet of linear pipe, it usually takes X amount of hours per feet. And I times the two together, and I get a price on how much it's going to cost. Now, a lot of estimates can work off of that. And if you can get that material takeoff list, that is a great start to be able to predict what your cost is going to be.
Omar (03:12):
The issue is that when you're doing things that are new or that don't have good benchmark data, that becomes really challenging to try and get a good estimate off of that. So you're kind of guessing a little bit. So you really want to do even a further grounds up and say, okay, what's the cost? How much would it actually take to get these things done? And you may have to be working very closely with the engineers that are doing the construction of it, or the foreman or the craftsmen to actually understand what is this going to take to get this thing completed. So that's where the amount of work it would require to actually get a solid estimate is more so something. Then you probably wouldn't want to have your project engineers doing that, and you'd want to have an expert that can manage that process for you.
Omar (03:53):
So that's, that's one really big reason that you'd want to have an estimator on your team. The second is when you have a large portfolio of projects, like say you've got 15, 20 emails, definitely in the hundreds of projects, you're going to want to have an expert. That's running those project estimates the same type and the same way every single time. And that's going to help give consistency to your business. It's going to help to allow other people to come in and know the process for getting something estimated. So when I used to be at a plan, we would have an estimator for the group. So say for 15, 10 project engineers you'd have one estimator. And every time you wanted to run a project, you run that project through them. And what they would do is they'd go out, they'd walk the project, scope out, they'd understand what you're trying to do.
Omar (04:39):
And they would estimate the amount of linear feet of pipe cabling, any sort of instrumentation, everything that would be needed for that project. And then they would do it based off that material takeoff and say, here's where I think the cost is going to come in, where you may not be as familiar. And this is what an estimator is. Job is, is okay, where are we talking about on inflation costs? What are we talking about for material commodity prices, tracking that and knowing the trends for prices in the marketplace are going to fluctuate. Now, estimator will have a very good handle of when those things are going up and down and when they should add contingency and extra budget for potential variations in those prices. So that's where I think, you know, if you don't have that experience, if you don't have the time attracts them and stuff, I mean, it takes time to stay on top of a lot of these things that are changing in the market.
Omar (05:28):
It makes a lot of sense to have an estimator on your team because they're going to help you make sure that you have the most accurate estimates and that you're delivering on your promises. Now, remember, and I say this so much on the omar project, and it's also a point of confusion. It's not just about hitting your targets below budget. Anybody can hit a target below budget because what you'll do is you just make a huge budget. It's about being accurate. It's about getting in a tight window of knowing I'm going to predict the of this. And I'm going to land right around that within a plus or minus 10% range. That is an excellent metric to try and shoot for. And that's a tough metric trend shoot for, especially for very complex project. So that's where your estimator and the experience and the knowledge that they have comes in to really help.
Omar (06:15):
Because a lot of times these estimators used to do construction or they've done many projects. So they know exactly how long things should take. And just one other point, too, because this is relevant to even smaller businesses. If you look at who comes to your house, say you have a big scope of work that you have at your house that you want to get plumbing, redundant, electrical, done. They don't send the new guy to come to your house, to look at this and predict the cost. Now they send one of their most experienced people, if not the owner of the company's coming to your house because he knows, or she knows that the estimate is the most important thing for his business to be successful. Because if they're not right, they lose money. Typically these are fixed fee contracts, lump sum contracts. So if you don't get that estimate, right?
Omar (07:00):
Guess what? They're out of, they're out of money. So they're sending their best people. And same thing you should think about in your organization is, Hey, the estimate is the bread and butter to us, making sure we're spending the least amount of capital. And we know exactly the amount of capital we want to spend on what we're doing, because everything revolves around it. Whether you approve the project, whether you go forward, how many people are going to be on the project. And those costs all are part of the estimate. I hope that's cleared it up. So if you are looking for a project estimate or if you feel like you're getting out of control with these
Speaker 3 (07:33):
Things, definitely think about getting a professional estimator on your team. I think it can be tremendous help and tremendous value to your organization. That's it for today for the Omar project. Hope you guys have a great rest of your day.
Speaker 1 (07:46):
Thanks for listening. I hope you enjoyed the episode. If you'd like to hear more, you can join us at www.the omarproject.com. We have a lot more information on project management, technical skills on the leadership. And also you can hear from more of the top experts in the field.