Editor’s note: Years ago, James Falk shared with readers of Cabinetmaker magazine and members of the Cabinet Makers Association his pricing theories of pricing work using the term “soft variables” to describe things that often affect the cost of work but seldom are accounted for in bidding spreadsheets. Today, Falk has expanded on this concept and greatly expanded the number of “soft variables” he calculates.
No manufacturing job exists in a vacuum. Each individual job/project must be managed. Often the management and non-manufacturing portions of the job, will cost more than the price of materials and labor to fabricate the product. Even after one knows their true fabrication costs, one must figure in the cost of having the job flow through the shop, in order to get an accurate idea of what the bottom line expenses actually are. Regardless of the company size or job size, extenuating non-fabrication variables come into play.
Typically a job may go through most of the steps below. Each one needs to be explored, to make sure as many aspects of the job are known before supplying the first price to the client. Anything that takes time or saves time affects the bottom line.
This consists of the actual number, as well as, getting a handle on how the job is expected to proceed. It is a good idea to figure out what the client's expectations are at this stage of the project.
Frequently this is the most misunderstood step, as the definition of exactly what is to be done, how it is to be accomplished, and who is to do it, brings multiple interacting variables into play. Often this becomes more of a song and dance, or courtship of the client or contractor, as there tends to be far more time spent here than is actually necessary to fabricate the product.
For example, it is not uncommon for the first set of drawings to be based on the architect's concepts and then designing the products to work within the manufacturing abilities of one's shop. The next set of revisions can sometimes be a total redraw, if the client has changed their mind from the time the architect originally conceived the plan until this point in time. The third set is usually what can be fabricated from, and then the fourth set may be “as built” or for the record for large job contractual obligations.
There is also frequently a change of materials somewhere along the design process, which may include samples to be made up before the job can go into production. The phrase “value engineering” can come up during this phase. This is not necessarily a bad thing, as when a time frame is tight, to be able to get it done faster, even if it takes some money out of the contract, may make the job run smoother and thus the percentage of profitability will be higher in the end.
The paperwork portion of the job requires a totally different set of skills than the design and manufacturing portion. Often it is best to have individuals trained in this aspect of the business to handle this. The smoothest large jobs actually have individuals dedicated to just one or two jobs. Depending on how one chooses to run one’s business, this job may be more important than the actual produced product. “You can pay me now, or you can pay me later,” as the saying goes. It is not uncommon to bid exactly what is on the plans in hopes of getting awarded the job, knowing full well that an additional amount of work will be need to be done which can be charged for later, via a change order. If a company considers and prices all of the aspects of what needs to be done during a job, frequently they will not be the lowest bidder.
While no job exists in a vacuum, with other trades and client interactions, one also needs to interact with suppliers, workers, and possibly subcontractors. Putting all of the pieces of the puzzle together at the beginning of the job can prevent frantic running around, especially if one has a “we will get to it later” philosophy. This includes looking at what jobs are currently being worked on, any potential manufacturing conflicts of storage space, cash flow, labor, finishing room throughput, shipping, or installation. Installation is a specialty that is sometimes best left to a subcontractor, unless the shop has a continuous flow of work.
At the end of the job, the best way to tell if you are a business or a hobby, is to look back and review the entire job. Did you make money? Why, or why not? With all of the interacting variables, it is frequently difficult to pinpoint the exact reason; however, it may be possible to find an overall weakness in the project sequence. Just as in manufacturing, finding a standard that one follows for the front office portion of the job can be very beneficial. This way the standards can be tweaked for the maximum profit. If there are no standards, every job is haphazard and prone to the repeating of the same mistakes.
Soft variables revisited
Follows is a list of many topics that can go unrecognized during the course of an average job, but which can impact the final outcome tremendously. Not all variables are applicable to all companies or all jobs, but the concepts and job stages are shared by many. Reviewing a list such as this during the bidding phase may increase the potential profitability of the job.
Time frame for estimate, time frame for job, number of phases, price by job only, breakdown price by each item, breakdown price by item, task, installation, delivery, etc., and whether this is an actual proposal or just a ballpark estimate.
Missing information? Are you "buying the plans," meaning you must fabricate everything as noted with no exclusions, whether or not you actually see them at the time of the bid? Can you exclude items from your bid? What is considered "millwork"? Who is in charge of appliances, electronics, IT?
Can hardware be substituted so that standard production techniques can be used? Is this job within our abilities? Will we get (do we want) any assistance from others in this process?
How much engineering and specification research is needed before a bid can be put together? Is this a fabricate only job, and a truck will pick it up on the loading dock?
Will the architect provide drawings in a usable format? Is the architect in charge of the whole job? What are the interior decorator's responsibilities, experience?
Is there an engineering firm involved? Number of drawing revisions anticipated and requirements of the shop drawings. When can actual final measurements be taken? Is this reasonable?
Are permits necessary and who is providing them? Are inspections necessary and how does that effect job sequencing, production, and timeline? Is this an ADA job and who is to making the dimensional specifications? Is the Health Department needed to sign off on this project?
Is everything logged in some sort of project software? What is the turnaround time for RFI's? Who is in charge of inputting all of the information? Who is providing finish control samples? Number? Charge per sample? Are MSDS sheets needed for all materials?
Is paperwork needed for energy credits? Is this a LEEDS or other certified type job? Do you know how to fill out the forms?
Does this job have more "politics" than usual? What are the chances of the millwork becoming damaged before the final sign off by client? What is the punch list protocol? How many times can they add to the punch list after all items are completed?
Are progress photos required? What is the time lag between applying for payment, and receiving the payment? Are there provisional lien waivers? Are there payment lien waivers? Will there be a final lien waiver?
Is this a government job with sealed bids? Is this job bonded and will a bond be needed? Is this a certified payroll job? Is this a prevailing wage job?
Will an in house bookkeeper be needed for this job? Will a dedicated project manager be needed for this job? Will a copy of all material invoices need to be presented prior to receiving payment? What are the insurance requirements of the job?
What is the payment schedule? Have you worked with this builder/client before? How will company cash flow be scheduled during this job?
Has the company/owner/contractor, been researched on Dunn and Bradstreet? Does the company/owner/contractor have a list of outstanding lawsuits? Is it fiscally possible to go after the company/owner/contractor, if they choose not to pay?
Is the client living or working on premises, during any or all of the construction? Does the client stop by daily to check out the progress? Will this job lead to others? Should it to lead to others?
Is this the type of work we want to be doing and the type of clientele to be working for? Is this a job requiring a certain level of security or secrecy?
Ease of working with office staff/past interactions with them, ease of working with in site supervisors/owners, their past experience doing this sort of job. Location of the decision making individual.
Interactions with other trades:
Have we worked with this crew and company before? Are they team players? Ease of working with the other decision making individuals
Are all products fully manufactured in the shop? Is interior trim included? Is material readily available?
Is this a union job? Are you a member? Are other trades members of the union? Will holidays/vacations affect the production schedule? Can other shops be relied on to fill in the production gaps? Does everyone have the necessary OSHA cards?
Does this job follow standard manufacturing processes and techniques? Will any portion of the process need to be subbed out ? Availability of all materials and hardware.
How will the products get to site? What are the delivery hours? Climate controlled storage required?
Who is doing the installation? Installation hours? Proximity of the job site to the shop? Access from parking to the site? Doorway sizes, window sizes through which product must be delivered?
What sort of cleanliness is required, dust, drop cloths, complete walls erected? Are there amenities: sanitary, water, lunch truck, access to town with hardware store? What is the distance from the shop, travel time, traffic considerations. Is a hotel stay advantageous?
Does one need to "tip" any person on this job, to facilitate getting it done? What are the building rules and regulations? Whose job is it provide protection for the installed millwork?
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