Estimating Principles
Y1W2 The dangerous estimator
An estimator is the most dangerous after a few years of work experience. At least I was. The attitude comes up like: I am getting the hang of this. I can do it. I will show them I am not stupid! And then (s)he proceeds energetically with typing away and making a beautiful estimate.
I have made some painful mistakes in this period. I remember that on a tender I thought installing a one point anchoring system on a rock loading barge should be the thing to do because it was like that on tenders before. Well, after we won the job it appeared that specific circumstances determined a 4 point anchoring system was required. That was a 500k Euro mistake. (Or as another much more senior estimator tried to cheer me up: this mistake might have won us the job!). The thing is, as an estimator you are a generalist, who knows some of most aspects of most types of jobs. However, you will never know as much as the individual specialists!
So you have to talk to the people who really know, even when things seem obvious for you. And for the ones who supervise a ‘potential dangerous estimator’, don’t just check the beautiful spreadsheet — check who they talked to and what they talked about.
This is applicable for all estimators though. Quality of the estimate improves by every person you talk to. Another post I will talk about contradicting information you are bound to get if you ask more specialists the same question…
Y1W4 The 1‰ rule
The amount of time you have for an estimate is always limited. You need to be a master in time management; to be ruthless in deciding what to give attention and what not.
One of the principles I use to prevent me wasting valuable time is what I call the 1 ‰ rule. If a cost item is less than one per mille (0.1%) of the total project value, I won’t spend more than five minutes estimating it.
That means I will insert a reasonable number from experience and will leave it like that. That number might be 20% off, but even then its impact on the total project cost is almost negligible, also when there are many of these small numbers.
On a project where I had oceans of time I detailed the costs much further. That showed clearly it was a waste of time, the cost impact of this further detailing was negligible.
It can need quite some mental flexibility. I was doing a €1+ billion tender where anything below €1 million barely deserved attention. Meanwhile, I was working on a €100,000 project, where I had to spend real effort into the type of sea fastening we needed for the vessel mobilization! Giving both projects the appropriate level of attention took real mental discipline (I am afraid I did not fully succeed though…).
Y1W6 Costs should always go down
One of the first things I do when I get a new tender is to quickly calculate the ballpark costs. Useful as a benchmark for myself and for the commercial manager so (s)he knows who to inform and what procedures are applicable.
Keep in mind though: when you quote a number to a Commercial Manager, they have a tendency to forget that the numbers are rough and that they could go up/down quite a large percentage. Especially that they could go up significantly…
Another principle is that Commercial Managers and higher management tend to get nervous or even upset when the estimate creeps up during the tender process. This also tends to erode their confidence in the costs / estimator.
The above 2 principles can result in unnecessary managerial anxiety and consequently unnecessary extra work for you as the estimator when the costs indeed tend to creep up. How to prevent this? Give them a high initial number to start with. If you are honest you can call it an expected ‘non exceedance’ figure (but this introduces further dangers if the tender prices rises even above this number!).
During the tender slowly go down to the final number. Keep some money in the pocket till the end to cover for a possible price increase of a few % in the last few days.
Nobody benefits from unnecessary excitement during the tender.
Y1W9 Demotivation by Micromanagement
When guiding junior estimators I am of two minds.
My natural tendency is to give them free range. I like to give them a task they can properly put their teeth in. I think that it is more rewarding for them and learning goes faster. Of course I am always available for questions and I keep a close eye how things are going.
The problem is that an estimate is build up of thousands of cells with information which all have to be (as) correct (as possible).
When I check an estimate from a junior, we start with the broad picture: work method, planning, productions and so on. But then we go to the thousands of cells… And here the micromanagement starts.
I want to discuss all cells and want them to be correct. Thus the estimate will be discussed till the highest detail and an extensive action list will be made. This action list will then be checked and rechecked till the estimate is good enough. Micromanagement to the letter! And highly demotivational for the junior!
But I can’t just let it go, because we need to produce a good estimate.
The above can – in my opinion – only be avoided when we guide the junior slowly towards being responsible for a tender. Start with having them as an assistant to a senior and let them sort out interesting chunks of the tender. Then, when they are ready after a year or so, give them a simple low pressure tender and build it up from there.
Hurrying this process will inevitably demotivate many of the juniors
Y1W10 Fuel Costs Small Craft
Fuel usage of vessels is a significant cost element in most marine estimates. Fuel usage of large vessels is normally estimated properly.
However, the fuel usage of the small vessels is normally estimated way too high. Why is that?
The first reason is that the individual fuel costs per small craft is just a small amount. We don’t give it too much attention. It only becomes a big amount because there are often many small craft on site and these craft tends to be on site for long durations. But this cumulative big amount normally doesn’t catch the eye.
The second reason is that when giving individual vessel fuel usage due attention, the calculated amounts seems so small that we tend to put a bit extra in ‘to be sure’
On top of that we tend to overestimate the active hours of small craft. They are surprisingly inactive and tend to be moored alongside a quay or barge for long times, only springing into action so now and then.
And lastly, fuel did not use to be a big cost element so nobody bothered. When I started estimating in the 90ies nobody cared about fuel costs, because it was so cheap. This attitude is still lingering.
But, what are we talking about? What difference can optimizing of fuel use of small vessels make? Is it worth the effort? I checked a few old estimates from the last years and found that the optimized fuel costs of small craft is between 0.5% and 2.0% of the total calculated costs. When we assume a non-optimized fuel use is around double of this – which is my experience on some projects – then a sharp look at the fuel use of these small crafts can optimise overall costs to the same percentage: 0.5 -2.0%. Which is significant !
Y1W11 If you can’t solve the problem, change the problem
Uncertainties
Y1W7 Last minute changes
With last minute changes I mean all changes which have a significant impact which can’t easily be digested in the time still available.
Procedures are bypassed, but generally for a good reason. Because why do we tender? To win the darn job of course!
However, this comes with a considerable risk. When you don’t have the time to properly digest the changes, you can easily miss or misjudge important cost elements. On top of that an average Tender Manager does not fully realize this risk!
How to limit this risk? Even with the limited time you have, estimate in such a way that you give yourself a few “free” hours at the end (don’t tell your manager you have a few spare hours!). Spend even less time on number crunching and reporting; these precious few hours are better spent contemplating whether you have properly costed all elements.
There are occasions you really need all the time available to update your spreadsheet with no time to spare for reflection or double checks. Make sure to let your manager know and spell out the risks. Putting that in an email as well could be advisable depending on the situation.
Note:
I notice there is often the unrealistic expectation that estimators just need the time to put the numbers / new situation in a spreadsheet, and the outcome will be 100% correct. Estimating is much more messy though. There are normally lots and lots of dependences, so a considerable change of scope or execution method can have effects far beyond the direct SOW or execution method change.
How to get Information
Y1W3 Make people happy (to help you)
Sending someone an email or chat out of the blue rarely brings you very far. If the recipient has the time, you’ll probably receive a polite correct but not very inspired answer
Following up with real conversation, in person or by phone/Teams is already better. You will probably get what you want.
But what you want is that people are happy to help you. Then they will be happy to think along with you and the quality of their response inproves dramatically. The number one way to accomplish this is to tell them more than they strictly need to know.
Tell them about the tender. Show your enthusiasm! Explain where their contribution fits in and why it could make a real difference.
This can backfire though. I once phoned a supplier of SS bolts for a quote. For me a small cost element, for him a few months turnover. So my usual motivational spiel drove him to overdrive. He kept peppering me with options which were a few hundred Euro cheaper and happily explained the pros and cons in great detail. I didn’t really have the time, but didn’t have the heart to dampen his enthusiasm. The unexpected side effect was that became a bit of an expert in SS bolts as well 😊
This way to approach people helps getting high quality answers. But for me it is as important that in this way I can contribute in people feeling seen and appreciated. Satisfaction of one of the major needs of any human being.
Y1W8 Are you worthy of my knowledge?
When the UK was still part of the EU I got involved in a tender where a 3 m diameter pipeline had to be installed on the seabed before the area had to be reclaimed. A price had been made already, but it had to be updated due to scope changes
So I checked the price and the design. One thing jumping out directly was the enormous quantity of gravel required to surround the pipe and the high costs to buy this rock and get it at location.
It seemed to me that the design could be optimized, so I called the – very senior – design engineer and asked how he had arrived at the current design. He started to laugh and said that the design certainly could be optimized – depending on certain conditions – , but nobody had asked him!
This phenomena I have encountered a number of times when dealing with the most senior engineers and works managers. For some of them “you have to be worthy” of the information. That means you have to ask the right questions, they have to judge that you have sufficient knowledge to appreciate their answers, and they feel that you approach them respectfully.
As a young estimator you are at a disadvantage here. The only thing you can do is to be respectful, listen carefully and be as prepared as you can before approaching them.
The Zen in Estimating
Y1W5 Staring out of the window
A famous Dutch comedian once said “the most difficult part of my work is to explain to my wife that I am actually working when I stare out of the window”
My former colleagues know a characteristic pose of mine is feet up, hands on the belly and indeed staring out of the window.
So when do I use ‘the pose’?
I use it when the mind is tired of intensive activity and needs to cool off for a bit. Then ‘the pose’ is solely for relaxation and consciously enjoying the pleasurable sensations in the body for some time. There is a chance I drop of for a few minutes, but that only heightens the pleasure 😊.
I use it to consciously withdraw from the continuous bombardment of hundreds of small decisions to be made, go back to the big picture and plan the things to do the coming hours.
The highest enjoyment comes from assuming the ‘pose’ and thoroughly visualise/run through possible solutions to technical/schedule problems. It is highly satisfactory to spend a more prolonged time in full concentration and repeatedly play a story from start to finish in the mind. Blissful actually, comparable to a good meditation.