Estimating low voltage work, part 5: building the bid

The first four posts in this series covered the tools, vetting a job, the takeoff, and handling the questions. By this point, the estimator has quantities, sheet references, RFI answers, and a decision on every item in the question log. This post covers turning all of it into a price.

Building the bid is where the earlier work pays off. A thorough takeoff means the estimate is mostly assembly: each quantity gets a part, each part gets a labor task, and the totals roll up into material, labor, and project costs. The goal is a single, reconciled document in which every number traces back to a count, a price, or a labor unit that can be defended.

What this post covers

The post follows the order an estimate is built in. Along the way it covers:

• Why bottom-up pricing. The common shortcuts contractors use to price work, and why each produces unreliable numbers.
• The one-time setup. Labor rates, labor units, a parts catalog, adjustment factors, and a scope library.
• Building the estimate. One line per item from the takeoff, site conditions, and the project labor that never appears on a floor plan.
• Rolling it up. Material, labor, project costs, contingency, bonds, and tax, with a worked example.
• Reconciling the bid. Margin, schedule, scope, markup limits, and cash flow checks before the bid goes out.

Why build the bid from the bottom up

Everyone bids a little differently, and there is no single correct spreadsheet. There are, however, methods that consistently produce bad numbers. The three most common are pricing by the drop, working backward from the hours the job is expected to take, and backfilling the markup from a target margin.

Pricing by the drop

A flat price per drop is fast and easy to explain to a customer. The problem is that it treats every drop as the same amount of work. Consider two drops on the same project (illustrative conditions):

Priced by the drop, both carry the same number, though Drop B can take several times longer to install. On a job with easy conditions, the price runs high and the bid is lost. On a job with difficult conditions, the bid is won and the money is lost doing the work.

Working backward from expected hours

This method starts with a gut feeling: the job looks like three technicians for two weeks. The estimator multiplies that out, adds material, and calls it a bid. Experienced estimators can get close this way on familiar work, but it is easy to miss things. Labeling, testing, documentation, as-builts, closeout, project management, travel, and firestopping are the items that most often disappear from a number built on instinct. Because the total looks reasonable, nobody goes looking for what is missing.

Backfilling the markup from a target margin

Some contractors enter their material costs, or pull them from a catalog, price the labor, and set a target margin for the whole job. The spreadsheet then backfills whatever markup is needed to reach that total. The method is fast, but every project carries two margins: the margin on material and the margin on the job as a whole. They are usually different numbers, and this method hides the first behind the second.

Because the spreadsheet adjusts to hit the target, the final number always looks right. A missing set of patch panels lowers the cost, and the bid still lands on the expected margin. Small jobs also often require substantial markup to cover mobilization, project management, and overhead. Backfilled across the material, that markup can exceed the limits that public work and school projects frequently place on material markup, without anyone noticing until an auditor asks for supplier invoices.

Building from the ground up

The method that holds up is a build-up estimate. Quantities come from the takeoff. Material is priced from current supplier pricing. Labor is applied using units calibrated to the company's own crews, adjusted for site conditions. Project costs, overhead, and profit are added as separate, visible lines. Every number traces back to something that can be checked, and every markup is set on purpose. The rest of this post walks through building one.

Set up once, use on every bid

Most of the work in a good estimating system is done once, before the first bid. These are the foundations every estimate draws from. They take time to build, and they make every bid after that faster and more consistent.

Labor rates by class

Not every hour costs the same. A project manager, a lead technician, a programmer, and an apprentice all carry different wages. Set up a rate for each labor class, built in three layers:

1. Base wage. What the employee is paid per hour.
2. Burden. Payroll taxes, workers' compensation, insurance, benefits, and paid time off, expressed as a percentage of the base wage. The result is the burdened cost, the true cost of an hour to the company.
3. Markup. Overhead and profit applied to the burdened cost. The result is the bill rate.

An illustrative example:

The markup on labor is where overhead is recovered. As covered in part 5 of the business setup series, the overhead rate per billable hour belongs in this number. A bill rate built only on wages leaves the overhead unpaid. Some estimators also use a blended crew rate, a weighted average based on the typical mix of labor classes on a crew, for tasks that are not assigned to a specific class.

Labor units calibrated to the crew

A labor unit is the time it takes to install one unit of something: one foot of cable, one jack, one camera. Published labor units are a starting point. They are not an answer.

The time to complete a task varies from crew to crew, largely because crews divide the work differently. One crew may pull the cable, terminate the field end, and bag the jack until final testing, all as a single task. Another may only pull the cable, then terminate both ends at testing. Neither approach is wrong. The labor units have to match the way the crew actually works, or the hours land in the wrong task, or nowhere at all.

The only way to know the real units is to track actual hours on completed jobs. After each job, record the crew hours and the quantity installed for the main tasks. Once a task has several jobs logged, the measured rate is far more reliable than any published default.

A parts catalog, and project quotes

Build a catalog of the parts the company actually buys, at its actual cost. A catalog is the backbone of the estimate. It links each part to its labor, keeps pricing consistent from bid to bid, and builds a record of historical pricing over time. Two habits make it reliable:

• Price each part in the unit it is taken off in. Cable is taken off by the foot, so price it by the foot, not by the box. Quantity times unit cost is then correct without conversion.
• Link each part to the labor task that installs it. When a camera is added to the estimate, the hours to mount and terminate it come with it. Nothing has to be remembered separately.

A catalog is not, however, a reliable source of pricing for a competitive project bid. Two things work against it.

Copper pricing moves. Some distributors price cable on live or daily copper prices. What a box of cable costs today can be dramatically higher next week, not because the distributor paid more for that box, but because that is what it will cost them to replace it. A catalog price from last month may already be wrong.

Quantity changes the price. When a company buys material for an entire project, even released in phases over the duration of the job, distributors will usually offer better pricing than they would on a few items bought off the shelf. Catalog prices typically reflect the smaller purchases.

On any bid where price matters, and early on that is nearly every bid, request a project quote. Send the distributor the bill of materials with quantities and the project name, and ask how long the pricing will be held and whether cable pricing is tied to copper. Getting quotes from more than one distributor is often worth the effort. Enter the quoted prices in the estimate in place of the catalog prices, and update the catalog afterward so the historical record stays current.

Because the quote behind the bid expires, state in the proposal how long the pricing is valid. A bid accepted three months later at last quarter's copper price is a loss the estimate never accounted for.

Adjustment factors for site conditions

Labor units describe standard conditions: accessible ceilings, normal working heights, an unoccupied space. Real projects rarely match. Adjustment factors add a percentage to the labor hours when conditions are harder than standard. Common factors include working height, hard-lid ceilings, retrofit work in finished walls, occupied spaces, secure facilities with escorts, healthcare infection control, and outdoor exposure.

Apply a factor in one of two places, never both: on the individual estimate lines it affects, such as only the gymnasium at 24 feet, or across the whole project when the condition applies everywhere. Applying it in both places counts it twice.

A scope library

Keep a library of standard inclusions, exclusions, clarifications, and assumptions, organized by system. Most bids use many of the same statements: line voltage power by others, patching and painting excluded, certification testing included. A library means each bid starts with tested language rather than statements rewritten from memory under a deadline. Project-specific statements from the question log are added to the library's selections for each bid.

Build the estimate

With the foundations in place, the estimate itself is a matter of carrying the takeoff over, one line per item.

One line per item

Each line in the estimate carries an area or location, a part, a quantity, and, when the work is harder than standard, a condition. The material cost comes from the catalog, the labor hours come from the linked task, and the condition adds its percentage to that line's hours. For labor-only work, such as programming, testing, or a task with owner-furnished material, the line carries a labor task with no part.

Keeping the areas from the takeoff pays off later. A bid broken out by floor, building, or system is easier to check against the general contractor's counts, easier to phase, and easier to price when a change order adds or removes an area.

An excerpt of what a few lines look like (illustrative entries):

Project labor that never appears on a floor plan

The takeoff counts devices. It does not count the time it takes to run the project. Every estimate carries lines for the project labor that sits around the installation:

• Project management, scheduling, procurement, and coordination meetings
• Submittal preparation, per system
• Shop drawings, riser diagrams, and as-built drawings
• Mobilization and demobilization
• Material receiving and staging
• Daily cleanup
• Programming, testing, owner training, and closeout documentation
• Paid travel time, when the crew travels to the site

The Division 01 notes from vetting the job belong here as well. Pre-task planning, daily reports, morning stretch-and-flex sessions, safety orientations, and badging are all time the crew spends on the project. A 15-minute daily requirement across a two-person crew on a 40-day job is 20 hours. Carried as a line, it is paid for. Forgotten, it comes out of the margin.

Close out the question log

As the estimate comes together, work back through the question log from the takeoff. Every item is now resolved in one of three ways: priced in the estimate, written into the scope as a clarification, exclusion, or assumption, or priced separately as an alternate. An item that is still open when the bid goes out is a risk nobody priced.

Roll it up

Once every line is in, the estimate rolls up into three cost groups, each with its own markup: material, labor, and project costs. Keeping them separate is what makes the bid explainable, and what keeps every markup a deliberate decision.

Material

Material starts with the extended cost of every catalog line. Two allowances are commonly added before markup:

• Freight and shipping. A percentage of material cost, unless freight is already built into the catalog prices.
• Consumables and small parts. Zip ties, labels, anchors, firestop putty, and the other items nobody takes off one at a time. Carry them as a percentage of material or itemize them on large jobs.

The material markup is then applied to that total. Because it is set on its own, the company always knows exactly what it is charging on material, which matters when a customer or a public contract limits that markup.

Labor

Labor hours are totaled by labor class, then priced twice: once at the burdened cost, which is what the hours cost the company, and once at the bill rate, which is what the customer pays. Project-wide conditions, such as an occupied building, are applied to the total hours here if they were not applied line by line.

Premium time needs its own treatment. If part of the work must be done after hours or on holidays, the company pays the crew a premium and the bid includes one. Prevailing wage projects need their own rates entered rather than an adder on standard rates, wherever the contract requires certified payroll.

Project costs

Project costs are the expenses outside the takeoff, each with its own, usually smaller, markup:

• Travel and per diem. Mileage, airfare, rental vehicles, lodging, and per diem. Federal per diem and lodging rates are published by the General Services Administration and are a common basis.
• Equipment rental. Lifts, trenchers, fusion splicers, storage containers, and dumpsters. Price rentals all-in: the rental rate, damage waiver, fees, and delivery and pickup. Delivery alone can be a significant part of a short lift rental.
• Permits and fees. Low voltage or alarm permits, plan review, inspections, and registration fees.
• Subcontractors. Concrete scanning and coring, line voltage electrical, boring, locksmith work, and any system the company is not providing itself.
• Other direct costs. Shipping beyond the freight allowance, plan printing, software licenses, and a warranty reserve.

Contingency, bonds, and tax

Contingency is an optional allowance for risk, usually a small percentage of the subtotal. It is not a substitute for a complete takeoff, but it is reasonable on retrofit work, older buildings, and projects with unknowns.

Bonds are priced as a percentage of the bid when a performance or payment bond is required. Get the rate from the surety, not from memory.

Tax depends on the state, the locality, the type of contract, and whether the customer is tax exempt. Determine what applies and enter it deliberately. Do not assume a percentage carried over from another job or another state is correct.

A worked example

The roll-up for a small two-story office renovation with structured cabling, wireless access points, four access-controlled entrances, and twelve cameras (illustrative figures):

Each number on that table traces back to the estimate lines, the catalog, the labor units, and the project costs. If a reviewer asks where any of it came from, the answer is a line, not a guess.

Reconcile the bid before it goes out

A total is not a finished bid. Before anything is sent, check the number against the company's targets, the project's schedule, the documents, and the company's cash. These checks take a fraction of the time the estimate did and catch the mistakes that cost the most.

Margin

Compare the gross margin to the company's target. In the example above, gross profit is $19,413 on a total of $59,931, a gross margin of about 32 percent. If the target is 30 percent, the bid passes. If it falls short, find out why before adjusting anything. A low margin usually points to a markup set too low or a cost that grew during the estimate. Raising numbers until the percentage looks right only hides the cause.

Know the difference between margin and markup. Markup is calculated on cost. Margin is calculated on the selling price. A 25 percent markup produces a 20 percent margin, and a 100 percent markup on labor produces a 50 percent margin on that labor. Confusing the two is one of the most common ways a contractor ends up earning less than intended.

Schedule

Divide the total labor hours by the crew size and the hours in a working day. In the example, 256 hours with a two-person crew working eight-hour days is about 16 working days. Compare that to the schedule in Division 01. If the project allows 10 working days, the bid needs a larger crew, premium time, or a conversation about the schedule before it goes out, not after liquidated damages start.

Scope and documents

Check the bid against everything gathered in the earlier steps:

• Device counts in the proposal match the takeoff and the drawings.
• Every item on the question log is priced, written into the scope, or carried as an alternate.
• Every RFI answer and addendum has been reviewed and reflected, and every addendum is acknowledged on the bid form.
• The plan sheets and RFI answers that define the scope are referenced in the proposal.
• The inclusions, exclusions, clarifications, and assumptions selected for this bid match what was actually priced.

Per-unit cross-check

Pricing by the drop is a poor way to build a bid, but it is a useful way to check one. Divide each system's total by its device count, such as cost per drop, per door, or per camera, and compare the results to similar past jobs. A number far outside the usual range is not automatically wrong, but it is a reason to look at that system again.

Markup limits

If the contract or the customer limits markup on material, which is common on public work and school projects, confirm the bid complies before it is submitted. Some customers require a cost and markup breakdown with the bid. Because each markup in a build-up estimate is set separately, that breakdown can be produced directly from the estimate without reverse-engineering anything.

Cash flow

Finally, compare the payment terms to the cost of the work. In the example, material costs about $27,335. A 10 percent deposit on a contract of roughly $61,000 including tax is about $6,100, leaving the company to carry more than $21,000 in material until the next payment. Covering the material entirely would take a deposit of about 45 percent of the contract.

That may be acceptable, or it may not, depending on the company's working capital. Either way, it is a known number. Where the terms allow it, structure the payment schedule so the deposit and a material delivery milestone cover the material, and plan for retainage on general contractor work.

Bringing it together

A bid built from the bottom up is the sum of everything that came before it. The tools produce clean drawings and counts. Vetting decides the job is worth the time and records the Division 01 requirements. The takeoff produces quantities, sheet references, and a question log. The RFIs and the proposal language resolve every question. The estimate then carries each quantity through a current price and a calibrated labor unit, adds the conditions and project costs the job actually has, and rolls it all up with markups set on purpose.

The result is a bid that can be explained line by line, checked against the company's margin, schedule, and cash, and defended when a general contractor or owner asks where a number came from. It is also the starting point for every change order and every lesson learned on the job, because the estimate and the actual hours can be compared once the work is done.

An estimating workbook built around this method uses the same structure: labor classes and rates, calibrated labor units, a parts catalog, adjustment factors, a scope library, the estimate, project costs, and a bid summary with margin, schedule, markup, and cash flow checks. The same structure can be built in any spreadsheet. What matters is that every number in the bid has a source.

Next in this series: turning the bid into a proposal.

Planning and device counts are numbers. Those live on the calculators. The estimating workbook that follows the method in this series is in The Kit. The rest of this series is on the estimating page.

Related on this site

• Estimating low voltage work, part 4: handling the questions
• Starting a low voltage business, part 5: building a working number for startup costs and overhead
• Calculators