For decades contractors have largely stuck to the script of providing a low-detail, lump-sum price when estimating a construction project. This price is meant to encapsulate every aspect of the proposed construction – materials, subcontractors, in-house labor, allowances for unknowns, management, administrative costs, taxes, profit, etc. While a lump sum number may suffice for small residential remodeling projects, it can start to quickly feel inadequate when you’re looking at a large commercial development. The potential impacts on budget, schedule, and design are just too large to NOT be able to take an in-depth look at, which really only becomes feasible with transparent estimating.
The total, lump-sum price is historically the only number a contractor allows their client to see for a number of reasons. The old school of thought often held ideas around it being no one’s business how much money the contractor was going to profit, or that the information was all proprietary, or that the clientele commissioning buildings didn’t understand enough about the actual process or costs of construction, and therefore couldn’t use additional information anyway.
It would be another article entirely to go into this old reasoning with any depth, but the takeaway for Hynes Built is that we are here to serve our clients and earn their business by meeting their needs as effectively as possible. We want to earn your trust and your confidence, and an easy way to help accomplish that is by NOT hiding anything in our partnership with you.
As a company, we have always committed to being organized in our processes and procedures, with estimating receiving our upmost attention as there are real dollars on the line for both us and our clients. For years we have worked internally with detailed spreadsheets, prices, and scope of work descriptions on every single trade necessary for a given project. The thought process is this: the more uncertainty you can eliminate as early as possible, the better off everyone involved is. Organization and detail, applied early and often, is the best way to achieve this aim in our experience. With that level of detail already in our DNA, it was a simple change to start providing those internal spreadsheets as part of our pricing proposals, and our company’s march toward complete transparency began in earnest.
Clients benefit enormously with fully transparent pricing and breakdowns. This list is far from exhaustive, but it hits on some of the key ways that transparent estimating helps create more successful construction projects.
Greater Understanding of Project as a Whole
A lump sum price, even if a detailed scope of work is included, can leave a massive gap in understanding about what phases or trades make up the bulk of the price. You also miss out on some data as you lack the ability to pluck out certain trades and compare them against other bids, which means the project could suffer by not detecting numbers that were out of line with all other competitors. All this trouble is avoided with a transparent estimating process as you can see by percentage which trades account for the bulk of the budget, and if any “flyer” numbers are erroneously included in any of your contractors’ proposals.
Knowledge of Contractor’s Overhead and Profit Margins
Every contractor is a unique entity that has different experiences, capabilities, comfort levels around certain job types, numbers of support staff, and a million other differences. That means that each individual contractor is going to charge a different amount for overhead and profit, and it will likely vary vastly depending on your specific job’s conditions. Without knowing what the contractor is charging you for their “cut” of the project (which is the case with lump sum bids), you in turn won’t know how good of a fit that contractor is for the type of work you’re proposing. But with a thorough knowledge of what your contractor’s markup is and why, you will get peace of mind that everyone is charging logically and appropriately.
True Partnership on Complex Joint Efforts
Lump sum bids with little to no detail automatically start to create a hostile working environment where it is Team Clients vs. Team Contractor with Secret Estimate. When presenting a fully transparent proposal, we have really enjoyed seeing the paradigm shift to being aligned and completely on our client’s team, both getting creative about how to lower the price together instead of battling against each other on budget. This becomes crucial on more complex or open-ended jobs that have a lot of design (and therefore cost) wiggle room.
Ability to Trust AND Verify Information
“Trust, but verify” is a classic management proverb which breaks down to trusting the team you hire to do their job, but also having a built-in way to verify that they are doing it to your expectations. As your advocate that you’ve contracted to help you with your project, we want you to feel empowered to have that same relationship with us that we do with everyone we work with. You deserve the ability to reinforce your trust in us with transparent facts and figures. We’ve incorporated the delivery of that into our process so you will have that information automatically from initial estimate to final completion.
Comparison Made Simple
One of the trickiest things to do when comparing lump sum estimates is to get to a point where you can truly and fairly rank them against each other on an “apples-to-apples” basis. When reviewing any number of lump sum estimates, this usually leads to a weeks-long or months-long back and forth trying to determine if anybody missed anything and why the prices are so far apart from each other. Transparent estimating removes the bulk of this hassle by answering those questions before they’re even asked, and skipping to the end goal of determining what the best decision forward is.
Direction for Value Engineering
With lump sum pricing, you don’t get any numbers “jumping out at you” like you can with transparent estimating. Efficiently arriving at a point where we can do realistic value engineering is one of our primary goals with our transparency as essentially every project ends up there at some point. Who doesn’t want to save money where they can, right? With transparent estimate spreadsheets it is immediately obvious that there is too much site work, or too much on interior finishes, or too complex of framing for the current budget. Then discussions can be had to determine the best way forward (early on when it is free, instead of during the project when it is expensive) based on this new knowledge.
Simply put: better information leads to better decisions, and we want to help our clients make the best decisions possible. That’s why we have gone all-in on lifting the veil on our pricing, going completely open book and transparent for whatever information our clients need.