Ballpark Estimates Are Foul Balls

When you Google “ballpark” you get answers like “in a range of” or “in the general area of.” Think about this: A new lead calls and you and asks you to ballpark the cost for them. You know, the simple bathroom addition in the garage attic, 10 furlongs from the nearest waste line or supply, in the jurisdiction of the meanest inspector in the valley, the job which hasn’t been measured, designed or drawn. For all we know these clients could be aliens from the planet Mingo and need a live remodeler for a bomb fuse. But hey, we’re brave even though we just had the stitches out from the last “ballpark” surgery. We’re smarter now so we add, “Now don’t hold me to this, but…” Sound familiar?

Here’s why this ballpark thing is all wrong. In the major leagues, there’s very little guessing. The pitcher knows a lot about most batters before they come up to bat; they know whether he’ll go after a slider or a breaking ball on the first pitch and whether he likes it high, close or what. But with a new client, we know very little about them. It’s almost like our team is playing in the dark. A ballpark has about 125,000 sq. ft. inside the foul lines. That’s a lot of real estate to cover in daylight, but you’re in the dark before you find out what this batter is like. You need history before you can deliver the right pitch.
Ballparks are for baseball and not estimates, but we sometimes do need a way to place the potential cost in an area for budget approval. We will look at a method you can try instead that’s a lot safer. We have used this for years to determine how realistic a client’s budget was for their intended project.

You and I both know a client is not going to give you the go-ahead on your “ballpark SWAG” (if you don’t know what this acronym stands for, you need more field experience — or send me an e-mail), so do the right thing and tell them the truth — that you don’t know. But then tell them why you don’t and why no one else does either. If it isn’t shrink-wrapped and on the shelf, you don’t know what it’s going to cost until you measure and design and estimate and schedule, but when you do all those things, you know exactly what it’s going to cost, and that is how they should decide who does the job.

Good pricing comes from good plans and specs that are accurate; otherwise, no pricing. If they let you have the job based on allowances or T & M, they still expect the cost to be “in the ballpark.” If the cost goes over, you have a reputation killer of a client on your hands. You just stepped in front of a fast ball and without a helmet, too.

We know that a package remodel, whether bath or kitchen, is simple and straightforward; it costs virtually the same from job to job. For a full-service remodeler and a complex job, things can be a bit dicier. Is there a good and reliable way to let us bracket the cost for the job that’s faster than the full blown estimate? Take a look at the following method. We have used it for years, and it served us well with a job size of at least 90 days duration and a full range of remodeling construction.

First have a good set of plans showing accurate room sizes, the type of new construction and demolition planned. We separated all new construction (an addition for example) from those areas to be modified (no foundation or roofing). Next we performed a comparative analysis to new construction; the new work is recorded by area as 100 percent. For the areas to be modified we did something else; we use a relative scale of four levels of change:

Level 1 — 15 percent (opening or closing a doorway, nominal drywall patching, new carpeting and paint)

Level 2 — 35 percent (significant wall intrusions, new floor covering, electrical activity, one or more new openings, paint)

Level 3 — 55 percent (structural changes, headers, ceiling rework, closing of an opening, relocate electrical, subfloor work, drywall and paint)

Level 4 — 75 percent (room gut, patch subfloor, close up opening, cut new opening, match floor elevations, drywall and trim)

Level 5 — 100 percent (all new construction from foundation to roof covering)

Next, mark rooms off on the plans and number and compute areas by room numbers. Be sure to list the activities by each room area including new space. This process takes at least two people and three is better. Each person independently takes the plans and assigns each room one of the levels. There are no halves or variations; it must be 15, 35, 55 or 75.

When the assignments have been made, a regular average (or if a job with many different sized rooms is involved, a weighted average) is figured, arriving at an effective square footage for the job. You simply then multiply the average effective square footage by the historical cost of effective square footage over past (at least 10) jobs. The result should be within 8 to 12 percent of the finished cost. That’s not close enough for me to bid or contract, but it does sometimes put some distance between you and the competition.

My effective square footage from the table (sum of the rooms) = 931.2 ESF, and if my last 10 jobs this year averaged $260 per sq. ft., my estimate here would be 931.2 X $260 = $242,112. This is quick (once you have plans, it only takes an hour) and it should have an accuracy within 10 percent.

There is nothing magic about the L1 to L4 percentages; they are completely arbitrary. They should, however, be spaced about the same distance apart and the description should be progressive toward finish. To implement this system you will need to go back and assign weighted averages to some completed jobs. The more you go back the better the bid will be.

Compare the costs of certain components such as plumbing fixtures, drywall, carpentry and trim — items for which you can easily check today’s price vs. the last job done. This will clue you in to how much, if at all, to increase you cost per effective square foot.

The value and dependability of the above method lies in the similarity of the “L” assignments by different people who rate the plans. For baths and kitchens, I will add the cost of appliances and bath fixtures to the effective square footage inasmuch as these are special cost items.

Is an estimate that carries a potential error of 8 to 10 percent a valuable tool? My answer is, “Yes, maybe.” The “maybe” is apropos for smaller jobs because the smaller the job, the less effective the percentages are in describing the project. At some point the amount of footage is too small to adequately reflect the proper mobilization cost. Accuracy also is better if you have more people rate the plans. You could copy and send them out via e-mail to friends from networking.

Test it on some recent jobs you have done, and you will find it surprisingly accurate. The system doesn’t work for kitchens and baths without an addition to cover the cost of cabinets, countertops, appliances and fixtures. For those numbers make sure you use appropriate selections.

The better the integrity of your record keeping and your job cost variance analysis, the better the accuracy of your database. And just like the pitcher who knows what the batter likes to hit, the batter also knows what is likely to be thrown and that’s why some folks always seem to hit homers — while you’re here...