As helpful as using that data can be to get yourself started there are some real intrinsic problems that come along with using that data as it comes right out of the can so to speak.
All the way back in 2001 in a discussion on the Uniformat & Masterformat classification systems in the JLC Online Forums years ago Jim Erwin the developer of the now defunct Synapse Software Buildworks once wrote regarding the use of “canned estimating data”:
Re: Uniformat & Masterformat systems IMHO, doing detailed item estimating for residential using national costbook prices is like using a community toothbrush. If someone is going to the time and effort of detailed item based estimating, they should only be doing it with their own regular items and the current prices that they pay. If they don’t want to make that effort, then they should be doing unit cost estimating with composite line items and historical data. Considering the narrow margins, high cost of delivering a finished product, and the risks of running a business, just “winging it” is a formula for disaster. Estimating is not a total solution. Defined work processes, effective controls, professional customer relations, and a method of measuring and comparing performance all have to be a part of a successful plan for profit.
And back in 2004 my friend Bob Kovacs in another JLC Online Forums discussion comparing two other estimating products Xactimate & HomeTech again got to the subject of using canned data.
RE: What are the Top Estimating Software Packages? …On top of Joe’s comments regarding output, I’d also be concerned with input. In other words, where is the data coming from that’s in the program? Most of the guys I know who use Xactimate and/or Hometech use the data that comes with the program, which scares the life out of me. They’re playing with the law of averages, hoping that their actual costs are lower than the programmed cost more often than they’re higher.
Given that, if you plan to insert your actual costs into the program, have you considered the time you’ll need to invest in setting all of that up and maintaining it? It’ll kinda negate the “advantage” of being able to download quarterly updates from Xactimate. Is the time needed to do that offset by the bells and whistles you see in using Xactimate over your current spreadsheet?
To which Joe Stoddard then also commented:
RE: What are the Top Estimating Software Packages? …I totally agree Bob – my belief is that everyone would be better helped if these packages shipped with a *blank* database, but that’s what sunk Quantum Leap. Everyone wants a magic button that gets them out of taking off a plan and calculating costs. One of my biggest challenges as a consultant is trying to get client expectations in order.
1) Just because there’s a cost next to an item, does not mean it’s YOUR cost – even if you subscribe to the “city update” or “local cost modification service” They’re a guess, not a fact.
2) Just because you can import a budget does NOT mean you don’t need to check it, add/subtract as necessary.
3) Just because there’s a suggested manhour count does not mean that’s your productivity, and it should not be the basis of your actual construction schedule. Xactimate does not have a separate “subcontractor” category (you simply set up items as lump sum, or hourly with no labor burden) – so therefore you have to assign/check durations when stuff imports over in to Project. I had a client who actually thought they could base their final construction schedule on the estimate without checking it or tweaking.
Worse, I actually had a client importing stock budgets from Xactimate into their accounting system, not checking them or tweaking, and then complaining bitterly about the estimating software because their job costing was all out of whack.
While I very much feel the same way as Jim Erwin, Bob, and Joe we do provide a starter set of data with our 360 Difference program that is based on all the data I have collected from various sources and modified over the years the keyword there being “MODIFIED.”
I think the data in the database books are a good place to start in that they provide both a framework to look at and organize your costs and they provide a starting point off of which you can begin to set up your own numbers. And by starting point let me further clarify that to say they should be used as a starting point for the labor hours assigned to a line item task. The actual cost for the labor and the cost for the materials really do have to be your very own numbers.
My own reasoning for that thinking is as follows. First of all if an estimate line item cost is based on three criteria; the labor hours the task takes times the labor cost plus the of materials by relying on your own numbers rather than the “canned” data for those costs you’ve just reduced your potential for error by 66% and your actual costs for labor and your costs for materials are relatively easy to pin down.
Labor cost can be pinned down and defined with tools like our own Capacity Based Markup Workbook or Diane Gilson’s Employee Cost & Pricing Analyzer™(eCPA) or just purchasing Ellen Rohr’s book How Much Should I Charge?: Pricing Basics for Making Money Doing What You Love and following the procedures in it with a pad, pencil and calculator.
As for material costs building a materials list of just what is needed is probably the very first thing we ever did the first time we ever did any project and while it is still possible to make errors it is a relatively simple objective task.
It’s estimating the labor hours that a task will take where the real difficulty of estimating comes into play because estimating that time contains so much subjective analysis and judgment.
A contractor estimator needs to look at the “canned” book figures for labor hours as starting benchmarks, they are not absolutes. The labor hour units are standard as to “generally speaking” but individual as to interpretation. They are based on valid statistical samples that those publishers have researched but we don’t know the exact criteria they had in mind so they are subject to interpretation, in fact your interpretation. Use those data book labor figures with your own interpretation of their meaning. If it “sounds right” then go ahead and use it an monitor the results to see how accurate your judgment and interpretation actually turned out to be.
One of the neat features I have programmed into the estimating module of our 360 Difference system is as you review and approve the starter database items or any “canned” database items in your unitcost costbook in the detail view for an individual line item you have a checkbox you can check off to indicate that the data components in that line item that you have “approved” and the software also gives you a visual cue or warning to let you know what data hasn’t yet been accepted and “approved” as your own company’s data.
Once you check off the Labor Materials External Sub Contractor or Equipment components as approved (You can lick on the thumbnail image on the left to see a screenshot of a line item detail and the thumbnail below to see a screenshot of the list of costbook items in that sub-category) the field containing the total for that particular component changes from pale orange to white and that pale orange flagging color is user modifiable too if you want to lets say change it to pale yellow or red.
The estimator can then quickly see if the data they are using in an estimate have been used before and has been modified or approved for their own company’s use and they can even review the date it was reviewed and approved too to make sure it is up to date and current.
I always cringe a little when we get a new user who has just bought my program that tells me they want to use it to produce and estimate they want to get out to a client next week! Geesh! That’s really not the right way to work with any new estimating program.
To really use any estimating program correctly and accurately you need to do your homework and spend some time setting it up correctly (and we’re very happy to work with and help our clients do just that from training then on how to do it themselves to working as their virtual assistants, like someone in their office, performing the set up process for them).
Our goal with 360 Difference Estimating is to give our users the tools , training and help our users need build a library of estimating data that is truly theirs.
While this may take some time and effort in the beginning it pays off in the long run due to both the accuracy of the costbook line items they’ve built and they no longer have to put their faith in money into purchasing cost books year to year with quarterly updates.
Other articles discussing the inherent problems in using “Canned” Estimating Data:
Business: Using Cost Books for Estimating Using cost books for estimating
by Bob Kovacs