cfw - understanding your costs / open book costing models
TRANSCRIPT
Paul Wintle CITBConstruction Futures Wales
Programme Manager
Understanding Your Costs
Ian Widdrington & Joe McCarthyConstruction Futures Wales
• Introduction to Construction Futures Wales• Definitions of Frameworks and Open Book Costing• Steps to Develop Your Own Open Book Costing• Working on a Framework for the First Time• Top Tips For Tenders and PQQs• Introduction to Accreditations being requested by Buyers• Culture, Technology, and How to work Profitably on a
Framework• Questions and Answers
Agenda
Exercise
How do you currently Estimate/Cost Jobs?
What are your experiences of Open Book Costing to date?
Take 10 mins in Table Groups
Open Book Costing
The Basic Requirements
Your Costs!
• Cost of Labour• Cost of Material• Cost of Plant / Tools• Cost of Risk• Cost of Quality• Overheads
Step 1 Establish the Workload
• The Customer/Client needs to define the ‘Workload’– Is it Planned Maintenance? (Kitchens, Elec, Heating, Decoration)
– Is it Reactive Maintenance? (Base on past inc. geographical areas)
– Is it New Build? (What type of works and Max/Min)
– Others? (FM, Security etc.)
Step 2 Establish the Labour who may be working on the
Framework
• Identify each Operatives Role• Name them (ideally)• Can include sub contract and specialists• Organisation Charts help
Step 3 Establish Availability of Staff
• For Example:– Works 40 hours/week or 40 x 52 = 2080 annual
working hours– Minus 20 days holiday 20 x 8 hours = 160 hours– Minus Statutory Bank Holidays 8 x 8 Hours = 64
hours– Total Available Time = 2080 – 160 – 64 = 1856
hours / year
Step 4 Establish Full Payroll Burden
• Salary £15,000• Bonus £250• NI £1325.44• Pension/Healthcare?
• Total £16575.44
• Employer’s NI Contributions• Earnings Threshold -£4895• NI Calculated On £10,355• NI @ 12.8% £1325.44
Do this for all staff, including Management that may be involved in the clients workload.
To get total Hourly Rate divide Total Salary by Total Hours
Changing Regs on Workplace Pensions – Check your Staging Date
Step 5 Establish Labour Requirements
• Example– On a typical Kitchen
• 2 Carpenters for 48 Hours• 1 Plumber for 8 Hours• 1 Electrician for 4 Hours
– On a 200 Kitchen Refurbishment Project• Carpenters 200 x 48 = 9600 hours• Plumber 200 x 8 = 1600 hours• Electrician 200 x 4 = 800 hours
• Risk is always a key consideration
Repeat for Management time required for the project
Step 6 Establish Material Costs
• Normally identified in the clients Scope of Works
• Use your data from previous projects / invoices
• Identify the ‘Average Perfect Project’ material cost– Do not include extra for damage and rework
• Include Sub-Contractor Work Packages here
Step 7 Establish Plant /Tools Requirements
• Vans (Operatives) / Cars (Management)– Include Insurance, Maintenance, Tax and Fuel
• Consumables• Tools / Plant• Waste Disposal• Workwear• Mobile Phones / ICT / TrackersApportion the costs as best possible e.g. Van used for 40% of the
time on this framework apportion 40% of the cost to the project
Budgeting
• Zero Based– Incremental Budget?– Root and Branch Review on an Annual Basis
• Activity Based Costing (ABC)– Management Information– Activities / Functions that drive Cost Base
Step 8 Establish The Cost of Risk
• Material Cost Increases• Bad weather• Fuel Cost Increases• Client / Design changes– Scoped and Unscoped Changes
• No access• Sickness / Holiday Cover
The Risk Money doesn’t necessarily get paid, it will only be used if the Risk materialises – it is a Client contingency
Step 9 Establish The Cost of Overhead
• Identify in last years Accounts• Exclude items covered in other sections of the
Cost Model• Apportion based on turnover:– If this contract is 30% of the turnover of the business
then 30% of the Overheads need to be recovered in the Cost Model
Step 10 Establish The Profit
• Calculated from the last 3 years Accounts:– Establish what the Net Pre Tax Profit is as a percentage– Apply to the project on a annual basis
2012 2013 2014
Sales 233,383 321,679 332,345
Cost of Sales 67,034 97,116 98,668
Overheads 141,600 179,361 182,025
Profit 24,749 45,202 51,652
% of Profit 10.60 14.05 15.54 Average 13.4%
Working in Collaboration, reduction in waste and efficiency improvements will increase profits over time
Frameworks
Frameworks Why Are They Needed?
Long term frameworks provides organisations with:
–Work smoothed contracts–Protected Margins–Business Certainty–Opportunities to recruit, develop and retain the workforce–Opportunities to eliminate waste and inefficiencies–Shared Innovation, knowledge and expertise
….. Leading to a Sustainable Business
Frameworks What do you need to win?
A ‘fit’ Organisation– Strong Leadership– Values and Culture founded on Learning, Openness & Honesty– Motivated, skilled, dedicated workforce / Supply Chain– Competent Management Team– Simple adaptable processes and systemsUnderstands the proposed Customer/Client needs– Who are they?– What motivates/drives them – Culture and Values– Who are their customers?– What are their aspirations
Frameworks What do you need to win?
Informed of Best Practice– Egan and Latham– Collaborative Working – Innovation– Continuous Improvement– Lean PrinciplesAre appropriately Qualified and Accredited– Trade Qualifications– ISO– CE– Q-Mark
Frameworks What do you need to win?
• To get through the Pre-Qualification Process – Hurdle / Filter• To Write a winning Bid at Tender stage
– Technical Assessment• Good Interview Technique and
Presentation
PQQ Typical Questions Based On?
• Organisation• Financial Information• Business Activities• References• Quality Assurance• Health and Safety• Equal Opportunities• Environmental Management• Professional and Business Standing• Collaborative Working/Partnering
PQQ Maximising Points?
• Ask for the weighting for each of the criteria• The higher the weighting the more important to the client/project• The higher the weighting the more attention it needs• Attend industry days• Review the PQQ before submission• Ask Questions• Adhere to word count…… use pictures!• Develop re-useable ‘chunks’ of information and apply CI
What do Clients Want?What do Clients Want?
Tasty food Nice presentation Good Value Cheap No waiting Polite service Doesn’t poison you
Quality
Cost
Delivery
Health & Safety
What do you want when buying a meal?
Free from Defects
On budget
On time
No Accidents
Quality
Cost
Delivery
Health & Safety
What do Clients want from a Project?
What do Clients Want?What do Clients Want?
Tender/Bid Technical Assessment
• To Evidence your Capability – your Co. and Supply Chains• Real ‘Glory Stories’• Client Testimonials
• Time, Cost, Quality, Health & Safety• Continuous Improvement/Innovation• Benchmarking• Value Management
• Suggest alternate business solutions to the client• Value Engineering
• Understanding your own business to come up with alternative solutions• Social Benefits
• Local employment, Reinvestment in Local Economy, Social Inclusion
Tender/Bid Maximising Points
• Tell the Client what they want• Not what you like to tell them
– Review your Bid again and again and then again!• Don’t keep it to yourself• Accuracy is paramount
– Don’t underbid the Real Cost of Delivery• Will lead to reduced capacity, looking for variations, lower
quality, accidents, reputation damage etc.
Formatting
Interview What’s Required
• The Real Thing• Practice, Practice, Practice• Not presented by Marketing• Involve the Team
• Including Operatives and Sub Contractors• Use Real Life Examples• Give real answers to real questions• Be ‘Who You Are’
Remember - People Buy People
Interview What do Clients Look for?
• An Organisation that:• Empowers its People and Shares Learning• Communicates freely with all parties• Demonstrates Trust and Integrity with a ‘No Blame’ Culture• Focuses on Client Needs• Focuses on Overall Benefits (not just their own)• Lives an Promotes Success
And…..Enthusiasm, Belief, No Notes – From the Heart, Want It!
Frameworks Where to find them
Sell 2 Wales www.sell2wales.co.uk Tenders Electronic Daily http://ted.europa.eu/
Tenders Direct (endorsed by OJEU)http://www.tendersdirect.co.uk/default.aspx?source=GoogleC1AG2&gclid=CJTcrKqHlJICFQSKMAodqm5P7A
Tender Matchhttp://www.tendermatch.com/?crcat=payperclick&crsource=google&crkw=ojeu+notices
AccreditationsAn Introduction
Clients want appropriately Qualified and Accredited Contractors and Manufacturers– Trade Qualifications– ISO 9000, 14000, OHSAS 18000, BS11000, ISO 27000– CE Structural Steel, Structural Timber, Individual Products, anything that has a European Harmonised Standard– Q-Mark e.g. Doors, Fire Doors, Windows, Glass, Paint, Timber Panelling, Ply etc.– Achilles– Construction Line etc.
Culture and TechnologyWorking Profitably on a Framework
• Continuous Improvement – Lean Techniques
• Teamworking and Collaboration• Measurement and Control• ‘No Blame’ Culture• Good Leadership and Management• Empowerment and Training• Focussed on Client needs• Sharing Best Practice
Culture and TechnologyWorking Profitably on a Framework
• Vehicle Tracking• Tablet / Phone
– Issuing Work / Signing Off
• Appropriate Stock– Type, Quantity, Replenishment Systems
• Timeliness of reporting• Billing / Invoicing• Acting on Facts• Keeping the ‘Eye on the Ball’
