From Estimate to Execution: A Practical Guide to Project Cost Control

Dominic Cozzetto:

All right, everybody, welcome. Welcome, welcome. Today our topic is From Estimate to Execution: A Practical Guide to Project Cost Control. We’re really going to be talking about how to connect your data from your pre-execution through execution and back to estimating again. Before we get started, a few housekeeping notes. This ON24 experience that you’re in right now can be completely customized, so you can move those windows around. You can make them bigger if you want to by dragging on that corner. There’s also engagement tools inside of here to interact with throughout the experience. There’s a toolbar on the bottom of your screen, so feel free to click through that to see what everything does. Also would like to point out there’s a Q&A box, so make sure to submit any questions that you have throughout this webinar and we’ll see if we can get to those at the end.

All right. For those of you who aren’t familiar with InEight, we actually provide a powerful field-tested construction project management software for owners, contractors, engineers, and architects who are building the world around us. Customers worldwide rely on InEight for real-time insights that help manage risk and keep projects on schedule and under budget across the entire project lifecycle. And that lifecycle really kicks off with estimating. So, InEight Estimate empowers you to win more of the right jobs at the right price with accurate, standardized, and flexible estimates that adapt to the way you build, giving you total confidence in every number that you submit. So that is who I represent here on this webinar. These other two gentlemen actually use the software, and so we’re going to tie some of that in here today as well.

All right. I have a poll question. Just want to see who’s in the group today. So if you could go ahead and I’ll give you a minute or so to fill that out for us. Just to introduce myself, my name is Dominic Cozzetto. I’m the Product Director for the Estimate product at InEight. I’ve been around for about nine years in the product management space for the software now, going through a few of our different applications as well. So Estimate now, I was in charge of Scheduling for a bit and our Plan in Progress tools that track field time and quantity collection. Before that, I was in the industrial construction space. I spent 12 years as a project engineer and an estimator, so I’ve actually performed the work and did the work in the field using these tools before I came over here.

So if we could go to who I have on with me today. I have Scott Valdez, the Director of Project Controls at MasTec. Scott, why don’t you tell us a little bit about you, your experience, and really the sectors that MasTec is involved in.

Scott Valdez:

Yeah, MasTec does pretty much everything from advanced technologies, communications, to bridges to industrial construction. We’re actually one of the biggest power constructors in the country. I’ve spent most of my career in the industrial space, spent the better part of a decade moving around the country on projects, and ended up coming over to MasTec and helping run their Project Controls.

Dominic Cozzetto:

Fantastic, thank you. Also with us today is Erik Wilson, the Director for Project Controls at Austin Industrial. Erik, why don’t you go ahead and tell us a little about yourself?

Erik Wilson:

Sure. Thanks, Dom. Yeah, my name’s Erik Wilson. I’m the Director of Project Controls at Austin Industrial. We do construction and maintenance predominantly in the oil and gas and chemical industries. We also do work in pulp and paper mills as well as some food processing.

A little bit about my background, so I’m a mechanical engineer by trade, but went into the construction and construction management business out of school, been around for about 20 years doing anything from field engineering, some project engineering, project management, did a little pipe fabrication stint for a while, did a little bit of estimating, and then I’ve been really focusing on project controls for about the last five or years or so. And yeah, glad to be here today.

Dominic Cozzetto:

Great. Thanks, Erik. Glad to have you here as well. So, yeah, with that, let’s go ahead and see what the poll results were. Looks like we do have a lot of estimators in the audience today. Fantastic. And a lot of others too, so maybe we should have filled that out a little bit more, but that’s okay. So great, great. Glad to be here and approach this topic with you. So let’s jump on into it.

Efficient budget management is kind of our first thing that I really want to look at. So my first question to you guys is, I think we’ve talked before on connecting estimates with project actuals. I know both of you are doing that. How would you say that has transformed your bidding process and your overall budget management process at your company? So, Scott, let’s go ahead and start with you.

Scott Valdez:

Yeah. I think outside of the tools, the most important thing for us has been standardizing the process. So, understanding how our estimators are going to estimate the work and making sure that that’s in a standardized format and then that is easily translatable or conformable, whatever term you want to use over to project controls and how we’re going to actually track the work once it hits the field. I think that’s critical to the business. Obviously, it’s also critical to making sure that we get the right information back to estimating so they can evaluate how their estimate performed against real life conditions.

Dominic Cozzetto:

Yeah, great. Great. Erik, what about you?

Erik Wilson:

Yeah. I think just to build a little bit on what Scott was saying about standardization, right? I mean knowing what’s in your units and having a standardized way of conforming your estimate into a budget is really critical for, I mean not only successful execution but also making that a timely process post award. I mean particularly for us, and it obviously varies with contract size, but customers have a pretty high expectation of being able to quickly mobilize and get boots on the ground, if you will. And so that standardization of these estimating activities and codes roll up to these different accounts in your budget is really critical. And then of course, you can leverage that standardization when passing actuals back and you can give your estimating team some sanity checkpoints to see how the estimating norms are aligning with our execution methodology.

Dominic Cozzetto:

Yes, yes, absolutely. And we see the most success when you do align those between estimating and project control. So, great, great answers, guys. Unfortunately, we always have unexpected cost overruns, so what is your strategy for managing those unexpected cost overruns and how does, if you link that estimate with your actuals, help mitigate some of those surprises? Erik, I’ll jump over to you first.

Erik Wilson:

Sure. I mean obviously, nobody likes cost overruns and obviously step one is trying to figure out exactly why that’s happening and I’m sure probably this resonates with lots of people, it’s always the estimator’s fault, right? “Oh, the estimator must have missed it,” or whatever. And having that kind of soup to nuts, “Hey, here’s what was in the estimate and here’s how it transferred over to your budget,” really can help show that’s a red herring. I mean at least in my experience, a lot of times it’s not necessarily a fundamental issue with the estimate. There’s something else happening, right?

That’s not to say that there aren’t the cases where that happens, but being able to have that line of sight from what the estimate basis was to what’s in my current budget can really help the project team focus on, “Okay, what’s really driving this cost overrun? Is this something that we can improve entitlement to change to the customer and be compensated for? Or is this something that we’ve maybe just missed or we need to change the way we’re managing the work?” So it’s incredibly helpful to make that process very quick.

Dominic Cozzetto:

Yeah, I think you probably hit at the heartstrings of most of the audience here saying, it’s always the estimator’s fault. You never get credit for the good things. I always say one of the scariest days of my career was when I actually won my first project. That’s terrifying, man. You get done celebrating and then you go right back to the office and triple check again every number that’s inside of that bid to make sure you didn’t miss anything that you’re not seeing.

Scott Valdez:

Yeah, what did I miss, right? That’s always the question you ask after you win one.

Dominic Cozzetto:

Oh, no.

Scott Valdez:

How low?

Dominic Cozzetto:

Yeah. Scott, same question for you though. Yeah.

Scott Valdez:

Yeah, I think Erik hit on the key for me, which is traceability from that estimate over to the actual controls tracking side of the house. Everybody knows estimating is at a completely different level of detail than typically we would track our costs in the field and understanding the build-up of what made some of those codes and how that relates to the scope is the key to identifying, okay, did we have this captured? And also, was this a part of the scope, part of that base scope? Is this truly a reimbursable change, right? It’s that starting point to say, “Okay, are we going to get paid for this or not?” So you have to understand what’s in your scope and how that came from the estimate, how that relates to your clarifications and assumptions that you turned in with your bid, any of the fine print language that you have in your contract, but at the end of the day, you have to understand what you estimated and what the scope is to complete before you can move forward.

Dominic Cozzetto:

Yeah. I think that was one of the 10 commandments, and I know that… This is how I can tell you and I worked in the same company in the field at the same time is we had this giant sign in our office trailer that just said, “Know your scope,” with big exclamations behind it because you can’t get that change order going if you don’t actually know if it’s in your contract or not. So, yeah, good stuff. In your experience, what long-term advantages come from maintaining accurate and traceable estimates across projects and how does incorporating that field data support the benefits of those traceable estimates across projects? Scott, let’s start with you this time.

Scott Valdez:

So I think there’s quite a few long-term advantages. Selfishly as an operations guy at heart, understanding, “Hey, this is how we track jobs. This is what they’re going to look like coming from estimate. This is how I’m going to go back and understand what the estimators actually took off and where my gaps are.” I think that’s an instant long-term advantage, that consistency with process obviously builds a good culture.

Obviously, the other piece of that is making sure that we are estimating accurately, so it’s not just Estimating hands us a number and then we go build it. We have to go back and tell them, “Hey, this is how we actually perform. This is what unit rate you gave me. Based on field conditions, based on impacts, this is where we ended up.” So when you go forward to your next bid, you can really take that into account and make sure you’re not shortchanging yourself or overbidding, frankly.

Dominic Cozzetto:

Yeah, nobody ever says that overbidding part on there. It’s always, “Oh, are we short changed?” But nobody really goes back and looks on, why were we so high this time? What are we over allocating here? Erik, what about you?

Erik Wilson:

Yeah. I mean for me probably the latter part of what Scott said really resonates for me. For anybody that’s writing a kind of Covey lingo, sharpening the saw, getting that feedback loop is really the long-term benefit. And also, to kind of build on what Scott was saying, being able to sharpen your pencil if you need to depending on market conditions and if we need to get competitive on numbers, knowing where we can skinny up our numbers and what our limits are for how skinny we can get on a number if we really want to win something. So that, to me, is a big piece of that long-term benefit of being able to close that feedback loop.

Dominic Cozzetto:

Nice, nice. Yes, yes, exactly. I just wrote some notes down. Scott, you hit on this on that last question was, the level of detail differing between estimating data and what you actually want to track for in the field. So, is there something people should be looking at for that level of detail and really managing that data loop?

And I go back to, and I told this story at an AACE event, or a advancing pre-con event with Scott earlier this year is when my first job, I was a structural steel field engineer and these new account codes rolled out and the office wanted us to track steel by weight category, so light, medium, heavy, extra heavy. Foreman came in and said, “Hey, there’s no possible way we can do this. I can give you a hang list and overall hours.” I said, “Why?” And he ended up putting me in a man lift with somebody with a stopwatch and saying, “Okay, this is a light piece of steel, go ahead and start tracking the hours.” So after about an hour of me doing that, I realized how ignorant I was on just that topic of getting accurate data back at the right level of detail for your benchmarking and going forward. So, that’s my story for that and I’ll never forget that, but Scott, anything that you look for as far as level of detail to get accurate numbers back from the field?

Scott Valdez:

Yeah. I mean there’s a few things I look at. Obviously, every estimator is going to look at every nut, bolt, gasket that needs to be installed because that’s what we need to capture to make sure that we have a good cost. From an actual’s perspective, I think of practical type things, is this the same unit of measure? What’s the installation duration? How hard is it going to be to count? What level of detail do we have to break things down into? Those are all factors and frankly, the maturity of your organization, if you’re looking to implement something from a tracking perspective and you’ve never done anything like that, I usually recommend a higher level of detail because you’re only as good as the information you’re getting back. So if the folks in the field who are actually tracking it, this is a new experience to them, I always say, start out at a higher level of detail and you can become more granular as you develop your culture and your company.

But really, it’s that common sense, that practicality piece. Okay, does this make sense? And I think of things that have specific numbers. Pieces of steel have individual numbers, so I might have a single phase code for tracking costs to, but I have all those individual pieces with their weight and so that’s how I’m going to track quantity. So just understanding what your folks in the field are doing and making sure that you’re not starting out at the calculus course when they haven’t learned arithmetic. I think that’s critical to success.

Dominic Cozzetto:

Right. I like that metaphor. Erik, good luck following that up. What do you have to say on this?

Erik Wilson:

Yeah, Scott pretty much hit on all the high points. I mean probably about the only thing I can probably add to that is, as far as counting widgets goes, you’ve got to have a tangible widget to count. And I’ve spent lots of time on construction sites, but I mean I didn’t come up on my tools, so I got to really think hard about, okay, well how’s a foreman going to look at this stuff? And having something tangible I think is critical.

And then also giving them the ability to earn some progress incrementally. I think about some tasks like pouring concrete, for instance, I mean if you’re going to wait to claim all your credit when you pour out the foundation, I mean the incentive there to over progress or whatever is pretty high because you’re not going to earn any hours for days or even depending on how big the foundation is or how big the pour is, I mean you may earn absolutely nothing for a reporting period. I mean you can’t put your field supervisors in that position because I mean that’s what they’re being measured against. So you’ve got to try to balance that between giving them something where they can earn some credit but not killing them where their time sheet’s the length of their arm and they’ve got to count every little grain of sand.

So there’s a narrow path in there, and I completely agree with Scott that you got to view this as a, Rome wasn’t built in a day, so if you’re starting, a 75% answer is way better than a 0% answer. So just get kind of close to start and then you can start fine tuning it, but don’t try to nail it on the bullseye right out of the gate because I mean you’re going to end up with no answer and then what’s that really doing? Right? You’re just kind of spinning the wheels.

Dominic Cozzetto:

Yeah. Or just absolute garbage because there’s no way for someone to track it properly and then you’re going to base future bids off of it, and that’s even worse than having no data at all most of the time. But-

Erik Wilson:

Yeah, you want to feed meaningful information back to your estimators, right? Because again, I mean Scott made some really good points, they’re down in the roots of the weeds in terms of counting every little bit and piece because that does have an impact on the unit rate. And so they want to get that validation of like, “Hey, am I good on this?” And it’s like, “Well, I can get you at this level, I can give you a number to check,” but I can’t necessarily get you down at that really granular level because we can’t have our foreman standing there with a stopwatch timing a guy on 150 pound bolt up and see how that compares with a 300 pound.

Dominic Cozzetto:

Yeah, I mean that’s the example I give, but on the estimating side of the steel, you need to know your weight ratios and your piece count because it’s going to take me way longer to install a bunch of light steel than it is two columns that was the equivalent of entire conveyors. So you definitely need that when it comes to estimating. But no, I really like what you guys both said there. Start at the higher level, iterate, and evolve these as you go and see what you’re tracking well.

One of the biggest setbacks I see for customers who are starting this tracking process is they try to nail it, like you said, try to nail it exactly what it needs to be every single time and are afraid to adapt and evolve that process. So, no, really good stuff there guys, really appreciate that. We’re going to go onto the next topic here and that’s real-time data integration. So, Scott, let’s start with you again. Can you share specific examples of how the real-time updates from the field have improved your estimating and even your forecasting process?

Scott Valdez:

Yeah. I think the good thing about having this real-time information available is it gives that estimator an instant snapshot on how a job is performing today. So, it’s that instant feedback loop to understand, okay, I just did a simple cycle turbine job. I need to understand how I’m performing on concrete foundations on that job. It’s in Texas. And really it’s not for the estimators to go and use that number. You don’t want to really use those numbers until they’re finalized, but it’s that instant gut check.

I mean to the point we were making earlier, the estimators are sitting there in the weeds, they’re building all these things up and then at a certain point, they get to a number. And really the whole point of historical data is to validate, okay, is that number in the ballpark? Am I confident in this buildup number? It’s my second estimate check to say, “Okay, I did all this work to get up to an estimate number. Now I have a unit rate. What’s it look like in real life?” So I think that’s the value of that instant feedback loop.

Dominic Cozzetto:

Nice, nice. Thank you for that. Erik, can you give us the same thing, but maybe on the forecasting side?

Erik Wilson:

Sure. Yeah. I mean for us, forecasting as a controls guy, that’s kind of my whole life is why we track all these widgets, count widgets and count dollars and measure time, it’s to be able to provide accurate forecasting. So, not only the more accurate, but the more timely feedback you’re getting really just helps adjust your forecast and balancing it against, okay, well what did we bid this work at? Where are we standing? What’s happening? Being able to get that feedback and inform your estimate, I’m sorry, inform your forecast and really be able to dial it in is very beneficial. Helps me justify my existence.

Dominic Cozzetto:

Yeah. That real-time time loop is nice. I always enjoyed that for forecasting in the field because, man, you can have someone projecting that they’re going to finish at their one productivity rates or production rate, whatever you want to call it, when they had performed at a 0.7 up to that point. So being able to show what they’re currently doing and asking, “Well, how are you going to improve that to actually get that up to a one and you’re earned?” It’s always something nice to have in your pocket just to at least start to build out that plan to how to improve that production or not. Yeah.

Scott Valdez:

Well, and just to add on that a little bit is we sometimes track different areas of the job and it’s a similar type of work, so we use account codes to normalize that data to understand what type of work is being performed. And that’s usually a very good indicator for other portions of the job. If I’m installing small bore piping on one end of the job and I’m running a 0.8 productivity, to your point, and it’s the same unit rate, it’s a good instant feedback to say, “Okay, I’m running a 0.8 in this area, this area over here has the same type of pipe, same type of situation. Am I really going to get better?” So what’s causing the issues? It helps you dig in to understand operationally what’s causing the problems.

Dominic Cozzetto:

It helps you make the faster, more confident decisions through the execution phase, right?

Scott Valdez:

Yeah.

Dominic Cozzetto:

Erik, anything to add on that as well? Or…

Erik Wilson:

Yeah. Actually while Scott was saying that, it came to mind here something that happened for us quite recently. So when we do civil work, we’ll typically kind of bid the whole kind of ball of wax, the foundation and setting equipment and scarifying and placing the grout and doing the whole nine yards. And on a particular project, we weren’t doing the foundation work, we were just doing the grouting of the equipment. And so having that delineation where we had to pull the grouting scope away from the other parts that we typically all bundle and package together revealed that we’ve got some misbalance in our rules of credit with the way that we summarize and grab this piece and that piece from the estimate.

And we were getting real-time data back from our project of like, “Hey, we are just getting killed here on this work, what’s going on?” And we were able to go look back through the estimate and see where we missed the roll up, I guess, of how we were rolling up individual tasks from that grain of sand level of detail from the estimate and not allocating them to the right rules of credit at the execution level. So, being able to get that feedback to our estimators in a timely manner is key. So, we can make those corrections and still come out whole when that whole scope’s in there, but when it’s split up and you got kind of a different view of it, right?

Dominic Cozzetto:

Yeah, absolutely. Absolutely. So now that you have that connected data, how does that help reduce data discrepancies and really help enhance your performance in the field and maybe even the profitability? Erik, go right back to you on this because it is tying right into that.

Erik Wilson:

Yeah, I mean I’m trying to think of maybe some other examples where that’s been the case. As far as discrepancies goes, I mean it’s definitely driving those to the surface a lot sooner. I think about a decade ago or maybe even five years ago, we would kind of do a post-mortem at the end of the job, but we don’t necessarily need to wait until the end of the job to be able to do that and give that feedback to the rest of the organization. And again, that timing’s pretty key. I mean at any given time, we’re estimating work just like everybody constantly. And so being able to get those adjustments and that feedback to the estimators where they’re able to make some corrections now, you obviously need to be very careful doing that, right? I mean you don’t want to be just adjusting your estimating norms on a whim, but giving those estimators some time to pause and, “Okay, yeah, am I quantifying this right? Are we actually executing the work in this manner?” is really helpful to the business as a whole.

Dominic Cozzetto:

Yeah. Nice, nice. Yeah, and that’s one of the advantages too, is having this connected platform to reduce some of those discrepancies going back and forth, because you’re tracking it the same way every single time. But Scott, did you have any add-ons to that?

Scott Valdez:

I think we touched on it a little bit, which is that instant look at performance really helps you make decisions at a point in time when you can actually affect change on the job. If you wait until your month-end forecast that goes to the corporate accountants, then all of a sudden, you see an issue at the end of the month that you had three weeks potentially that you could have worked on it and tried to come up with a solution to perform better. That’s, I think, the most important thing on an operational perspective.

And then again, that feedback loop over to estimating to making sure that you’re setting future jobs up for success. I can’t emphasize that part of it enough. So it’s one source of the truth and the other thing is you can drill into the details to understand what is actually driving the issues within a particular phase code or scope of work. I think that’s the other piece is not just seeing a top level number to say, “Oh, well I’m not doing good in concrete.” It’s, “Okay, concrete foundations of this size are having an issue and is this a claiming issue? Is this an hour charging issue?” Having that more detailed level beyond just the cost-tracking code, I think helps significantly when you’re trying to troubleshoot problems.

Dominic Cozzetto:

Even down to what Erik was saying there, right down to that claiming scheme level of discrepancy too. Yeah, absolutely. Absolutely. Okay. We’re going to move on to our last topic of the day and then we’ll have some time for some questions after this, but it really is change order handling. Again, we talked about earlier on and knowing your scope, what are some of the best practices that you guys have seen for ensuring that all those account codes are accurately reflected at the right level of detail to be track hours against installed quantities in the field? So, sorry, that was the wrong question. What are some of your best practices for actually handling those change orders that do eventually come in? Scott, go ahead and go first.

Scott Valdez:

Yeah. So again, having that clear understanding of what the estimator estimated at bid time, how that scope has developed, the details behind it, if there’s changes to an electrical cable schedule or revisions and you can quickly figure out, “Oh, they’ve added additional handrail or additional grading,” having that traceability back to the estimate to say, “Okay, how many square feet in each area did I include?” That’s really critical to the change management piece.

Tying that into change management, I mean that’s a whole nother topic that we’d probably spend an hour on itself, if not longer, but tying it to individual issues, tying it to actual document issuance. I think, again, those details, the devil’s in the details and that’s what drives this change management process. And frankly, it’s what makes it easier to have those conversations with owners and saying, “Hey, I can show you all the way from bid time what the basis was, how that developed, what changed.” Owners have a tendency to always be surprised when change happens, but when you are very clear on, “Hey, this is exactly what has changed and this is when it changes,” it makes that conversation easier to have.

Dominic Cozzetto:

Yeah, and that’s where I was going to tie in those account codes is when you have that level of detail inside of your system already, it’s easier to generate that change order for a scope of work at the same level of detail that your original bid was proposed at. So, that’s where I was tying that in there. Erik, thoughts on this?

Erik Wilson:

Yeah. I mean I’ve got some scars from trying to bridge that gap. I mean we will do true up models with customers from time to time where our contract’s based on the BOM or BOQ, and then we get IFCs later and we’ve got to reconcile the IFC documentation to issue for approval, IFB, whatever the status is, and then you got to reconcile those deltas and quantities. And going back to code of accounts and how you can roll up those grains of sand in a logical manner so you can demonstrate entitlement to change is really critical. And having them integrated helps you show how changes in, let’s say you’re just measuring piping by linear foot, say, right, and your well density changes from one every 20 feet to one every 15 feet. That’s obviously going to have an impact on your price, but it isn’t going to necessarily change that key quantity of linear footage.

And so if that’s the case, how do you demonstrate entitlement to change? Hey, why is the price going up, right? What’s going on? And so having everything integrated really just helps facilitate that discussion of, “Hey, here’s where we started. Here’s where we are now.”

Dominic Cozzetto:

Yeah. And having that integrated really helps be consistent too, right? I was on a project that had a giant chunk of, it was an allowance, kind of an unknown scope and we priced it the same every time. So like Scott, you were saying there, you go to the owner at first and they say, “Oh man, you’re charging me way too much for this,” but by the 200th change order on that project, they knew exactly what I was going to charge them for all that, and it was hard for them to argue it. So yeah, good stuff. Good stuff.

All right, well we have one more poll for you. So just wondering how many organizations actually use standardized account codes, chart of accounts, phase codes, whatever you want to call them, a standardized way to track your projects across multiple projects at a time.

While they’re filling that out, my last question for you guys before we get to the Q&A box is, and as an estimator you’re really thinking, “Hey, I need to get this bid in.” As soon as that bid goes in, you might have a few days of clarifications and it’s on to the next bid. So how do you really retrain that department to start thinking about supporting those one projects, the estimate turnover process, support through execution, change management, project controls, the whole thing? Because the best experience I’ve had on projects were when those estimators were involved actually throughout that entire project. It made it a lot easier as a young field engineer for me to do that.

And then when I got to estimating, it really helped me learn the entire estimating process when I did support the field throughout the projects that we had won, except when I had to go to the middle of nowhere to support Scott’s project, that wasn’t the most fun thing ever. But, how are you guys looking at that from more of a corporate level now? Erik, let’s start with you on this one.

Erik Wilson:

Sure. I mean the estimating mentality is, “Hey, is it in there? Okay, good. All right, all good, I’m going to move on.” But getting those teams to integrate, I mean the why matters. Why am I doing this? And that’s the general approach I try to take with most things is if you can help people understand why they’re doing something, then you don’t necessarily need to have the flowchart of like, “Oh, okay, I do A, I do B, I do C, I get an answer. Okay, now I’m done and I move on.” Right?

And I’ll say, we’re quite fortunate, our estimating department is very approachable. Obviously they’ve got deadlines, right? I mean they’re very, very firm deadlines, and so we try to be respectful of their time, but we do have some processes that have taken some time to mature in terms of estimate handover and, hey, here’s what was in there, here’s what wasn’t in there, here’s the execution methodology of how we came up with this placement rate. So, we do have some policies and processes to help facilitate that transfer of knowledge from our estimating group over to our field execution teams.

And then depending on the project and what’s going on, we’ll have estimators go sit on a job site sometimes and help true up jobs or help the project team get out of a bind, which is really beneficial, because I think until somebody spends some time in an estimating chair, I mean it’s hard to get an appreciation for what you have to produce with what you’re given, the expectations of what you need to produce based on, here’s a concept of something and you’ve got to think of so much stuff. And if you’re not actually sitting in the chair being asked to do that, it’s pretty hard to get an appreciation for that.

Dominic Cozzetto:

Man, before you go, Scott, I’m going to stand on a soapbox and say the best estimators spent time in the field. The best field guy spent time in estimating. And the best designers spent time in both. So we’ll just leave it at that. Scott, go ahead and add on to, if you can, because that was a fantastic answer from Erik.

Scott Valdez:

Yeah. That was a great answer. And I think one important thing that I like to push, and we’ve been pushing over here, and one of the things that makes us more successful is making sure that you have operational involvement during that estimate time and that you’re not just estimating in a vacuum based on John S. Page, your R.S. Means, or whatever book you have in front of you, understanding operationally how you’re going to execute that project and making sure that your bid aligns with that execution strategy is critical for success in the field.

So the other big thing, and Erik touched on it, was that estimate turnover, right? That’s not the end of the conversation between estimating and the project team. That’s really the beginning of a conversation and it lays that groundwork for that site team to understand who was involved in the estimate, what the basis of estimate was, and really give them the points of contact to go back if they have questions on scope. So similar to how we talked about actuals coming back in a loop over to estimating, it’s a similar thing between the actual operations folks and the estimators themselves.

Dominic Cozzetto:

Yeah, great stuff, Scott, there. And it really is just an ongoing process. You have to change that mentality of, “Hey, my work stops when I put the bid in.” And I still say one of the best times that I’ve had in my career was my second project. I actually helped with part of the bid and then went out and built the project so I didn’t have to learn that scope, I knew what that scope already was, and you kind of hit the ground running there. So super fun on that.

We have some time for some Q&A. So, are you guys ready?

Scott Valdez:

Ready as I’ll ever be.

Erik Wilson:

Do it.

Dominic Cozzetto:

You said yeah, ready? All right, Erik, I’m going to hit you with this one because you were speaking of rules of credit earlier. How could the principles of rules of credit be integrated into the initial estimate development phase and eventually to the budget control creation? So are you looking at that in the estimating phase or are you more just having a standardized rule of credit that you’re adapting every job in the control space?

Erik Wilson:

That’s actually a great question and a timely one. So we’re reevaluating that right now, and maybe painful is not the right term, but it takes a lot of understanding and a lot of conversations to get aligned. And that’s back to the why, right? That why question of, okay, well why do you need me to do it like this and why can’t I do it like that? Okay, well, what is your current process and how are you going to bucket that stuff? So I guess the short answer is it really needs to be consistent. Because if it’s not, that feedback loop is going to give you pretty… You’re not going to have a nice bell curve of historical data. You’re going to have data outliers if you’re not comparing apples to apples, if you will.

And then the second part of that is the speed with which you can conform your estimate is going to get slowed down tremendously because you’re making bespoke rules of credit for every job. And so, one of those challenges though is you kind of have to balance that against, okay, well, I am kind of fitting, I mean you don’t want to quite do a square peg in a round hole, but maybe I’m okay with this oval peg in a round hole and it’s close enough for what I need right now. And kind of getting back to what Scott said earlier on the, hey, you know what? You don’t have to hit it on the screws right away, just get close and then you can refine it as you go. So, I guess that’s a long way of saying, yeah, you do want to standardize it and if it doesn’t fit perfectly, that doesn’t mean you abandon ship and try something else, you just got to get it close and then kind of just do that. What’s that? The OODA loop where you’re improving your process every iteration that you do.

Dominic Cozzetto:

Yeah, good stuff. Scott, any add-on on that? Or are-

Scott Valdez:

Yeah. You hit the nail on the head there. I guess the only thing I’d add is just depending on how standard your construction projects are, if you’re pretty consistent in what you’re doing, you can do some of that stuff up front through account code hierarchies. This is the standard level that I estimate at, this is the standard level that I track at, that’s at a higher level, and then basically weight your rules of credit based on those. That is definitely one way that you can do it.

For us, it’s more just, hey, these are our standard rules of credit for typical types of work that we perform, and that’s always the basis of the conversation. Our work is very unique in the industrial world, so not every… In fact, no jobs really look like the other jobs in my land. So, we always use the standard as a starting point, but the one thing that we do make sure that we do is that we involve the folks who are actually going to have to install it, the superintendents, the construction managers to say, “Hey, this is the basis. Are there any adjustments to these rules of credit based on this particular situation that you think you need to make?” And it’s a buy-in process, right? It’s not just carte blanche for them to go change it, but it is an open conversation to have.

Dominic Cozzetto:

Yeah, it’s great and it really ties into things both of you were saying, Scott, that estimating, hey, estimators are counting all the chicken guts and feathers, every single bolt, nut, and gasket there is. And Erik, when you were saying, hey, you want to give people the ability to actually see progress on their activities, you kind of tie those two together with the rules of credit so you can throw those both ups for the pipe into a claiming scheme inside of the application. Then when you get done with that, you claim it even though you’re not 100% fitted out on that pipe. So it really is not necessarily thinking about that when you’re doing the estimating, but when you’re conforming that to make a budget out of it, what can I roll up here and make sure that the field crews are getting credit for when we’re actually installing them?

Good. There’s one here I want to answer. It’s, why not give the estimators the OBS instead of having the estimator create the WBS? Wouldn’t that make a more rational way to do this? It depends on the bid. It depends on the bid on that one. A lot of the times you’re required to give a certain WBS back to the owner, kind of in a pay item structure. You have to do a little plug here. InEight Estimate lets you do all kinds of different structuring inside there. So I can have a WBS, a cost structure, an account code structure, so I can cost it the way I want to, review it the way I want to, and submit that the way I want to. So yes, I agree more rational way, sometimes not an option.

This one’s a little vague. So Scott, I’m going to let you run with this whatever way you want to. It says, “Hi, all. How do you prioritize critical issues according to project scope?”

Scott Valdez:

Critical issue. That is an open question for sure.

Dominic Cozzetto:

[inaudible 00:46:02] where your your mind went. Yes.

Scott Valdez:

I think when I hear the word critical, obviously schedule comes to mind. And then the other thing that instantly comes to mind is what’s going to cost me the most money? So, separating those two things, understanding the schedule progress and which widgets need to be installed to drive schedule progress and how many widgets or hours I need to earn to maintain schedule progress, that’s how we would look at it from a schedule perspective. So, hey, when the foreman’s breaking down the master schedule into their short interval schedules, are they including the things that need to be done to achieve a critical path? So that’s how I would look at it from a schedule perspective.

And then obviously from a cost perspective, the key performance metrics, productivity factors, labor efficiency indexes, and really the biggest one is a forecast to gain loss versus your budget. I mean those are the big red flags that I look at when I’m trying to figure out, okay, what’s going to hit us in the face this month? That’s what I’m looking at.

Dominic Cozzetto:

Nice. Nice. Yeah. Yeah. Good answer. Good answer. That was very open-ended. I wanted to see where you go with it. So, yeah, absolutely. The dollar drove your thought there. Erik, this one’s for you. How do you integrate security staff to provide data when no work is going on, but certain equipment must be running for the project?

Erik Wilson:

I’m not sure I’m totally understanding. This is-

Dominic Cozzetto:

I’m thinking more, how are you tracking or maybe even estimating maybe some cold storage or just some equipment turns during when there’s actually nothing going on in the project yet, some warehousing, maybe something like that?

Erik Wilson:

Yeah. So how do you integrate security stuff? So, I guess I’m hearing this and I’m thinking this would be part of my indirect estimate. So, I mean I don’t think we do anything too whiz-bang crazy, nobody else does our indirects. I mean those are all generally time-based budgets that we figure out a duration and a headcount or a quantity to allocate budgets for them and include them in the estimate. I feel like I’m not really understanding the question with my answer here, so I apologize, Don, if I’m making-

Dominic Cozzetto:

No, you’re right. Your head kind of went where mine did. I would budget that in indirect staffing, I’d have someone on site that was just kind of tracking that or someone who was traveling between multiple sites to track it on multiple sites at the same time.

Erik Wilson:

Yeah. I mean as far as progressing indirects go, I mean that’s probably one of the easier things to do. I mean you’re basically just kind of counting up the man hours and looking at the time sheet and, “Okay, I’ve got this many actuals and here’s my actuals.” One thing that we will do is just, I mean it’s not really a productivity measurement per se, but it’s really just, how are we doing against what our plan was? So, we’ll look and say, “Okay, we were planning on having three indirects for this time period at $25 an hour or whatever, and here’s my cost. Okay, well, what was my actual?” And so am I spending ahead or behind of my plan? And that’s sort of how we measure our performance on our indirects.

As opposed to just, because I mean you can do a cost to cost on your indirects, but of course that leaves you fat, dumb, and happy until you’re not. And then it’s like, “Well, how much? Well, I don’t know.” And you just sort of keep adding onto it as you go. So, there’s probably much more accurate ways of doing it, but that’s generally how we do it is how we do it against what we budgeted for our indirects.

Scott Valdez:

I think you’re spot on there, Erik, and honestly, I think understanding those non-direct installation costs and how you’re performing against them is as critical as understanding your direct piece of it because those are usually the costs that bite you. You can see when the direct costs are going to hit and you see it coming over time. Those indirect costs, those time-based costs usually hit you towards the end of a project when you’re out of money. So, making sure that your time-based forecasting for construction equipment, for indirect staff, for the weld inspector to come out, those are all things that, if you can understand the basis and make sure that you are performing against your budget, performing against your current estimate, performing against your forecast, then that’s going to help you guys identify issues.

And again, it’s that identifying issues when you can affect change. So if you identify that, “Hey, I’m over staff based on my plan,” and it’s the beginning of the project, you have a chance to make an impact there as opposed to when you identify at the end when I’m out of money, there’s nothing you can do at that point.

Dominic Cozzetto:

Right. Right. Yeah, those indirects add up quickly if you’re not capturing them correctly.

Erik Wilson:

They sure can.

Dominic Cozzetto:

They honestly do.

Erik Wilson:

Those are some of your most expensive people on your job, right?

Dominic Cozzetto:

Yeah. One more question for you two, and then I’m going to answer a couple and then we’ll be out of here. I have my own opinions on this, but I have to remember this isn’t about me. So, do you recommend having different work breakdown structure and cost breakdown structure for construction projects? Or should it be one structure?

Scott Valdez:

I’ll take this one.

Dominic Cozzetto:

Go ahead, Scott.

Scott Valdez:

I think that completely depends on the type of construction you’re doing and the level of detail in your schedule and what your owner requirements are. So in the industrial world, I can tell you that we hardly ever have a cost breakdown structure that aligns one to one with a work breakdown structure because the way that we track costs is different from the way that we need to show that in a schedule to be able to actually put together a realistic plan to complete the work. So that’s typically where we’ll go into a deeper level of detail down to the individual widget to understand which schedule activities relate to which phase codes, that’s kind of a great equalizer for us. So, you can do it. It happens all day long in the infrastructure world. If you’re on a corps of engineer jobs, yeah, you’re 100% going to have the same CBS that you have a work breakdown structure, but it really is dependent on the type of construction, the owner, and how you guys track your work.

Dominic Cozzetto:

Yeah. That’s a fantastic answer. When you said it depends on the project, I thought you were just going to give a cop out, but no, that was spot on. Erik, anything at all to add to that?

Erik Wilson:

That was a much more elegant answer than I would’ve given. I would’ve said, “Don’t make them match.” But we do have a… Well, I mean because you can really set yourself up. If you don’t need to do it, then I would recommend that you… Well, you really need to think hard about why you would do it and what benefit you’re getting if it’s not a requirement of your contract because you can really create a lot of work for yourself trying to just keep everything reconciled. I mean you think about the budgets that you have in your schedule, your cost budget and your ERP, and then your budget that you have in your widget tracking program. I mean those all need to have the same denominator. Reconciling many to one is a lot easier than many to many, and so you just really need to give that some thought and don’t do it unless you have to.

Dominic Cozzetto:

Yeah, and I feel like we could give another hour-long webinar to just scratch the surface on how to properly track percent complete as far as installation percent complete or time percent complete or cost percent complete across how to map those correctly between your, I’m going to say InEight plan where I’m doing my installation tracking, to your InEight schedule when you’re doing the time tracking and what goes where and how does the cost structure actually fit into the whole thing? That is a giant bowl of spaghetti that we don’t have time for in the next four minutes. So, great answer by both of you on that.

The last one on here that I’m going to take is a pretty easy one for me, how much AI is getting integrated to your modules? I’m going to tell you, a lot. That is where it’s going, but I want to just, without letting the cat of the bag on a bunch of it, it’s to make your estimators more efficient and more timely in producing their work so that they can have time to actually build the work and make a plan in their head. So, it’s not like, “Hey, give me an estimate for this and scan the drawings,” and that’s not anywhere in the works, but making it so it’s checking and easier to get data into the system is really a route we’re going down. And actually a lot of exciting stuff that’ll save a lot of people a lot of time coming up.

So, I’ll leave that as a teaser right there. And with that, yeah, we got time for one more quick one. Scott and then Erik, what advice would you give a company beginning the journey towards full estimate to actual integration? You got a minute.

Scott Valdez:

I would really make sure that you have that conversation operationally and with your estimating department on what level of detail are we looking to get back? What is our overall structure that we’re going to standardize on? What types of work do we do? I would really start with an account code structure. What type of work do you do? And then from an operational tracking perspective, don’t try to go to the bottom of that tracking structure when you’re tracking work in the field. Don’t be scared to use a roll-up. That’s my two cents.

Dominic Cozzetto:

Nice. Nice. Erik, what about you?

Erik Wilson:

Yeah, I’m going to steal a cubby term here and say, begin with the end in mind, right? I mean if you don’t have a really clear picture of what you’re trying to accomplish, I mean there’s so many details to derail your train of thought and your structure that if you don’t have a very, very clear picture of what success looks like, I mean you’re going to just spin your wheels and be stuck.

And then just to build a little bit on what Scott said, I mean you got to have the right stakeholders part of that discussion. Because if you don’t have everybody in the tent with you, it’s going to be very, very challenging to be successful. And in all reality, if you’re doing it, you’re probably building the plane while it’s flying, which also adds a pretty high level of complexity to coming up with a solution. So, just make sure you’ve got a very clear picture of what you’re trying to accomplish before you start.

Dominic Cozzetto:

Yeah. Great advice there. And I’m going to tell you, don’t use disconnected systems. Yeah, shameless plug. Use a connected system that actually will make everything a little bit easier for you because it’s hard to get started with anyways. And you better get started soon because a lot of other companies already have and are already way far along inside this process. So you might be getting a little bit left behind right now. So bite that bullet, jump on in.

Thank you everybody for coming and participating in this. There is a survey on the console if you would please share your feedback on that, that would be great. If you want to learn more about InEight, go to ineight.com or there’s a bunch of links inside the resource section on here as well. Or go to learn.ineight.com to see even more of an advanced breakdown in what our tools do. So, Scott, Erik, thank you for your time and everybody have a great day.

Erik Wilson:

Thank you, Dom.