Scope First, Then Price

Steve Martin used to have a bit in his routine where he tells a joke, supposedly to an audience of plumbers, delivering an esoteric punch line that only plumbers would appreciate -- the rediculousness (?) was even funnier than the actual joke (I highly recommend Steve Martin's autobiographical "Born Standing Up"). In the same vein, when I was working in estimating, we used to have Steve Martin-like jokes - Jokes funny only to estimators. As an example, a number that was way-off due to a typo, like "$10,000/cy for concrete material - aaaaggghhhh, that's hilarious!" (Estimators rolling on the floor laughing) - we would call that an "Estimating Joke".

OK, back in your chairs, both of you.

Estimate vs Budget

It is useful to think of a "Budget" as what you have to spend, and an "Estimate" as what the specific scope of work should cost. In the Design & Construction industry, it has been my experience that these terms are pretty much interchangeably used - but the distinction is an important one. Before you give a reasonable estimate, negotiate a price, or even take a scientific wild @$$ guess (SWAG) at a budget, it is wise to clarify the scope first. A price without an accompanying scope is a problem waiting to explode.

This probably sounds like common sense, but budget-and-scope or estimate-and-scope mismatches happen all the time. I would bet that more change orders, disputes and claims on projects come from "missed scope", "misunderstanding of what was included", or "apples-and-oranges" mismatches than any other recurring project problem.

Who's To Blame?

There is a certain amount of anxiety on projects (more on larger projects) when it comes to being "on-budget", depending on what commitments are made, and at what point you are in the scope definition and price-assignment process. The ramifications and repercussions of being "off", or "over-budget" can be severe. Imagine the Red Queen in Alice and Wonderland: "Off with their heads!"

There is definitely an art to leveraging past experience and assigning an accurate number to a sparsely-defined scope -- This skill is something professionals work hard to refine, based on experience, past project cost histories and "tweaking" to match special considerations of the project at hand (read, for large projects: "don't do this at home, or without supervision"). I would be delighted to provide assistance or make a referral - however, at any level of endeavor, a price without a scope is comical. That would be like going to the store and saying to the clerk, "I'm hungry, how much will my groceries cost?" ---aaaagggghhh, that's hilarious!

No Kidding

OK, so what do you do? Here is a 5-step formula:
1. Agree on the Major Scope items (80-20 rule) - once you establish the major items, including labor, materials, equipment, professional fees and incidental costs, it's kind of like "The Price Is Right" - But you don't need to guess, there are many ways to get to a reasonable price once the Major Scope items are set.
2. Agree on a "Go-By" - establish quality and quantity standards for these major items. Using what has been done before as a guide "tweaks" or further refines the cost level, and helps confirm expectations.
3. Identify Unknowns - Agree on a place-holder for what isn't quantifiable or decided, but will be required. This is typically a range, and will be the variable cost within a budget or estimate.
4. Look for Unusual Aspects - Usually, estimates and budgets are based on educated extrapolations of previous experience, but miscalculations happen when they don't take enough into account what is different about THIS project.
5. Review, Reflect and Adjust - Estimate/Budget/Scope-Matching is an ITERATIVE process, it needs to be reviewed and tweaked (with input from team members and affected constituents) to be most effective.

If It's That Easy . . . .

There are all kinds of stumbling blocks involved in this process - including political, personal, tactical, avaricious, evil (?), etc . . . But just starting with agreement on scope can lead to more successful negotiations, happier clients and fewer disputes.

As an exercise, don't just get a receipt, but take a minute to review it and make sure the scope is right BEFORE you agree to pay.

An Estimating Joke where you pay the consequences isn't funny.





Here's another joke:

Right Tool For The Right Job

One of my Dad's favorite expressions when I was growing up building stuff with him was, "Use the right tool for the right job." - I'm sure he meant "get the tool that was designed for the specific need at hand." And, since he has a great tool collection, it's a matter of locating the tool in his garage or toolbox, and getting on with the job. He would proceed to show me why the tool was right for the job and how to properly use it - an extremely invaluable education that lead to my appreciation of tools, and also to notice the finer attributes of really fine craftsmanship.

Don't Have The Right Tool?

Not having the Right Tool for me (with a more pedestrian toolset than my Dad's), means a trip to Lowes for a look at the latest cool stuff -- but sometimes the "Right Tool" just isn't available or affordable. So what do you do? We all tend to improvise, but there's a reason why there is a massive tool industry that is constantly coming up with new and better tools for new, more specific uses - starting with safety. Part of proper planning should involve thinking through what tools and equipment will be needed-- but, over the course of a project if a new need arises, improvisation is at least a consideration.

Yes, you can use a small flat-head screwdriver to drive in a Phillips-head screw, when a Phillips isn't available (same with thousands of like-tool substitutes)-- and usually, a beefier or higher-quality tool will work better than a cheaper one -- but aside from Safety and Common Sense, there is no good way to get around the "Right Tool" rule. Along these lines, there are a number of humorous pictures being sent around of people working in ridiculously contrived "Rube Goldberg" contraptions*. You may have seen the one with the guy working under his car on the side of the road while it is propped up by two boards - looks like the guy has his life in his hands.

When No One's Looking

The best advice I heard about considering contriving something to substitute for the "Right Tool" - Think about what the headlines would say in the paper the next day after your accident - then, a more conservative approach (maybe even hiring a professional) may be the answer. Most people who get hurt using the wrong tool were really just trying to "get 'er done" - think again, maybe there's a more reasonable way . . .

Related Trivia:
*Rube Goldberg - actually Reuben Lucius Goldberg (July 4, 1883 – December 7, 1970) was a Jewish American cartoonist, sculptor, author, engineer, and inventor. Goldberg is best known for a series of popular cartoons he created depicting complex devices that perform simple tasks in indirect, convoluted ways – now known as Rube Goldberg machines. In the construction industry, we often refer to an improvised plan to accomplish a task as a "Rube Goldberg".
A commonly known Rube Goldberg Machine is the game "Mouse Trap".

There is a really great Rube-Goldberg-inspired video of the band OK Go, that I recommend, even if you don't like the music.
http://www.youtube.com/watch?v=qybUFnY7Y8w