Matching exceptional decision-making with good old-fashioned elbow grease, electricians are a true mix of brains and brawn. It’s this unique skill set that’s propelling the electrical trade as one of the fastest-growing industries in the country–with a projected percent change in employment of 6% from 2022 to 2032. The average growth rate amongst all industries is 3%.
Considering that the global construction volume is expected to grow by 85% by 2030, it’s clear that an influx of new and ambitious electricians are looking to seize these new opportunities. But with more opportunity comes more competition and more electrical contractors bidding on the same jobs.
To grow your business in this environment, you must ensure you’re winning as many profitable jobs as possible. Armed with the proper knowledge, you’ll have the power to revamp your bidding process, rendering it quicker, more precise, and inevitably more lucrative.
In this article, we’ll explain how electrical contractors can rise to the top of their trade through more effective bidding. Keep reading to learn how to bid on electrical jobs.
How to choose the right job
Bidding shouldn’t be a gamble. If you’re tallying up costs and adding just enough profit so that your bid is lower than everyone else, you’re likely leaving bags of money on the table.
Choosing the right job to bid on:
- Don’t waste your time on half-baked opportunities.
- Scrutinize each package to determine if it fits your company and expertise.
- Don’t bother with jobs that don’t align with your areas of expertise unless you have a good reason to do so.
- Crafting a bid takes time, so focus on the ones that truly speak to you, are realistic, and have a fighting chance.
Don’t bid to beat other contractors–bid to be profitable. Don’t fall into the trap of taking less-than-ideal terms to win a job.
It’ll put you at ease to know that you have a job secured, and once you hit the job site, you’ll focus on doing good work. But eventually, you’ll find that you didn’t actually make any money because you were undercutting yourself for the sake of winning a job. In all honesty, it’s better to go after the right job than to spend time, money, and resources on a job that’ll drain your bank account.
Take care of your business first and foremost. It’s not impossible to craft a bid to meet your client’s needs and accomplish your financial goals. This is what the science of bidding is all about.
Evaluate job costing data
If you have your eye on a job, take the time to review any past jobs that were similar in size, scope, or practice. How did these jobs turn out? Did it turn a profit? Did it come in over budget? If so, why? Is there an easy fix you can make this time around to improve your chances of profitability?
Job costing will answer nearly every question you have leading into a new job:
- Do I make money on these jobs?
- Have I been estimating the correct price?
- Are there scheduling improvements I can make?
- Can I improve the efficiency of my crew on this job?
The goal here is to review and identify past mistakes. With this knowledge, you’ll have a solid footing to craft a compelling bid. With the right launching point, we’ll now look at how to craft a winning bid.
How to create a perfect bid for an electrical job
Review the documentation
This process starts by reviewing the specifications and project plans in great detail. Sift through every piece of information that you can. This might seem like it goes without saying, but you shouldn’t take this step for granted. Due diligence here can make all the difference.
Concentrate on contractor qualifications, payment terms, and insurance requirements. Pay special attention to Division 01 and Division 26 (these will vary state-by-state).
These sections will cover general specifications (Division 01) and crucial project elements like low voltage, electrical protection, and instrumentation (Division 26). When studying these sections, take note of material grades, installation methods, and who is responsible for each requirement.
While these sections are straightforward, there’s a kicker–don’t overlook anything that seems unusual. It’s all too easy to end up with a bruised ego and a diminished bank account because you underestimated the cost of a low-grade material. If you have a different option in mind, make sure you get it approved first, in writing.
At this stage in the process, it’s your responsibility to acquire as much information as possible. When you run into an information gap, you can thankfully rely on RFIs to help you clear things up, as discussed in the next section.
Ask questions (make an RFI list)
If you’re left guessing on anything, it’s best to go ahead and fire off an RFI. Just be sure that your question isn’t already answered in any of the project plans or contract documents.
When to use an RFI:
- Ambiguous designs
- Inadequate or incorrect materials
- Missing information
- Unexpected issues/obstacles
- Inconsistencies in installation requirements, work site conditions, or timelines
At this stage, you should make a point to visit the job site with a quality camera. Take photos of everything. Go for enough coverage so that you don’t have to drive all the way back to the job site to take a picture of a single fixture you forgot.
Use this time to evaluate everything under the sun: How high are the ceilings? Will you need ladders, lifts, or any specific tools or equipment? If you need specialized tools, do you have them, or will you need to rent them? If so, consider an allowance in the contract for rental equipment that adds an additional $1k to your price.
Obtaining the answers to these questions is vital to create an accurate bid–so don’t rush through this process. Take your time, be thorough, and ask as many questions as you can to clear up any unanswered elements from the contract documents.
If you need help creating an RFI, check out our RFI template for help building a convenient and professional RFI to help your next electrical estimating process.
Estimating material and labor costs
Two popular methods exist for estimating costs in the electrical trades:
- Unit pricing
- Square foot pricing
Using unit pricing, subcontractors break down costs into units and assign a fixed rate per unit. This results in a base labor rate that you can apply to the entire project. It’s a system where you give a price for a given item, such as a 2×4 fixture, a switch, or a receptacle.
Whatever the item is, the unit price is all-inclusive, i.e., $125 for a 2×4 lay-in or $250 for a receptacle. Project details still matter here. For example, if you need to put in a large number of a particular unit, you can implement custom unit prices for six or more receptacles.
On the other hand, square foot pricing is calculated by multiplying the total area of work by the labor rate per square foot. This method is great for quickly estimating costs in the initial planning stages, as it utilizes historical data. However, it’s not the best way to estimate commercial jobs since many factors outside of square footage impact cost.
Regardless of the method chosen, the best way to get started with either method is a material or quantity takeoff. To do this, count all the symbols on the drawings (i.e., receptacles, switches, fixtures, etc.), then measure all the wiring runs. From there, you’ll extrapolate this information into a list of material quantities, including prices and labor units.
This list should include all electrical components, wiring, switches, outlets, circuits, breakers, conduits, and anything else needed for the entire project. This process encapsulates a material takeoff.
Perform a quantity takeoff
|Scope of work||Location||Qty.||Units||Material||Labor||Equipment|
|Site plan lighting fixtures|
|SS1-Visionare Lightning(VMX-1-T3-64LC-7-5k-UNV-AM-BZ)||Lighting Fixtures||5||EA||$||$||$|
|SS2-Visionare Lighting((2)VMX-1-T3-64LC-7-5K-UNV-AM-BZ)||Lighting Fixtures||2||EA||$||$||$|
|TT-Hinkley Lighting(REEF-1951-HE)||Lighting Fixtures||3||EA||$||$||$|
A material, or quantity, takeoff will count the materials and equipment needed to complete the project. This gives you a convenient list of all materials and their expected costs that serves as a crucial reference doc while estimating overall expenses.
It should clearly break down each material and its total cost for all electrical wiring and other necessary components of the project. By precisely identifying and quantifying essential materials, one can achieve a precise estimate, ultimately leading to a more effective bid. Use the information you acquired from the specs and drawings to help you get started.
You can manually perform the takeoff, relying on the project plans and drawings, or you can use takeoff software. Either option is viable, but we recommend using software for its ability to speed up the entire process while at the same time reducing human error.
Regardless of the preferred method, takeoffs must be as accurate as possible. However, it’s better to overestimate than underestimate here. If you fail to order enough materials, it’ll eventually lead to a slew of change orders or project delays.
In addition, it’s always a good idea to work a contingency fund into your business. To do this, add a little extra to your estimated quantities to allow for any waste or unexpected events. To be extra safe, this should be about 10-15% extra. Moreover, be sure to include additional expenses such as taxes and delivery fees.
Request quotes from suppliers
Start this process as early as you can while performing your takeoff. With a list of all the materials needed, you should have what you need to start having these conversations. Be sure to research current market prices for all material costs on your list. Prices may vary depending on the manufacturer, brand, and quantity purchased.
Consider contacting two or three suppliers you deal with the most. However, don’t limit yourself when comparing prices. Be sure to check the prices you review against a standardized comparison. For example, run your quoted prices against EPIC’s target prices. Don’t rely on a gut feeling; use an actual price comparison to see if you’re acquiring materials at a fair rate. These should be fact-based, not feeling-based, discussions.
Moreover, get quotes on key commodities such as large wire, MC cable, feeder wire, gear, and lighting. As always, fight for better terms and try to get guarantees on delivery times and pricing totals. Many suppliers will be hesitant to provide a long-term commitment on pricing, so you must stay diligent and persistent. This way, you can start your estimate with consistent material prices.
Estimating labor costs
No bid would be complete without a precise estimate of labor costs. Don’t be fooled into thinking that labor costs are merely a tally of all hours needed to complete the job. There is so much more that goes into calculating an accurate labor estimate. First and foremost, this includes labor burden.
Labor burden entails the total cost that an employee has on your business. To understand the “full cost” of an employee, you need to consider the cost of wages, benefits, taxes, worker’s compensation, insurance, employer-specific taxes (FICA), and other labor-related expenses. All combined, these account for a worker’s full labor burden.
After you’ve accomplished a fully burdened labor rate, you’ll need to decide whether you’re using square foot or unit pricing. Under unit pricing, labor costs are determined by assigning a fixed rate to specific labor units of work. Square foot pricing is even more straightforward–costs are based on the total area to be worked. You’ll multiply the total square footage by a cost factor.
Additional steps include adding a buffer to all your labor costs. This buffer should account for downtime and general cost overruns. Add a little extra to your estimates to give you some breathing room. Trust us, you’ll need it. Then factor in your own experience based on the size and nature of the job.
Lastly, we recommend referencing NECA’s and Means Labor manuals for additional resources and help for determining your labor rates.
Accounting for other costs
Equipment costs will largely depend on whether you rent or own the equipment. If rented, allocating costs is relatively straightforward: rental and fuel expenses should be directly attributed to job costs. Since you don’t have to pay anything to maintain rental equipment, indirect costs are minor or non-existent.
Owned equipment can be more complex. Depreciation, insurance, and maintenance expenses will all come into play here. As will the costs of loading, transporting, and unloading any equipment. Don’t forget to factor those expenses into your estimates.
With all these costs floating around, we recommend hiring an accountant to help you run an analysis that will effectively convert all of these costs into a combined hourly rate that you can apply to your jobs.
If you require other trades to help with the project, such as drywall or mason work, you’ll first need to identify all the costs associated with that additional subcontractor.
Follow the standard procedure here by obtaining a quote on their labor, materials, and overhead expenses. If you go this route, be absolutely sure to draft and sign off on a subcontractor agreement before you or they do any work.
Miscellaneous costs include all other costs outside materials, labor, equipment, and sub fees. Typical costs that fall into this category include:
- Financing fees (loans/interest)
- Contingency funds
Identify a targeted profit margin
For help finding a suitable profit margin, take the expected revenue for the job, subtract costs, and then divide that number by the projected revenue. Then, multiply that number by 100 to find your percentage.
You can use a margin/markup table to simplify this process even more. Margins and markups interact, meaning you can use one to help you determine the other.
- Profit = What you plan to charge – Cost
- Profit margin = Profit / Cost
- Total markup = Overhead + Profit
While profit is self-explanatory, some contractors mistakenly believe they don’t have overhead costs and shouldn’t charge for it. The reality is that every electrical contractor has overhead costs of some kind, and it’s essential to calculate this amount for each job to keep the business running.
Overhead includes all other indirect expenses such as office lease, estimating, sales, marketing, and other operational costs. Like profit, overhead is a percentage added to the project costs to arrive at a final sales price.
Create the estimate
Now that we’ve compiled the following information:
- Identified a profitable job
- Reviewed the documentation
- Performed a material takeoff
It’s time to create individual line items for each major job cost:
- Total cost of materials
- Total cost of labor
- Total cost of equipment
- Total cost of subcontractors
- Total miscellaneous costs
These line items make up the bulk of your estimate. After estimating job costs, you must also factor in profit and overhead to determine your sales price based on your markup and margin strategy.
Build your proposal
To build your proposal, you need to bring all of the above information together in a concise way that speaks to the project in a similar way as the project specs and drawings.
Bidders must provide a packet of documents, also known as a bid sheet, bid form, or bid template, containing project details, schedules, responsibilities, scope of work, and cost breakdowns for labor, materials, and equipment.
Owners will review and sign off on this information to lock in a price and timeline. The bid sheet should include the bid price, scope of work, schedule and payment terms, and contract terms, such as warranties, insurance requirements, permits, and dispute resolution.
You now have an accurate and well-thought-out estimate and bid you’ve invested considerable time and work into. However, it’s not quite ready to send off just yet. Get a second set of eyes to review your work.
The goal is to ensure that all numbers and calculations are correct and nothing is missing. To help you at this stage, we’ve put together this convenient bid proposal checklist.
Submit and respond to questions
After reviewing your work, submit your bid as per the bid site or via email (whichever your client prefers). Be sure to read the Division 01 specifications carefully and follow all bid instructions.
If the project owner or general contractor has any questions, you must be Johnny-on-the-spot with your response.
Be prepared to respond to a multitude of questions and have numbers ready to back up any of your cost estimates. Don’t be afraid to follow up on your proposal if you haven’t received any communication.
Use a follow-up process to increase visibility into your bid. In addition, if you didn’t get the job, following up will allow you to better understand where and why you missed out.
If you don’t win the job, stay professional and kindly ask for feedback to help you tighten your next bid.
What clients like seeing when receiving an electrical estimate
- Clear, concise, and well-organized documents and numbers.
- Highlights of your company’s qualifications, experience, and past successes.
- Company branding (logo, messaging, etc.)
- Inclusion of all required documentation.
- Timely bids submitted by or before the deadline!
How to make better business decisions in less time with Knowify
Electrical contractors are continuing to embrace digitization to deliver efficient and effective services.
You’ll need an integrated software platform that streamlines communication, time, and finances to stay on top of your game. This is especially crucial for an industry that must stay ahead of unforeseen project delays and coordinate with other trades.
Industry trends suggest a promising outlook for electrical contractors in the next five years, driven by a surge in commercial electrical jobs and new residential electrical construction and increased access to credit and investment in manufacturing structures.
To capitalize on this opportunity, many electrical contractors are turning to construction management software for real-time job costing, time tracking, and reporting.
To see how Knowify can elevate your electrical contracting business, schedule a quick 30-minute demo with one of our experts today!