The following tip is from the ISA book by Greg McMillan and Hunter Vegas titled 101 Tips for a Successful Automation Career, inspired by the ISA Mentor Program. This is Tip #45, and was written by Hunter.
When I started my career I had no idea what anything cost. I would be asked to estimate a small job and I might as well have used dice, darts, or a Magic 8-Ball to divine a number. In an effort to learn I started logging the price of everything I bought control valves, pressure transmitters, terminal blocks, junction boxes, etc. Eventually I reached a point where I could accurately judge the cost of equipment without consulting a vendor for prices.
Estimating labor was much more difficult. First I had to learn exactly how much labor was required for various technical and engineering tasks and then I had to learn the various “fudge factors” to apply to account for who was actually doing the work. If the normal onsite contractor was doing the installation they were relatively efficient and consistent, and easy to estimate. On the other hand, some sites had maintenance crews who occasionally would get assigned odd jobs if they were not busy. Suddenly, the hours would start mounting and my estimate might be off by a factor of two or even three.
Over the years I have developed elaborate spreadsheets that allow me to estimate projects from simple to dizzyingly complex. Keeping those spreadsheets accurate is an ongoing effort, requiring constant refinement as equipment prices change and labor rates shift, and I take the time after each project to compare my estimate and the actual cost to see where I was off.
Concept: Estimating jobs is an invaluable skill that every automation engineer should master as soon as possible. The best engineers can size up a job fairly quickly, generating reasonably accurate estimates of cost, schedule, and labor with limited information.
Details: All new engineers are awful at estimating. No college course covers this subject and estimating is closer to an art form than an engineering skill. The ability to accurately estimate jobs is critical to the success of a project engineer, but all engineers need the ability to quickly produce “down and dirty” estimates based on incomplete and imperfect information as well as generate accurate and detailed estimates when more information comes available. The first skill is necessary for quickly evaluating the feasibility of a project and determining if the payback is favorable. A preliminary cost estimate/project savings comparison can enable you to easily pick project “gems” from a rubble of ideas and not waste time pursuing projects that have no justification. The second skill is required to accurately determine exactly what a project will cost and obtain capital funding once a project is approved.
An engineer learns estimating by doing it. As a new engineer you should try to estimate every job you can, even if you are not responsible for project budgeting/estimating. When you are given a project, take a moment to try to determine the amount of material, technician hours, CAD hours, and engineering hours that will be required before looking at the budget. (This is a good habit regardless as it is much better to know a project is woefully under-budgeted BEFORE beginning it!) After the project, follow up and compare the actual material and labor figures with your initial estimate. Note the differences, learn from mistakes, and try again on the next job. Estimating truly is a skill that must be learned by experience.
Watch-Outs: Risk = Money. When you are estimating a job, it is important to realize that unknowns pose risk and risk equals money. If there are many unknowns in a job (poor specifications, vague requirements, unknown technology, etc.) then the estimate’s contingency percentage must be increased. If such a project estimate is too high for a client, work to identify and resolve the unknowns so that a more accurate (and hopefully lower!) cost can be developed.
Exceptions: Some companies have a capital project estimating group (or dedicated estimators) that do all of the estimating. These estimators usually have the task down to high art, using an array of software packages, personal spreadsheets, and experience to generate amazingly accurate estimates for multimillion dollar projects with essentially no information at all. If such a group exists in your company, you may not have the opportunity to estimate work. Even so, try to learn it anyway. Estimating may not be in your job description today, but it almost certainly will be at some point in your career.
Insight: Everybody estimates differently. Some try to identify every single task and piece of equipment and dutifully record it all in a huge spreadsheet to determine a project cost. Others use a more holistic approach, estimating task groups and materials as single entities. Either method can be accurate if done correctly. Many times several project engineers will estimate a project and despite different approaches they will all come back with figures that are within a fraction of a percent of each other.
When you are reviewing an estimate prepared by someone else it is usually best to independently “run the numbers” and compare the two results. It is extremely difficult to check an estimate line by line unless the estimating style is very similar to your own.
Rule of Thumb: Estimating is an invaluable skill for any engineer, and the only practical way to learn it is do it repeatedly. Estimate each job before starting it and always follow up and compare the final cost figures against the initial estimate.
About the Author
Gregory K. McMillan, CAP, is a retired Senior Fellow from Solutia/Monsanto where he worked in engineering technology on process control improvement. Greg was also an affiliate professor for Washington University in Saint Louis. Greg is an ISA Fellow and received the ISA Kermit Fischer Environmental Award for pH control in 1991, the Control magazine Engineer of the Year award for the process industry in 1994, was inducted into the Control magazine Process Automation Hall of Fame in 2001, was honored by InTech magazine in 2003 as one of the most influential innovators in automation, and received the ISA Life Achievement Award in 2010. Greg is the author of numerous books on process control, including Advances in Reactor Measurement and Control and Essentials of Modern Measurements and Final Elements in the Process Industry. Greg has been the monthly "Control Talk" columnist for Control magazine since 2002. Presently, Greg is a part time modeling and control consultant in Technology for Process Simulation for Emerson Automation Solutions specializing in the use of the virtual plant for exploring new opportunities. He spends most of his time writing, teaching and leading the ISA Mentor Program he founded in 2011.
Hunter Vegas, P.E., holds a B.S.E.E. degree from Tulane University and an M.B.A. from Wake Forest University. His job titles have included instrument engineer, production engineer, instrumentation group leader, principal automation engineer, and unit production manager. In 2001, he joined Avid Solutions, Inc., as an engineering manager and lead project engineer, where he works today. Hunter has executed nearly 2,000 instrumentation and control projects over his career, with budgets ranging from a few thousand to millions of dollars. He is proficient in field instrumentation sizing and selection, safety interlock design, electrical design, advanced control strategy, and numerous control system hardware and software platforms.