In the first of this three part series we look at why you as a contractor should start systematically and scientifically measuring the quality of your estimates. Measuring your estimating quality is very essential to the long term survival, growth and profitability of your contracting business.

To get an idea of how important estimating is to your business think about the implications of a winning bid that is below your costs. It will lead to an immediate loss on the job and heaven forbid the gap is large enough to put you out of business. At the same time an fairly overpriced bid will quite often not get you the job, so you have no business.

Everyone in the business knows how important estimating is but for some reason it doesn’t get reflected in the actions that the companies and their management take. You may disagree and yes there are beautiful exceptions, but in my honest opinion this is the general state of affairs. I’ve seen and heard of so many companies going bust due to bad estimating, that it is not even funny.

‘What gets measured, gets managed’, is a fundamental concept of management (Peter Drucker). Measuring something is the only way to concretely come to a decision on what action to take post analysis.

So is measurement a magic pill that will increase your profitability and send you on a growth spiral. No, but it will stop you from shooting in the dark. Moreover, it is a long term commitment and involves a change in philosophy of the management. As can be seen from the chart measurement is a continuous process, after making a decision the outcome must be measured to determine its effectiveness or impact. Which will start the process all over again.