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Eliminating Material Cost Overruns That Destroy Your Profit

Eliminating Material Cost Overruns That Destroy Your Profit

by Thomas McDonald

    

When bidding projects for pavement maintenance, one of the biggest pitfalls is material overruns due to existing pavement conditions.  Material overruns can strongly damage or totally destroy your profit, or even leave your project upside down where you owe money rather than making some profit or breaking even.  Careful examination, inspection and due diligence is required when bidding on older pavements.  Factors that can cause costly overruns are:

• Existing surface texture (rough and rocky or smooth)

The existing texture of the paved surface requires different yields or application rates of material for seal coating and type II slurry seal.  The rougher or rockier the surface, the more material it will take to fill the surface voids.  I usually use a scale of 1 to 10  (1 being very rough and 10 being very smooth).  I factor a higher amount of material at each level from 5 to 1 and less material from 5 to 10.  This helps me reduce my overruns and underruns of material.  It is not perfect, but it helps keep my job costs in the “ballpark”.  Also, when you crack seal, a 1 inch band is usually required on both sides of the crack.  The rougher the surface texture, the more crack seal material will be needed or used to do the banding.  I have found that this single factor in crack sealing can cause a large overrun in crack seal material.  You can use up two times to three times the crack seal material to do banding as you use to seal the crack if the surface texture is rough and rocky.

• Existing thickness of the pavement

When it comes to remove and replace (R&R) patching or pavement removal and repaving,  you need to know the existing thickness of the pavement.  IF you bid to remove 2 inches and the existing pavement is 2-1/2 or 3 inches, you will have additional costs to remove, haul off and then replace.  You can core the pavement to get an idea of the existing thickness,  which can cost you out of pocket costs of about $800 to $900 and if you don’t get the job, you lose the money.  You can also state in your bid that you are bidding to remove 2 inches and any additional thickness will constitute a change order for materials, haul off, labor and transportation.  The latter is usually the best recommendation since you will have no out of pocket expense and you have yourself covered for any extra thickness’ that you may encounter.  When you run into these areas, take pictures of pieces with a tape or ruler to show your client the extra thickness for proof.  Make sure you have a good view of the background to show it is their property in the picture.  Also, calculate the tonnage needed to patch or pave the square footage you are bidding, and once the job is complete, provide scale tickets for that job to show the extra tonnage of material needed or used.  With this evidence and your disclaimer in your bid you can justify the change order and at least recapture your costs.

• Existing width of cracks 

This is another pit fall to creating cost overruns.  Make sure you examine the cracks in the existing pavement (sampling is adequate) to determine if the cracks are as wide as they seem to be.  Most cracks fill with dust, dirt and debris and can be wider than bid when they are cleaned out.  If there are larger open cracks, (1/2 inch or more) you will need to have a good idea of how many linear feet of these types of cracks exist.  In most cases larger cracks will require a second application or even a filler material prior to sealing.  If you did not include this extra work, you will experience an overrun.

Overruns can cause you to lose money and some times cause you to pay out more than you made.  Seasoned or experience contractors and estimators become lax in bidding some times and overlook these conditions, which puts the project in the red and most times you can’t recapture the loss.  Also, new contractors and estimators overlook these conditions and the project is upside down without any way to recoup the lost revenue.  

Take the time and bid the project using the correct amount of material for the existing surface and crack conditions.  If you get eliminated due to your price being too high, you are still ahead rather than being upside down in material costs and loosing your profit, or even loosing money on the job.  This can also cause you to pay out of pocket after the profit is used up.  Should you feel you may be high due to your material costs bid for the project, tell your client why you bid to use more material when you turn in your bid or even prior to turning in your bid.  This will help state your position on the project and you are doing the client a service by letting them know there could be an unexpected change order, or even premature wear if they proceed without using the proper amount of material.  

We have other ways to control your bidding to help prevent overruns in our publication “Guide to Pavement Maintenance” which can be found at www.pavementbook.com

Thomas McDonald earned his Bachelor of Science in Business from the University of Colorado. He has over forty years of experience in pavement construction and maintenance and is founder, partner, and owner of PMIS, a company that provides pavement maintenance consulting services. He is author of Property Managers' Guide to Pavement Maintenance.