Navigating Risk And Reward: Mastering The Art Of Construction Estimating With Melvin Newman | Ep. 265

COGE 265 | Construction Estimating

Have you ever bit on a project where you thought, “I nailed the schedule here,” then you get going and you understand that you made a lot of mistakes that have a massive impact on your profitability? It happens a lot in construction. It doesn’t mean you’re a bad person, but it does mean that you need to do a much better job in construction estimating up front, analyzing the schedule and the risks associated with that schedule. That is the topic of conversation here on Construction Genius, with our guest, Melvin Newman. Melvin is the CTO and President of PataBid. Prior to founding PataBid in 2018, he worked in the construction industry for several years as an estimator and a PM. If you’re concerned with the risks associated with scheduling, this episode is for you. Dive right in!

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Navigating Risk And Reward: Mastering The Art Of Construction Estimating With Melvin Newman

Have you ever bid on a project where you thought, “I nailed the schedule here,” then you get going and you understand that you made a lot of mistakes that have a massive impact on your profitability? I know it happens in construction. It doesn’t mean you’re a bad person, but it does mean that you need to do a much better job in the estimating phase up front and analyzing the schedule and the risks associated with that schedule. That is the topic of conversation here on Construction Genius with my guest, Melvin Newman.

Melvin is the CTO and President of PataBid. Prior to founding PataBid in 2018, he worked in the construction industry for fifteen-plus years as an estimator and a PM, which means that Melvin knows what he’s talking about. He’s not just a tech head who thought, “Maybe I can make some money making software for construction people.” He’s a second-time guest on the show, and you know that I don’t bring on lousy guests. If you’re on for the second time, it means you have something to say and some value to provide. If you’re concerned with the risks associated with scheduling, this episode is for you. Let’s dive right in.

Melvin, welcome back to the show.

It’s a pleasure to be here.

Many years ago, I was chatting with one of my clients. I was doing a leadership development course for them, a twelve-month program, and it was in-house. We got onto the topic of schedule. One of the owners of the company was passionate about this. He said, “We run the job.” They’re a contractor that sits in the middle of the construction process. They’re not at the beginning and they’re not at the end. He meant that in terms of doing whatever he can to dial in the schedule and make sure that his guys are on the job site, doing work, not standing around, and things are flowing. When it comes to the schedule, what are some of the biggest challenges that contractors have?

Some of it is that contractors missed the schedule altogether. They don’t pay attention to it, especially at the beginning stages of the project. Right at the tendering stage, contractors tend to ignore it as “I’ll deal with it” in the projects and operation. Once you get past that $20,000 or $30,000 micro project, schedule drives everything these days, and misunderstanding what the critical path is on a schedule. That can sometimes be very difficult to identify, especially on more complex projects.

Misunderstanding what the current market is doing to your schedule, meaning everything from the time the owner wants the building to be up and operational to when you can get a product in. All of this is a major risk item to the schedule. When contractors are starting out a project, especially in the trades. General contractors tend to have this fairly dialed in these days, but the trades especially tend to ignore it until it’s too late.

Why do you think they ignore it?

It hasn’t been a major point of risk up until the last 10 or 12 years when owners have started to condense project timelines. They write that into the tender documents right at the beginning of the project. They’ll put a little fine print into the contract, “It must be delivered on such and such date.” If you miss that one line item in the tender form, it’s legally binding. You submit your price and then you go back and someone starts to look at this date and say, “If I work back from that March 14th date to today, I have to have all of my material delivered by next week.”

Especially when you start to get into some of the more complex trades like concrete formwork. That’s very straightforward in “complexity.” If you’re doing major unique architectural shapes, it can be a little trickier to get a hold of the formwork to get that set in. Once you have it on-site, you’re going. If you’re doing a multi-story building, a lot of it is repetitive as it goes up. When you start talking about mechanical, electrical, and plumbing, these are complex trades where you have hundreds of different material types on the project.

What we ran into a couple of years ago during COVID, there was the slam duopoly there where we had COVID happening, and then one of the main resin factories in Texas went up in flames. Suddenly, you could not get anything PVC to save your life, whether that was conduit or pipe. Whatever it was, you could not get PVC items. That lasted for a good year and a half to two years before it started to roll out, then it became microchip shortages.

All of this is a huge risk to the schedule. I was on one project where thankfully, we caught it at the time of tender. The excavation contractor never read the front-end documents. The whole project was a major excavation. He called me up with his price a couple of days later. Thankfully, it was a couple of days before closing. He’s like, “What do you think? How do you think I’m doing?” I’m like, “Your price is too low.” He’s like, “What do you know? You’re not an excavator.” I’m like, “Correct, but I know this project is taking place in January.”

In Canada, in January, you’re not going to be able to excavate anything here without major work because it’s all frozen. It’s understanding those things, or if it’s taking place in the middle of summer in Arizona, you’re probably too busy because it’s going to be damp. That’s the core there. If that is missed in the beginning, your project has huge risks on it that are going to be missed.

Something just popped into my head and I want to throw it at you. Much anguish comes to a company when they don’t understand the contract that they’re getting into. They haven’t thoroughly read the documents. I want to bounce it off to you. I know you’re in tech. What do you think is the use of a construction company getting comfortable as an initial look uploading one of these documents via a PDF to a chatGPT or some other AI and asking the chat, “Give the top five concerns regarding schedule based on this document?”

I would say with something like chat GPT, don’t use chatGPT simply because you need something specifically trained. This is why we have lawyers that are specifically trained in construction. A chatGPT is a massive averaging engine. It will spit back knowledge on everything it’s trained on, but it’s trained on too much for something like construction. You hit the nail on the head though with AI and being able to use that.

A few years ago, in my job as an estimator, I was running into this issue very consistently. The executives want a go-no-go discussion on a project. They want to do that go-no-go the day after the project comes out for bid. These projects have thousands of pages of documentation. How do you do a risk analysis on that project within a couple of days? I went and trained a natural language AI to look for common risks like liquidated damages. The project schedule was a big one. This was a straight-up tool off the side of my desk to help my own job. It was exactly what you said. You dragged all the documents onto it and then it would crawl through and look for these key risk items. It was able to crawl through several thousand pages in about 30 seconds.

You trained a natural language AI. I just want to make the point that what you’re describing here is very much possible to do, correct?

Yes. There are a couple of companies. I’m trying to remember. I met one of them at NECA two years ago. I can remember their booth, but they basically did something similar on an even grander scale. They would check the legalese in the front end. There are companies that are actively working on this now, and it’s 100 % possible.

One of my favorite stories was we got a project in and they wanted to do a go-no-go. They assigned it to one of my colleagues to take a run through the documents and he started going through them. He started at 8:00 in the morning. At lunchtime, he came to me and said, “Here’s what I found. Can you double-check it for me?” I’m like, “Sure.” I dragged the documents onto my little AI, got up, grabbed a cup of coffee, sat back down, and found everything that he had found, identical. I made a copy and paste of all the risk items. He was incredibly pissed off at me because he spent four hours doing what the AI had done in 30 seconds. It’s a tremendous application for this.

There are a bunch of companies out there. I know a number of different ones like DigiBuild that are using AI in the way that they’re executing their solutions. I want to make a marker here for everyone. Don’t just glaze your eyes over. You make a great point though that chat GPT is a generalist and not a specialist. You need to be considerate about building or accessing a specialized trained AI for the particular application in construction that you’re looking to get information on.

I’ve seen a lot of people getting excited about chatGPT across the spectrum. In construction, I would argue that it’s the wrong tool because we’re a highly specialized industry. The idea of applied AI in construction is fantastic, especially for contractors like that framer that you were discussing. He’s not going to have a lawyer on staff, most likely. He might have one on retainer, but he’s not going to have one on staff. He’s not going to have a contract specialist on staff.

If you’re trying to make those rapid-fire go-no-go decisions early on in a project, being able to use an AI there is critical. If it’s a higher-risk project that you want to target, bring the specialist in. Using AI as those first passes on everything can dramatically reduce your workload because it’s going to pull out the big items for you easily. It might miss the nuances in the contract language where you want a proper specialist to look at that, but it’s going to give you that idea way before you start anything, “Is this that red, yellow, or green project? Is it high risk?”

COGE 265 | Construction Estimating
Construction Estimating: If you’re trying to make those rapid-fire go-no-go decisions early on in a project, being able to use an AI is critical. If it’s a higher-risk project that you want to target, bring the specialist in.

 

I love it because we want to make the point that this is not a cure-all, particularly at this point in the evolution of technology. It is something that if you use it correctly, can save you a bunch of time.

I look at it like the transportation industry. Horses and buggies were used for millennia, then we started to produce cars, and then Ford invented the moving assembly line and made cars for the masses. They became the standard methodology. We still have horses everywhere. We can still do that, but we’ve evolved to commoditize transportation. AI is going to be the same thing. It’s not there to replace.

I run into this all the time with our platform. We have AI built into the foundation of the PataBid platform. I get on these calls with contractors and they’re like, “I can go get rid of my estimating team.” I’m like, “No, you cannot do that. If anybody tells you that you can, run.” Even if I were to train an AI to be 100 % awesome at reading construction documents, it’s not going to know your local conditions.

We do a bunch of stuff with fabrication shops and they’re like, “You’ve taught this AI how to read fabrication drawings,” perfect. It can pull everything off, but you have to understand, it doesn’t know the door sizes to your shop. If somebody gives you a spool sheet for a 48-inch diameter piece of pipe that’s 100 feet long, the AI is not going to know if that’s going to fit inside your shop. That is where your human knowledge is 100 % there. The AI is just going to backstop you and do a bunch of the grunt work.

Let’s pivot back to what we were talking about in terms of schedule. The word that pops into my mind is discipline. That’s one of the things that some contractors have a challenge with simply because they’re so busy. Describe for me a disciplined process that a contractor should go through when a tender or a bid first hits their radar.

Number one, get the front-end documents. If you’re in a trade, one of the famous things that GCs will do to you is not send you the front-end documents, but they will still bind you to them in your subcontract. You should never ever sign off on that contract until you have read those front-end documents. That is a core thing, especially in the various different substrates that are missed. They look at those as “They don’t apply to me,” but I guarantee you, every trade spec section binds you back to those front-end documents. I did an analysis once, and the first hundred pages of every construction project contain 75 % of the risk items on those projects.

You should never ever sign off on a contract until you have read the front-end documents. Share on X

That’s important because I can see someone. They get the bid in and they immediately click on their bid. They missed that first hundred pages and therefore, missed 75 % of the risk. Is that what you’re saying?

That’s exactly what I’m saying. Those first hundred or so pages of documentation on a project are critical to read and understand every time. Even if you use AI to do the first pass, you have to go back and read those when you decide to pursue a project. Step one, read through those. This was flogged into me by my mentors early on in my career, understand those front pages. The number one thing to look for is the schedule. Find out what your project schedule is before you start any takeoff. Is this thing even reasonable? Find out what is the risk if that schedule is not met. Sometimes there isn’t any risk. That’s extremely limited these days, let’s be honest. Most of the time, there are liquidated damages.

Now I understand where things are going on this. I like to start to map that schedule out even in Excel, like drawing out a quick Gantt chart. What are the big items on this project? When is concrete going to be done? When is framing going to be done? Roughly, when is the building going to be closed in? Where’s my part in this? Where does my critical path start and end? That all takes a day or two to pull together even on a larger project at a very high level. It’s a quick way to understand where you’re going to hit problems on the project.

Tell me if I’m off base here. It sounds like what I need to be able to do then is invest some time with some of my more experienced people upfront as opposed to just saying, “Here’s a bid, let me get it to my PE to start doing a takeoff.” Is that what you’re saying?

Yes, that is effectively what I’m saying. You do have to put some fences around it because if you let a project manager drive the tender, you are going to struggle to win a job because project managers, by the nature of their experience, see all the negatives. They’re always going to be like, “You forgot this on the last one. Put it in.” They tend not to remember the duplicates. If you let just the estimator run the job, they’re potentially going to miss things and not necessarily understand the field risks. It needs to be a combined team effort.

COGE 265 | Construction Estimating
Construction Estimating: If you let the estimator run the job, they’re potentially going to miss things and not necessarily understand the field risks. It needs to be a combined team effort.

 

That can sometimes be very difficult to engender because there’s always that tension between the estimators and the execution team. If you can overcome that, you want to bring your superintendent, your foreman, and your PM in and discuss the schedule. That’s always one where you want them to be heavily invested in it.

I would recommend that start to happen at a third to halfway point in the bid process because you’ll have something to show them. You’ll be able to say, “This is the key volume of concrete we have to lay. Where does this make sense? Do we need temporary heat?” That’s where your site super and your PM is going to be able to step in and say, “We’ve never been able to pour that much concrete in a single run. We’ve got to put some breaks in here,” then you can start to ask the questions of the engineer.

Let me ask you about that real quick. I’m going to explore the tension between the PMs and the estimators. There’s this idea of let’s win the work, and after we’ve won the work, we’ll figure it out.

That’s one of the models.

What I mean by that is I’m looking at my estimator and I’m saying, “Estimator, your job is to win the project. Project manager, your job is to value-engineer it so we can make some money.”

There are a couple of different models. There are three overall models that companies tend to run. There is one where they want to keep those two parties hyper-isolated. I’ve seen some companies go so far as to put the estimators in a separate building. They literally say, “You can only communicate via email.” I’m like, “Do you have a potato cannon that you load all the estimate documents in and launch it over to the other building and call it good, write a number on it, and say, ‘Here you go?’” That’s one of the ways they do it.

Another one is a hyper-focused team effort where for a project, they put the PM that they plan to assign to the project as part of the estimating team. That methodology has become quite a bit more popular in the general contractor route. You have the third one where the estimator is the PM. That tends to be much more common in the mid-size. I’ve run some analytics and that tends to work until the project reaches about a $3 million stage, then it’s just too large for a PM estimator to do solo. Does that answer your question there?

It does, but let’s talk about it a little bit more. I’d like to think about it in terms of I’m the president of my company or perhaps I have a responsibility to some extent for both estimating and project management. What is my job? How do I negotiate that tension? Even in this way, let’s say I’m the head of estimating and my counterpart is the head of project management. How do I negotiate that tension between the two of us so that it doesn’t cascade down throughout the rest of the organization and impact relationships negatively?

The key here is if you do it wrong, it can become debilitating. It has to be driven from above those two positions. The president of the company needs to take those two division managers out, sit them down, and say, “If there’s tension here, we need to go into a boxing ring and figure it out.” If there are any miscommunications, the president of the company needs to start to drive that collaboration because if it’s not driven from above them, it’s extremely hard to overcome that internally. I’ve seen it go both ways. I’ve seen companies where those two functions were at each other’s throats. There was pure animosity between execution and estimation.

I would swear that the vice president there encouraged that. It became severely debilitating because, let’s be honest, if an estimator wants to get revenge on a PM, they can do it before anybody realizes it. I’ve seen the other side where the head of estimating and the head of operations were close friends. We’re able to collaborate with a layer of trust that was incredibly powerful. It allowed us to do things that I haven’t seen in other companies get accomplished.

Going back to the responsibility of the president of the company, one of the key mentoring pieces that you have to work on with your executive team is helping them to take off their hat for their particular silo, put on the company hat, and be able to understand the logic of the decisions that sometimes are made which, in the short term or on a project basis, may go against one side of the company over another. It’s understanding that there’s a bigger picture in play here. If we can commit to the bigger picture even if we don’t necessarily agree with all of the details, that level of commitment can then be communicated throughout our organization in different silos.

It’s a lot of esprit de corps. Have you read The Art of War?

I’ve read it at some point. Not recently though, but go ahead.

I am a firm believer that everyone in business should have that as mandatory reading because, at the end of the day, your company functions very similar to a military unit. Some companies are able to engender an esprit de corps, a spirit in their company where it is unified. The company is heading in one direction. They know what they’re doing and what their position is. The key is if one of their counterparts stumbles, they know not to shoot them in the back but rather to try to pick them up. That’s a core problem that tends to happen between estimating and execution.

Everyone in business should have The Art of War as mandatory reading because, at the end of the day, your company functions very similar to a military unit. Share on X

In that tension, an estimate is exactly that. It’s an estimate. There is insufficient time to build the project in the estimating stage. You have six weeks to put together a price for a job that’s going to take place over five years. If the estimator makes a mistake in there, it’s key that the PMs come in and approach that in a collaborative way and dispense with emotion. That is the hardest thing. Circling right back to the beginning, at the schedule stage, that is such a key point. Dispense with the emotion on both sides of the fence, and bring the groups together for execution and estimation. Agree on that schedule.

It’s going to change when the project moves forward. You are going to have a tsunami of hurricanes roll across your project in the year. It’s going to be terrible weather. You’re going to get half the productivity you anticipated, but that’s not necessarily anyone’s fault. You can go back and say, “This is what was discussed at the estimating stage. How do we couch this next time? Can it be couched or is this act of God contractual stuff?” Work together on it.

One of my favorites was when I was young in my career as an estimator, I screwed up an estimate badly. I misread a quote and dropped roughly 30% out of what should have been carried for equipment on a project. What made it even worse was I was told by management to submit this bid, but they didn’t want the job. I won it for them. The ops manager took it on and they were going through everything. He came back to me and he’s like, “You screwed this up.” I’m like, “No, I didn’t.” You can’t see your own mistakes.

He sat me down and walked me through it. I’m like, “I’ve screwed this up badly.” He’s like, “Yes. Your punishment is you have to go negotiate the buyout now of this. You get to go back to buy this stuff and you have to tell them you have $0 to do it.” I got to go and negotiate for buying out all this equipment with a supplier who, to their credit, treated us fantastically. I took the guy out to lunch and I’m like, “I’m here to buy your stuff.” He was all excited and I’m like, “I got to negotiate the price.” He’s like, “How much of a discount do you need?” I’m like, “100%.”

He looks at me and he’s like, “That’s hilarious.” I’m like, “No. I screwed this up so we got to do something here.” He worked with us. It was fantastic. The ops manager came back and said, “You’ve achieved more than I thought you would here. You’ve done well. We’ll take it from here.” He managed to turn that project from a negative 20% margin to a plus 5% margin at the end of it. At that point, I’m like, “When we work as a team, it is an incredibly powerful situation.”

When we work as a team, it is an incredibly powerful situation. Share on X

Let me make a note here. It’s a very excellent way of mentoring and training people. If they do make a mistake, allow them to bear some of the natural consequences of the mistake. As your boss did, he had you go out and negotiate the buyout. That can help to lock in the learning because sometimes, what happens is we want to fix stuff and we miss the mentoring and the developing opportunity.

I know we’re on a show, so you might be thinking, “It’s easy for you to say but I got tens of thousands of dollars or millions even on the line here.” At some point, you have to ask yourself, “How are my folks going to get on-the-job training? How are they going to get those kinds of opportunities to learn from their mistakes so they don’t repeat them again and again?”

This goes back to the three models there. You can’t let your estimators be invincible. That’s a key thing. You’re hitting the nail on the head there. When somebody screws up, don’t hang them for it. Give them some of those natural consequences. If we’re talking hundreds of millions or some massive risk item that may be on the table here, you’re going to want to be involved in that too, but it is always best to bring the estimators in and the people who have made this mistake. Bring them into the resolution so they understand the next time they see it. I can tell you 100%, I have never missed those items on an estimate ever again. It was that learning experience early on that was tough learning.

Let’s go back. We’ve been talking a lot about schedule and risk as well. As you’re working with your clients and you’re drawing on your experience in the construction industry, what are some other elements of risk that are often neglected or come around and pounce on people and cause a lot of grief?

Location. This is always a huge risk. When you get the drawing package in, they’ll show you all the pretty renderings of the building. They’ll show you all these things. What they don’t show you is that it’s right downtown and you have no access. The elevators are not running because they’re not installed yet. They could only fit one crane on this building and the hours that it’s available to your work are between 2:00 and 3:00 AM. It’s location. Understand where your project is happening.

I had a fun project that I was involved with. It was called the Canadian High Arctic Research Facility, CHARS for short. It’s on an island way up inside the North Arctic Circle, and we have to build the building there. You had a two-week window where the icebreaker could get through the ice and they could carry your sea cans on a barge, basically behind the icebreaker. You had to bring your entire year’s supply of material within a two-week window. What was even more hilarious was they didn’t have a dock or anything to pull up on, so they dragged your sea can onto the beach, then it was about a mile to the actual site.

Is that the building? If you’re watching on YouTube, you can see a shot of the Canadian High Arctic Research Station.

That’s it. We had to work out the logistics for this thing. That became the number one risk factor on the project. It was how do we get logistics to get everything there. It’s a beautiful building that’s in the middle of absolute nowhere. They would drop it on the beach, and then there was one person in town who had a caterpillar D6 or D9. I can’t remember what it was. He would drag your sea can from the beach to the site. What we were charged for that last mile was double all the other expenses to get to the beach, but it was what you had to figure out in the bid.

All of this had to go in. We had eight weeks to put the estimate together for this one. It was a wild bid to figure out the risk analysis. In the winter, if you’re working on this, it’s 24 hours a day darkness. In the summer, your productivity goes up because it’s 24 hours a day of sunlight, but you have to be very careful you don’t destroy the people working on your projects. We had to get into psychology and everything for a construction project, so it’s location.

You have to be very careful you don't destroy the people working on your projects. Share on X

In terms of location, I have to think about the weather, the supply of labor, the supply of materials, and the project partners that I’m working with. The way they run their ship or their shop is going to impact me. What are some other risks that are on the table that sometimes get missed and are tremendously challenging for contractors?

What it takes to get to a work phase. Every trade has its organization that gives you the standards. In electrical, there’s the North American Contractors Association, NECA, and the Mechanical Contractors Association, MCA. There are a number of different ones for excavating concrete framing. They’ll give you book values for certain work functions, but you have to understand and read the front end of those documents very carefully because they make a certain number of assumptions. The thing that tends to be very often forgotten is if you’re doing a high-rise building.

Once you get over the 10th floor, productivity starts to drop dramatically. It’s simply because you can’t get people there in a reasonable amount of time. You have to start to think that once you get over ten stories, it gets ugly. Once you get over 60 stories, you have to be thinking about everything differently because your people will never be coming back down to the ground for lunch. They will never be coming back down to the ground to go to the washroom. You simply can’t because the only thing you have in this building is stairs and some man lifts.

Getting to the workplace, the analysis of that is critical and is often missed. Another key one on excavation is, what are you doing with the dirt? Where are you putting what you’re moving? That was missed so much. It tends to be underappreciated in a lot of instances and what it takes for your circuit time and for your vehicles to make it through.

Concrete guys tend to have it best dialed in. Once you start to get over those stories, how it’s going? Building dams goes back to location and time of year, which is your schedule. The schedule is everything and how you do the concrete on a dam because they’re always built in remote areas. The vast majority of Kiewit has a wicked process. They basically move in mini batch plants and they’ll build rails out to it. They concrete 24 hours a day and build up your dam. I’ve had the privilege of working on a couple of projects with them on some big dams.

Let’s talk about that real quick. That’s interesting. What did you learn from working with Kiewit? What do they do that sets them apart and helps them to be able to execute these incredibly complex and difficult projects?

Massive expertise. They employ people that I wish we could all learn from, like superintendents and project managers. As a counterpoint to that, unfortunately, they also like to try to overload their projects with lawyers. We’ve had to work through some of that in there. When it comes to boots in the field, Kiewit has some top-notch A-teams. That’s another massive risk that gets overlooked. Not necessarily overlooked but mis-quantified often. When you’re at the estimating stage, very often, you always like to put the A-team on the project. If the A-team isn’t available at execution time, that’s a fundamental change that may be extremely difficult to overcome.

COGE 265 | Construction Estimating
Construction Estimating: When you’re at the estimating stage, very often, you always like to put the A team on the project. But if the A team isn’t available at execution time, that’s a fundamental change that may be extremely difficult to overcome.

 

That’s a good one right there that we should take note of. I estimate perhaps and even if I appreciate the things that you were talking about in terms of location, I may estimate it for my A-team and then get my B-team on the project, and that can be tremendously challenging.

There’s a major contracting company that I worked for here at ACON. They have a road team that specializes in highways, bridges, and all that kind of infrastructure that’s heavily civil. They had a process tuned out that I’ve never seen anywhere else. They would bid every job with the A, B, and C-teams. They would see what happened on the job before they closed. They used a software platform called Hard Dollar, which was developed by Kiewit, and has since been spun out into a wholly owned subsidiary.

You could put all of your crews in there and you could very rapidly swap them in and out of these estimates so you could understand what your risk was. That all went into a risk analysis that they would do on every single project. The level of detail changed depending on the value of the project. For a $30,000 project, that risk analysis was one-line zero. On a $300 million project that was a highly detailed risk register. What happened between your A and your C-teams was all in there. There were probabilities assigned to that on what was the likelihood of the A-team being pre-booked and moving to the B-team. That was carried as a risk contingency on the project.

We’ve identified many areas of risk. We kicked off by starting a discussion in terms of the schedule. Reflecting on the whole conversation here, Melvin, give the audience 2 or 3 takeaways for them to focus on in order to avoid some of these mistakes and maximize their opportunity to build profitably.

Number one, always demand the front-end documents. If you’re a sub-trade and the GC is not sharing those with you, straight up walk away from the job because there’s something wrong there. Always demand those first hundred pages or so of the document. Number two, read those pages. Before you close that job, get very intimate with understanding those front-end documents because 75%-plus of your risk is going to be in those first hundred pages.

Once you have that identified, number three is to produce a risk register for every project where you itemize what you see on the schedule. Can I hit this? What happens if I overrun it? What happens to liquidated damages? What happens to my contractual obligations? What are the chances of material not being available? Itemize all of those. On a large project, a risk register might run 50 to 100 lines, like we’re talking about hundreds of millions of dollar-sized projects. On your smaller $10 million to $20 million projects, you’re going to be in the maybe 5 to 20 lines of risk on this. Get as detailed as you reasonably can with your risk, then take that risk register to your operations team.

Put it on the table and say, “Here’s what I’ve identified.” If I’m the estimator, “Here’s what I’ve identified. Let’s check them off. Can we zero these out somehow?” You never want to blow your project bid out of the water by carrying a huge contingency. If you sit down with your ops team and go through with your superintendent and your PM, they’ve run into lots of these risks in real life before. Sit down with them and say, “Can you mitigate this? How do you mitigate this? Can we mitigate this without putting money in?”

Once you get through that discussion, you will have a very solid game plan for how to execute. What’s nice is if you can do that with the PM who is going to run that project, you can all agree on what’s going to happen here and put together a comprehensive team package that’s submitted. I’ve seen this model work very effectively with a number of the GCs that I’ve worked with, where they’ve managed to break down a lot of the combative barriers between estimating and execution. When you bring those people together and they work as a unified team, it’s an incredibly competitive and incredibly powerful way of mitigating the risk while still understanding where the risk can’t be mitigated and needs to be mitigated financially.

Melvin, tell us a little bit more about yourself and your company, please.

I was a full-time estimator for fifteen years, and a couple of years now, full-time entrepreneur and business owner with PataBid. We produce AI-driven estimating software. We aggregate public procurement to track the very tip of the business spear, then we move into detailed estimation. We’re largely focused on complex trades and we’re heavily based on AI too.

As I said, it accelerates the grunt work, not replace the estimator, and brings a lot of these risk items analysis to the front so that our contractors can bid work in the incredibly constrained time frames they have now without a loss in accuracy and mitigate the risks. That is a nutshell. We are driven to change the way the front end of the construction business operates these days. If you ever want to go down a deep hole into that one, I can stand up on my soapbox and start to preach about where we got to get the industry to in the front end of the business.

We’ll have to have you back on to go through that. What I’d like you to do though is tell the audience, because I know we have a diverse group of people here. Who is your ideal client? The one person who must visit PataBid.com and learn more about what it is that you guys do.

Mechanical, electrical, and plumbing trades in the 50-plus range of employee-sized businesses. That mid-size company and in those complex trades. Those are the must-come-see, and if you’re involved in fire protection or any of those subs of subs. We’re heavily geared to that.

Melvin, I appreciate you coming and sharing your real-world experience. I do wish you all the best.

In the cold White North. Thank you.

Thank you for tuning in to my discussion with Melvin. I hope you enjoyed our talk. I know that I did. Feel free to reach out to him on his website, PataBid.com, particularly if you fall in that target market that he articulated very clearly at the end of the episode. Feel free to share this episode with other people who you think would benefit from the insights about schedule and risk. Please give the show a rating and a review wherever you get your podcasts.

The reason I ask you to do that is as a result of that, what happens is people can see the show on the interwebs. One final request I have for you. Go to my YouTube channel. Search Construction Genius, and subscribe. My YouTube game needs a big upgrade. The more subscribers we get, the more my game will upgrade. That’s a key part of it. Help me out there if you will. I appreciate you tuning in to the show.

 

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About Melvin Newman

COGE 265 | Construction EstimatingMelvin is the President/CTO of PataBid. Prior to co-founding PataBid in 2018, Melvin worked in the construction industry for 15+ years as an estimator and project manager. Melvin has experience in many of the key aspects of construction and pre-fabrication in the mechanical, electrical, and general contracting industries. He has worked for a variety of companies in his career, developing several key process advances and technological innovation.

Key areas that Melvin has deployed technology is Virtual Design Construction (VDC) and end to end digital estimation. In addition, Melvin is well experienced in software development, business analytics, and systems development for estimating and project execution. He is passionate about bringing digital technology tools to construction and making these tools accessible for all industry professionals.

As an entrepreneur Melvin co-founded PataBid and is the full stack developer on the platform, specializing in the development of the internal ML/AI systems. In addition to developing the platform Melvin is responsible for building the deployment systems and developing key business partnerships.