Estimating Wire

[Rockyd]

Brian,

What town/area were you born in?

Born in the old General Hospital, at Seward. It's gone, It's where the aquarium and stuff sits now.

The old house in Seward,AK is gone.

We were out at Sand Lake (south Anchorage) during the quake, and only had a hairline crack in the floor (Every cabinet had poured it's contents out, but happy to be alive) after the quake. All the "new stuff" down along Northern Lights Blvd. slid and crumbled. Southcentral Alaska took a beating. not much of a population statewide, back in 64.

Oil lease sale in 1969, changed everytheing, and the rest they say is history.

 

[brian john]

I was born at Elmendorf AFB in 1952, lived at Ft Richardson, till I was 4. My sister lived at Pt Hope for the last 12 yeas, just recently returning to the Orcas Islands near Seattle.

I took my 84 year old father back to his old haunts, visited a few friends in Wasilla, then flew north.

In military (Army not Air Force) the houses we lived in were still in use.

After the earthquake my Uncle (Civil engineer) worked on rebuilding downtown Anchorage.

 

[wiredit]

Shoot from the hip

Shoot from the hip

I am an electrical contractor in california and I definitely shoot from the hip on every house I do. I also aim a little high so that I'll be covered in the event that something didn't go so well. How many of you bid a job today and wire it tomorrow. Almost never. With today's copper fluctuations, even if you give the standard 30 day bid guarantee, there is no guarantee for yourself that wire won't be $.50 more a pound in 30 days. I bid every job based on what I could wire it for at that moment in time, and I don't guarantee my prices for any length of time. Most of my customers don't even question it anyway, if you do quality work at a fair price, they will use you anyway. Larger jobs however are different. For instance, I will be beginning the rough in on 2 apartment complexes in late May. I have already been contracted on both projects, and as part of my proposal to the GC, I state that my dollar amount is current and due to ever increasing copper prices, if awarded the project, I require all wire to be bought up front and stored onsite. It is less of a gamble for me because I already have figured in the cost of copper at today's price. Some say I am crazy because what if copper goes down in May. I say their crazy because what if copper goes up in May. let's think about it, when is the last time you bought a commodity that was cheaper now than it was ten years ago.

 

[tallgirl]

let's think about it, when is the last time you bought a commodity that was cheaper now than it was ten years ago.

In constant dollars, or inflation adjusted dollars?

I think copper is still cheaper in inflation adjusted dollars than, say, 10 or 20 years ago. Gold is certainly cheaper in inflation adjusted dollars than 30 years ago. Gasoline had been cheaper, but I think it sent new record highs in the last few years -- up until which it had been cheaper in inflation adjusted dollars.

If copper price fluctuation are really that much of a nuisance, it might be worthwhile to hedge with copper options contracts. Each contract covers 25,000 pounds of copper (1 COMEX copper future). If you bought an out of the money contract (meaning, you bought the right to buy 25,000 pounds of copper at a price above its current price), the contract cost should be fairly negligible. I checked a few near term out of the money call ("call" is the same as "buy", "put" is the same as "sell") contracts and the premium was about $500 per contract. If the price rises, you sell the contract and offset the cost of buying the wire with the proceeds. If the price falls, your contract expires worthless and you're only out the cost of the contract, but you save on the cost of wire. For a large enough installation, you might be able to cover your cost risk in the bid with a contract, otherwise you're exposing yourself to more risk through the option premium than the price fluctuations.

I'm sure someone with a better understanding of commodity options and whatnot (my forte is stocks and mutual funds ...) can figure out what to do with all that information. I'd be surprised if the really large electrical contractors aren't already doing something along these lines.

 

[LarryFine]

Julie, in real dollars, how much money would one have to be able to invest to make this worthwhile (or even possible)?

 

[IllinoisContractor]

I am an electrical contractor in California and I definitely shoot from the hip on every house I do.

You're right when you state that you can never be sure of where material prices are going to go. We do large tract projects of up to 1,000 homes in a single project and our standard contract states that our prices are valid until May 31st. (That is when our union labor wage agreement ends.) This can mean that on some projects our prices are good for a year or more. When prices fluctuate the way they have been it can really cause some anxiety. Fortunately, our contract is simply stating that for every house that we do, this is the price that we will receive. It does not state that we have to do every house in the project. When the wire prices went through the roof this past year we had to request a price increase. If the builders didn't agree to it then we just didn't do any more houses in the project.

When I asked about "Shooting from the hip" I was referring more to the question of does a contractor know what their actual costs are at the time that they estimate the job? When someone estimates a job, do they complete a take-off from the blueprint? Do they red line the print to make sure that everything is included to pass inspection? Do they take the construction factors of the home into consideration? Do they know what the exact material requirement (material list) is for the house? Each device has different material and labor associated with it. A recess can light with a baffle trim has different material and labor than a 3-way switch. Are there high ceilings, does the house have dimensional lumber in the ceiling of the 1st floor that needs to be drilled or are there open web joists? There are many other such factors in how much your material is going to cost and how many man hours the job is going to take.

I read in different forums about how people price homes based on square footage, per open, going rates, etc. I'm just having a hard time wrapping my mind around these ways of pricing. When the price of wire, conduit, steel boxes , cast fittings, etc. increases, how do you know how much you need to increase your square footage price, per opening price or going rate? I realize that I'm coming from a new construction, residential mindset, but I just don't understand how so many people can shoot from the hip when estimating a job and still sleep at night.

I mean no offense to anyone that estimates their jobs using these methods. We all have our own ways of doing things and that's cool.

 

[dbuckley]

In the UK, all significant electrical contracts have an automatic provision in them for price adjustment.

A bunch called BEAMA publish a figure (every month I think, its been a while!) which is used to adjust up or down the contract amount. That way the EC doesn't have to worry about price stability or hedging, and thus the competitive tender prices are lower.

So if you were doing that 1000 home project over a period of many months, you would tender on a price today. Then each time you invoice (every month or every home or whatever) you apply the multiplier to get the actual amount to invoice.

 

[IllinoisContractor]

A bunch called BEAMA publish a figure (every month I think, its been a while!) which is used to adjust up or down the contract amount. That way the EC doesn't have to worry about price stability or hedging, and thus the competitive tender prices are lower.

Is there a lag time to allow the builder to add the increase into the price of new home sales? I don't suppose they would be thrilled with paying contractors extra money if they were not able to include the increase into the homes already under contract.

It's an interesting concept.

 

[tallgirl]

Julie, in real dollars, how much money would one have to be able to invest to make this worthwhile (or even possible)?

I believe the smallest premium out there is about $500 and that would cover 25,000 pounds of copper for each contract. Each $0.01 per pound move in copper would amount to a gain (or loss) of $250 in the value of the option, with the lowest value for a "call" option being $0.00. So you'd be able to "lock in" the current price of copper for about $500, assuming the copper weight involved is 25,000 pounds or less for the life of the contract itself.

There are probably ways to make this work if you're bidding on a large contract, or if you pool with others who have outstanding bids you're not going to do in the next month or so. But if you're a 2 or 3 person shop, and you never have a large number of jobs you've bid on that won't be finished beyond the next week or three, I think you'd likely be better off buying the copper-related materials when the contract is signed. This is definitely more for the EC who has a contract to wire a large commercial installation, retail facility or apartment complex than someone who does 10 or 20 residential installs a month and bids each one two weeks in advance of roughin.