How to Bid on a Blasting Project – and Profit

Preparing a bid for a blasting project involves more than forecasting labour hours and materials costs. If you don’t account for hidden expenses, then your business may ultimately fail, even though you are working steadily.

This guide outlines a way to calculate a bid amount that will cover your costs and meet your target profit margin. It’s a formula that can be applied to virtually any contractor bidding process and it looks like this:

You’ll also learn methods for calculating material and labour costs specifically for abrasive blasting projects, based on blast area, production rates and material consumption rates and walk through the bidding process for a hypothetical project to illustrate how it all comes together.

But first, a few words about accounting: Accounting terms take on different meanings depending on the context. For instance, to make cost projections easier, I’ve included labour burden as part of direct labour, where your accountant might allocate it to overhead. The point is, don’t copy line items from your bid calculations to your income statement and don’t substitute this article for advice from your accountant.

Let’s get started with some definitions…

Your Direct Material Cost is the cost of all materials expended during performance of the service, including media, additives, fuel for equipment; tarps, tape and other disposable containment materials.

Your Direct Labour Cost is the cost of the labour of any employees working directly on the project, including supervisors and project management. Direct Labour consists of wages/salary plus their labour burden. Labor burden is the cost the company pays to have the employees on the payroll, including taxes and employee benefits (pension costs, health and dental insurance, workers compensation, paid holidays, etc).

Direct Expenses are expenses that will be incurred during the performance of the service, including equipment rental, permits, landfill fees, water-drawing fees, transportation costs.

Overhead includes your indirect costs – the ongoing operational expenses that cannot be directly allocated to any specific project, including salaries for administrative and sales personnel, professional services, office supplies and equipment, Internet and phone bills, marketing and advertising expenses, rent and utilities, taxes other than payroll taxes, banking fees, liability insurance and more.

The financial gain (or loss) to the business owners after subtracting the amount spent from the amount earned.

Before we can forecast direct material and direct labour costs, there are two metrics to be calculated: effective production rate and material consumption rate.

Your production rate indicates how much time it takes to clean a surface according to specifications. It is expressed as square feet per hour or square metres per hour.Your production rate will vary from job to job, according to several factors:

• Surface preparation specifications. The project manager will normally indicate what level of cleanliness is required, often referring to SSPC or NACE standards. Your production rate for “brush off” of loose materials and contaminants will be higher than your rate to render a “white metal” surface (for steel).
• Required anchor pattern. All things being equal, a deep anchor pattern requires a faster-moving particle, requiring more air pressure and the right abrasive (i.e. garnet instead of crushed glass).
• Nature of the coating/contaminant. How thick is the corrosion to be removed? How durable is the coating? Removing light scale will go quicker than blasting barnacles.
• Abrasive hardness. The harder and more angular the abrasive, the faster it will cut. A finer grade will generally scour faster than a coarse grade, due to more impacts per second.
• Equipment. A more powerful air compressor and larger nozzle will produce a broader spray pattern, allowing you to clean a larger area with every pass.

With so many factors, there’s no easy formula for determining your production rate. The best practice is to record your rate on every job – especially when you encounter new specifications, surfaces, contaminants, equipment and settings. Accumulating these baseline production rates will reduce guesswork and simplify the project scoping process.

Knowing your surface area and your production rate, you can calculate your blasting time: surface area divided by the effective production rate equals blasting time.

Note that we’re using effective production rate. Unless you’re blasting a big, flat surface, your effective production rate is going to be lower than your ideal production rate. A dissimilar surface with lots of different angles and shapes, or in hard to reach places, can take many times longer. Again, there’s no easy formula for factoring surface dissimilarity into your production rate; it’s a judgement call, informed by experience.

The second important metric is the material consumption rate, which indicates how much material will be expended per hour of blasting. The material costs to track are media, additives, fuel for blasting equipment and water (if there is a cost associated with it). Again, the best way to arrive at these rates is by keeping track of past performances with various equipment and settings, but you can also do specific tests to determine baseline rates.

For abrasive blasting projects, your Direct Material Costs consist of your Blasting Material Costs and your Containment Costs.

To find your Blasting Material Costs, multiply your material consumption rates by your projected blast time.

To find your Containment Costs, add up the costs of all the disposable materials to be used for containment, including tarps, tape, zip-ties, geo-textile membranes, filters, etc. Some of these materials – like tarps – will eventually wear out but may endure for several projects; the thing to do is allocate a portion of the expense to each project. Some containment materials – like clamps and posts – may last for years, in which case they are properly considered assets and should not be included in your containment costs calculations.

Your Direct Labour Costs include wages/salaries for any employees working on the project, including part time hours of personnel involved in project management, supervising, designing containment structures, etc.

Before calculating the Direct Labour Costs, we need to calculate the Labour Rate, which is the combined hourly wage + labour burden for all employees on site.

Again, the labour burden is the cost the company pays to have the employees on the payroll, including but not limited to payroll taxes, pension contributions, health and dental insurance, workers compensation and vacation time.

Calculating the Direct Labour Costs is a matter of forecasting the hours to be spent at various tasks, multiplied by the Labour Rate. Here’s one way to categorise the tasks performed on a blasting job:

• Blasting
• Filling
• Initial set-up
• Containment moving
• Man-lift moving
• Daily set-up
• Safety Meeting/Orientation
• Daily clean-up
• Job wrap-up
• Disposal
• Mobilisation/Demobilisation
• Blasting

This is the time spent on the nozzle.

How many times will you have to stop to refill the pot? One way to predict this is by looking to your media consumption rates and your pot capacity. If your media consumption rate is 59 kg (130 lbs) abrasive/hr and the pot holds 272 kg (600 lbs) of abrasive, then you’ll have to fill every 4.6 hours. Multiply that by how long it takes to shut down, fill the pot and get back on the nozzle again.

How long does it take for the initial set-up of your containment?

How many times will you have to move your containment? How long it takes to disassemble, move and reassemble each time?

If you’re using a man-lift, how many times will you have to move your man-lift and how long does that take?

Next, we’re going to find how many hours will be spent setting up and cleaning up each day. But first, we have to determine how many days we’ll be on-site by tallying up the hours for the tasks so far.

If a plant orientation is required and/or daily safety meetings, how long will these activities take?

How long does it take from the moment you arrive on site until the moment you start blasting?

How long does it take to collect debris/abrasive, disassemble containment, clean up the work site and load your vehicle on the last day?

How long will it take to dispose of the debris and spent abrasive at the landfill?

If you are billing for mobilisation time, how long does it take to load the vehicle in the morning and drive to the work site? How long does it take to get back to the shop and unload equipment?

Now, Joe can calculate his Direct Labour costs:

Now it’s time to add up the Direct Expenses you will be paying but passing on to the client.

What fees do you pay at the landfill to dispose of waste? Do you require a special permit to dump hazardous waste, and if so how much does that cost?

How much fuel will you expend driving your vehicle to and from the site? Do not include fuel expended during blasting operations, as that was factored into Direct Materials.

How much will you pay for renting equipment (i.e. man-lifts, compressors) used specifically on this project?

How much money will you allocate to the job for replacing hoses, filters, fittings, valves, nozzles (or a portion thereof)?

Are any additional insurance or permits required for this project? If so, how much does it cost?

Does your company need to pay for hotel and/or subsistence for employees?

We can now calculate Joe’s Direct Expenses:

Your overhead refers to ongoing operating expenses not directly allocatable to a specific project: those fixed costs you pay whether you are working in the field or not. Overhead includes (but is not limited to):

Salaries for owner/general management, sales, accounting and legal personnel, office staff, etc. + their labour burden.

Any expenses incurred during the execution of their work (supplies, computers, vehicles, computers, Internet, phone bills, client entertainment, etc.)

• Marketing/Advertising
• Rent
• Utilities
• Taxes
• Banking (Fees and Interest)
• Association Fees
• Insurance (liability + workers comp)
• Training
• Depreciation

Calculating depreciation. Assets experience wear and tear and ultimately become unusable. A fixed asset is anything that helps generate revenue with a life of longer than a year. Some assets, like land, are indefinitely useful and do not depreciate, but most have limited value that depletes during business operations (blasting machines, vehicles, etc). The formula for straight line depreciation can be used to give you an hourly depreciation rate for blasting equipment and vehicles.

Failing to allocate a portion of your overhead to each project will get you in trouble. Using the Labour Cost Overhead Recovery method generates a flat dollar amount to add to your hourly Labour Rate.

First, examine your overhead costs from the past year and make a forecast for your overhead for the upcoming year, projecting growth (or not), inflation and any other factors you deem relevant.

Next, forecast the amount of direct labour hours for the upcoming year (on revenue-generating projects).

Divide your projected Overhead Costs by your Projected Direct Labour Hours to obtain a flat rate that you can add to your Labour Rate (wage + labour burden) to allocate a portion of the overhead cost to the revenue-generating project.

The difference between your total costs and your bid amount is your profit.

How much profit you charge will depend on how hungry you are to get the job, but it’s common practice to aim for % target profit margin, i.e. 20%.

Profit margin = Net profit/final bid price

To make your profit margin, you’ll need to mark up your costs. Calculating your mark-up may seem straightforward, but there’s a hitch in the maths.

There’s no industry-standard approach to forecasting costs. Experienced blasters may be able to get by on visual inspection alone, but if they don’t account for all of their expenses, including overhead, expected profits can quickly turn to losses.

Do you have a method, formula, tip or shortcut for producing a more accurate quote? Share with your fellow blasters in the comments below.

Legal disclaimer: this article describes one of many methods for estimating costs. It is suggested as general advice only and is not a prescription for success. Neither Blast Journal nor it’s sponsors officially endorse any particular accounting method and we cannot guarantee you will experience better results by adhering to these practices.

Tim Cook contributed to this article. Tim is a veteran wet abrasive blaster operating out of Alberta, Canada. You can contact his company at www.wetblast.ca.