Principles of Estimating: Which system pays more?

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This question keeps coming up. Each shop wants to use the estimating system that “pays more.” Most folks believe they have the one that does. That’s one of the reasons they bought their system in the first place and continue to pay for it month after month. It is one of their tools needed to maximize profits.

I’ve seen many tests run to compare systems and see which one “pays more.” Sometimes it’s a single estimate, written on one system and then rewritten on a second system. Occasionally, it’s several estimates done this way. This generally proves the intended outcome, but there are several problems when testing like this.

Sample size is the first problem. When comparing just a few estimates, wide variances can be expected. Parts and labor data are developed independently inside the research departments of all three major information providers. There will be differences among these competing vendors and any single estimate can show significant differences.

A sample size of several hundred estimates would increase the confidence level that the sample distribution closely represents the distribution of all estimates written. A large sample size normalizes variables, including manufacturers, direction of impact and estimate size. A comparison using the entire group totals would then have some significance.

Another problem is interpretation of writer intent. Did they intend to R&I a certain part that is automatically included in one of the systems? Would the user remember to add this or that item? Is everything included in one system reflected in the other, and vice-versa?

For example, an existing Mitchell estimate is being written on a CCC system for comparison. The quarter panel is being refinished. Mitchell includes fuel door refinish in the quarter panel refinish labor. CCC does not. If the original had been written on CCC, would the writer have added to refinish the fuel door? Tough call.

A third problem area is errors. What would the estimate writer really have done when writing with the second system? Would they have selected the appropriate vehicle options? Would they have searched for or accepted alternative part selections? If the writer had a chance to ignore adding a needed operation, would they? Should an error on the original estimate be duplicated on the comparison estimate? Tough questions.

As another example, an existing CCC estimate is being written on an ADP system for comparison. The door panel was replaced but there is no R&I labor for the mirror. On the ADP system, this would be automatic. On the CCC system, it is a choice. Is this an error on the original estimate? The ADP estimate labor appears higher, since there is no way to remove labor for mirror R&I from the ADP estimate. Comparison results would be skewed.

Something to think about: If one system was head and shoulders above the others for generous labor allowances, why would any shop buy the other ones? Why would any insurance company use that one? Remember, all three major systems are used by both sides of the payment question.

Finally, estimating systems don’t “pay,” customers do. The estimate is a tool to reach an agreement. Each system has rules to follow and each system tries to make it easy or convenient to write an accurate estimate. This is still not an exact science and there is still plenty of room for negotiations.

Would we really want it any other way?

“In one hand I have a dream, and in the other I have an obstacle. Tell me, which one grabs your attention?”

— Henry Parks