Disciplined Job Costing In The Oilfield Services Industry Puts You in Control

You’ve been working on a project quote for days. The sales team brought in the lead, engineering sweated the technical specs, the quote is due in an hour and you’re about to hit SEND. Are we having fun yet?

Not really. The fact is, quoting new projects is stressful and never more so than on the issue of price. You want to know: what’s the magic number at which your price is competitive enough to get the work, but high enough that you can make a worthwhile profit at it?

According to VistaVu President Jory Lamb, the most profitable energy service companies have something in common: they know their magic number.

“These companies have a detailed, rigorous command of job costing,” says Lamb. “All else being equal, they know that one-half of 1% on price -- as little as $5,000 on a million-dollar project – can make the difference between winning and losing.”

How do the industry’s job costing leaders do it? Here’s what Lamb has seen.

They Include All Costs.

“There are the project hard costs that are obvious,” says Lamb, “but there are also less tangible, indirect costs that are relevant to the project you’re quoting. One customer told me, they include the guy sweeping the floor in the shop, and the broom he’s doing it with.”

They Job-Cost Throughout the Project.

At any given moment in the life of a project, these companies know where they stand. They can see down to the dollar what they’ve spent for labor, equipment, materials and yes, the guy with the broom. If costs are going off track, they know it early enough to make changes that can ensure profitability.

They Maintain Historical Information.

“Every project these companies do creates data that they use in the future,” says Lamb. “After years of doing it this way, project quoting is less subjective, far more precise and much more likely to get the business. In short, they’re not guessing: they know their magic number.”