Construction Engineering 221Cost Estimating and Bidding

RPQs1. Lump-sum and unit-price estimates are forms of fixed-price estimates.A = True B = False

2. The bidding climate refers to the anticipated weather conditions during the duration of a project.A = True B = False

3. An employee of a contractor pays $450 per month for his/her portion of the medical insurance. This is an example of a contractors indirect labor costs.A = True B = False

RPQ #11. Lump-sum and unit-price estimates are forms of fixed-price estimates.A = True B = False

The correct answer is A = True

RPQ #22. The bidding climate refers to the anticipated weather conditions during the duration of a project.A = True B = False

The correct answer is B = False

RPQ #33. An employee of a contractor pays $450 per month for his/her portion of the medical insurance. This is an example of a contractors indirect labor costs.A = True B = False

The correct answer is B = False

Important Estimating Principle

Become thoroughly familiar with the bid documents. Why?

Because.Accurate quantity takeoff of materialAccurate quantity takeoff of laborDetermine general and project overheadWhat equipment will be needed and when

More ReasonsBegin the formation of a project scheduleDetermine how project will be managedDevelop a list of questions (get answers)Begin a relationship with owner/AE

What Must HappenIn the arena of competitive bidding for a contractor to stay in business?

AND

In the arena of negotiated bidding what must happen in order to continue to attract clients to the negotiated process?

Estimating Is Very ImportantIn the competitive arenaNeed to be low bidder on sufficient number of projects to maintain a revenue baseAnd realize a reasonable profit to stay in business.

In the negotiated arenaReliable advanced cost information that will become the project cost

Fixed-Price Estimate FormsLump-Sum EstimatesBuilding constructionNature of work and quantities will definedGreat for owner financing and riskUnit-Price EstimatesWhat type of construction is normally bid using unit-price estimates?Nature of work is still well definedQuantities of material or work items not preciseWho first determines quantities of work items?Quantities shown for each work item.

Estimate FoundationWhat is the term use to describe a complete listing of all the materials and items of work that will be required for a project? (foundation to a good estimate)Quantity survey or quantity take-off

Bidding ProceduresPrivate procedures (rules and regulations) normally established by owner and AE

Public procedures follow various procurement statutes developed by federal, state, county and municipal governments

QUESTION ?Why do we have public bidding statutes (laws)?Public bidding statutes are designed to protect the public interest, not that of the contractor or AE. Their essential purpose is to protect public funds; prevent fraud, collusion, and favoritism; and obtain quality construction at reasonable and fair prices.

Decision to BidThe decision to bid by the contractor depends on the bidding climate.What is meant by Bidding Climate?The bidding climate is the affected by:Bonding capacity considerationsLocation of projectSeverity of contractual terms (contractor responsibilities and liabilities)Owner and their financial statusWho is the architect/engineerNature and size of project as it relates to company experience and equipmentLabor conditions and supplyCompletion date

The Bidding PeriodWhy is a reasonable bidding period important?An accurate bid requires adequate timeToo little time to bid results in contractors either not bidding or bidding too highResult of rushed or quick bids is NOT a lower priceWhen unsure, contractors add CONTINGENCY $$$$$$$ to their bid

Preparing a BidPreliminary ConsiderationsBecome familiar withInstruction to biddersProposal formAlternatesGeneral and supplementary/special conditionsDrawing and specifications (addenda)Form of the contractPrebid meeting (in-house)Prebid meeting (with owner)

Preparing a Bid (cont.)Jobsite visitObserve job site specific conditions that must be covered in the bid (site access, logistics)Bid invitationsQuantity surveys (take-offs)Unit-price project (AEs #s vs contractors)Experience needed to do quantity surveys?General contractors cost estimate of own work

Bid ComponentsMaterial Costs anything that becomes a part of the finished structureMaterial Allowance What is it? Example?Direct Labor costsBasic wage rates of the labor categoriesProduction rate that applies to the work typeThe largest areas of uncertaintyWhere is the most reliable labor productivity information to found? HISTORICAL COST DATA

Where do we find the materials in a project? Both in the drawings and in the specifications. Also, cant just look at the drawing to determine intricacies of the material requested have to study the specifications.

Labor is not an independent variable linked to a multitude of project characteristics What are some of those characteristics (1) location and not just physical location but also labor location (What is the current or future labor market?) (2) project seasons and related production rates (3) Availability of subcontractors to support construction.

Schedule will help with determining overheads and fitting it into the contractors master schedule

As the contractor comes to understand the project through the estimating process a decision can be made as to what kind of leadership is needed and is that leadership available

The trick to knowledge lies not in the answers but in the questions be determined to formulate questions develop a searching probing mindset. Two things happen project knowledge increases and career knowledge increases

Dont just get into the contract documents get into the minds that formulated those documents. Quantity survey or quantity takeoff -- Using these work quantities as a basis, the contractor computes the cost of the materials, labor, equipment, subcontracts, overhead, contract bond and tax.

Public bidding statutes are designed to protect the public interest, not that of the contractor or AE. Their essential purpose is to protect public funds; prevent fraud, collusion, and favoritism; and obtain quality construction at reasonable and fair prices.The decision to bid by the contractor depends on the bidding climate. The bidding climate the state of affairs surrounding a project that include

Bonding capacity considerationsLocation of projectSeverity of contractual terms (contractor responsibilities and liabilities)Owner and financial statusAENature and size of project as it relates to company experience and equipmentLabor conditions and supplyCompletion date

Careful study and analysis of the plans and specifications usually result in lower bid prices and substantial savings for the owner.

When contractors are rushed and do not feel comfortable with the quantity take-off or dont feel they have a good understanding of the project the contingency will go up. A contingency that the owner will have to pay but may never really need.

Contractors compensate for uncertainty by bidding on the high side, resulting in inflated proposals.

In-house prebid projected supervisor and estimator meet to discuss project

Bid invitations building solid business relationships

Experience yes! have to visualize the project to be able to accurately do a take-off (methods have huge impact on costs)