Chapter 13 Pricing Subcontractors’ Work. Objectives Upon completion of this chapter, you will be...
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Transcript of Chapter 13 Pricing Subcontractors’ Work. Objectives Upon completion of this chapter, you will be...
Chapter 13
Pricing Subcontractors’ Work
Objectives• Upon completion of this chapter,
you will be able to:– Describe how subtrade work is usually
estimated and explain the role of the contractor’s estimator in this process
– Identify potential problems with subcontractors on a project
Objectives (cont’d.)– Explain how the competency of subtrades
can be evaluated and list what should be considered in this evaluation
– Explain how surety bonds can be used to help manage subtrades
– Describe subtrade pre-bid proposals and explain their use with subcontractor bids
– Describe how subtrade bids are evaluated
Objectives (cont’d.)– Describe the main features of bid
depositories and explain their use with subcontractor bids
Introduction• Subcontractors
– Building construction projects• Often perform 80% or more of the work
– Contractor has to rely on subtrades• Good relationships • Mutual trust• Two-way communications• Common goals
Potential Problems• Possible reasons:
– Unreliability of some subcontractors– Errors in subtrade bids– Overlap or underlap in scope of work – Conditional bids from subcontractors– Bid closing congestion– Compliance with government positive
action requirements regarding minorities
Managing Subcontract Pricing Procedures
• Effective management practices– Required throughout estimating
process• Control problems
– Well-organized system of dealing with subtrades• Identify subtrade needs• Ensure subtrade capabilities
List of Subtrades• Complied after bid drawings and
specifications are obtained– Used to determine trades to be
contacted
• Subtrades should be notified early in estimating process– Design questions and problems are
resolved
Contacting Subcontractors• Most contractors maintain a
directory of subtrades– Checklist on computer spreadsheet
• Estimator checks off or adds trades required• Checklist is compiled• Copy is e-mailed to subtrades• Subcontractors return checklist with name
against trades they are prepared to submit prices
Unknown Subcontractors• Can be stressful
– Sometimes necessary
• Nominated subcontractors– Deal made before bids
• Clause is inserted in bid documents
• Unsolicited subtrade bids– Low price is received from unknown
company
Evaluating Subcontractors• Main concerns:
– Is the subtrade capable of meeting the quality and schedule requirements?
– Does the subtrade have the financial capability required?
Evaluating Subcontractors (cont’d.)
• Factors to investigate:– General company reputation– Quality of previous work performed– Quality of company’s management– Company’s disposition
• General cooperativeness • Ease of dealing with site and personnel
– Financial status of company
Bonding of Subtrades• Bonds are obtained to guarantee
work performance– Surety bonds: manage construction
risk– Bid bonds: give prime contractor the
right to damages from bonding company • If subtrade fails to execute the
subcontract after bid has been accepted
Pre-Bid Subtrade Proposals• Methods of submitting bids:
– Fax and e-mail• Provides a hard copy• Received quickly
• Pre-bid proposals: – Copy of subtrade’s bid without prices
• Complete in all other details
Figure 13.2 Pre-Bid Proposal (Delmar/Cengage Learning)
Analyzing Subtrade Bids• Subtrade bids
– Ensure all work required is included– List inclusions detailing all the work
• Excluded items should be listed on the subtrade’s proposal
• Estimator has to lookout for items excluded from the work and not priced
– Complicated by multiple trade bids and discounts
Figure 13.3 Subtrade Analysis Spreadsheet (Delmar/Cengage Learning)
Bid Depositories• “Bid shopping” or “bid peddling”
– Disclosing prices to obtain an equal or better price• Not illegal, but unethical
• Bid depositories – Assemble bids from subtrades – Distribute them to prime contractors
Scope of Work• Trade scope definitions
– Useful guide to what is accepted locally as the definitions of subtrades’ scope of work• Enables overlap and underlap investigation
• Examples:– Masonry scope of work– Windows scope of work– Glass and glazing scope of work
Summary• Subcontractors on building
construction projects– Often perform 80% or more of the
work – Several problems occur with subtrade
bids
• Effective management practices – Required to deal with subcontractors in
the estimating process