Chapter 8 Pricing Generally. Objectives Upon completion of this chapter, you will be able to:...
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Transcript of Chapter 8 Pricing Generally. Objectives Upon completion of this chapter, you will be able to:...
![Page 1: Chapter 8 Pricing Generally. Objectives Upon completion of this chapter, you will be able to: –Describe the general process of pricing a construction.](https://reader036.fdocuments.us/reader036/viewer/2022082413/56649e705503460f94b6d44c/html5/thumbnails/1.jpg)
Chapter 8
Pricing Generally
![Page 2: Chapter 8 Pricing Generally. Objectives Upon completion of this chapter, you will be able to: –Describe the general process of pricing a construction.](https://reader036.fdocuments.us/reader036/viewer/2022082413/56649e705503460f94b6d44c/html5/thumbnails/2.jpg)
Objectives• Upon completion of this chapter,
you will be able to:– Describe the general process of
pricing a construction estimate– Explain the concept of risk as it
relates to cost estimates of construction work
![Page 3: Chapter 8 Pricing Generally. Objectives Upon completion of this chapter, you will be able to: –Describe the general process of pricing a construction.](https://reader036.fdocuments.us/reader036/viewer/2022082413/56649e705503460f94b6d44c/html5/thumbnails/3.jpg)
Objectives (cont’d.)– Describe the two main components
considered when pricing labor and equipment
– Describe a strategy for dealing with factors that are difficult to assess on a project
– Describe the use of cost reports as a source of information for pricing estimates
![Page 4: Chapter 8 Pricing Generally. Objectives Upon completion of this chapter, you will be able to: –Describe the general process of pricing a construction.](https://reader036.fdocuments.us/reader036/viewer/2022082413/56649e705503460f94b6d44c/html5/thumbnails/4.jpg)
Objectives (cont’d.)– Describe how materials are classified
and priced in an estimate– Identify the problems associated with
pricing subcontractors’ work
![Page 5: Chapter 8 Pricing Generally. Objectives Upon completion of this chapter, you will be able to: –Describe the general process of pricing a construction.](https://reader036.fdocuments.us/reader036/viewer/2022082413/56649e705503460f94b6d44c/html5/thumbnails/5.jpg)
Introduction• Stages of pricing an estimate
– Preparing takeoff for pricing– Recap: pricing sorted list of items
• Labor• Equipment• Materials• Subcontractors• Job overheads
![Page 6: Chapter 8 Pricing Generally. Objectives Upon completion of this chapter, you will be able to: –Describe the general process of pricing a construction.](https://reader036.fdocuments.us/reader036/viewer/2022082413/56649e705503460f94b6d44c/html5/thumbnails/6.jpg)
Contractor’s Risk• Losing money in the process
– Actual cost exceeds estimated cost
• Example: lump-sum contract risks– Takeoff quantities are too low– Productivity does not meet
anticipated productivity– Material suppliers fail to meet
obligations
![Page 7: Chapter 8 Pricing Generally. Objectives Upon completion of this chapter, you will be able to: –Describe the general process of pricing a construction.](https://reader036.fdocuments.us/reader036/viewer/2022082413/56649e705503460f94b6d44c/html5/thumbnails/7.jpg)
Pricing Labor and Equipment
• Methods:– Use of productivity rates
• Convert takeoff quantities
– Use of unit prices• Applied to listed takeoff quantities
• Risk factors:– Hourly rate of labor or cost of
equipment– Productivity of labor or equipment
![Page 8: Chapter 8 Pricing Generally. Objectives Upon completion of this chapter, you will be able to: –Describe the general process of pricing a construction.](https://reader036.fdocuments.us/reader036/viewer/2022082413/56649e705503460f94b6d44c/html5/thumbnails/8.jpg)
Wage and Equipment Rates
• Wage rates– Represent average rates
• Vary according to location
– Include:• Base wage rates• Payroll additives
• Equipment rates– Ownership costs and rental rates
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Productivity of Labor and Equipment
• Job factors – Weather conditions– Site access– Storage space– Nature of the project– Other job factors (e.g., large versus
small jobs)
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Productivity of Labor and Equipment (cont’d.)
• Labor and management factors– Quality of supervision and labor– Motivation and morale– Tool and equipment quality and type– Experience and records
![Page 11: Chapter 8 Pricing Generally. Objectives Upon completion of this chapter, you will be able to: –Describe the general process of pricing a construction.](https://reader036.fdocuments.us/reader036/viewer/2022082413/56649e705503460f94b6d44c/html5/thumbnails/11.jpg)
Use of Cost Reports• Database of past job information • Key processes:
– Priced takeoff items: coded to produce budget
– Labor- and equipment-hours: coded– Quantity of work: measured– Wage and equipment rates: applied
to hours coded
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Project Information with Cost Reports
• Basic questions:– Why did the estimator choose the
original unit price for an item?– Why did the actual unit price vary
from the estimated unit price?
• Final cost report:– Should include explanatory
commentaries
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Strategy for Pricing Labor and Equipment
• Adjust unit prices for relatively certain job and management factors– Be optimistic with other factors
• Some danger involved – Identify estimating risks
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Pricing Materials• Categories:
– Finished structure materials (e.g., concrete)• Priced using unit prices against recapped
work quantities
– Materials consumed during operations (e.g., oil)• May be included in price of permanent
work
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Pricing Materials (cont’d.)• Questions:
– Do the materials comply with specifications?
– Do prices quoted include delivery?– Will supplier’s prices to remain firm?– Does the supplier’s price include taxes?– Will there be any storage requirements?– What are the vendor’s terms of offer?
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Owner-Supplied Materials• Contractor-supplied material
– Most project specifications include descriptions • Types, brands, etc.
• Owner-supplied materials– Specifications may be skimpy
• Size, weight, and packaging are usually necessary
• More details may be required
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Pricing Subcontractors’ Work
• Problems:– Not all subtrades offer lump-sum bids
• Bid unit or hourly prices
– Interpretation of what is part of the work of may differ
– Subcontractor whose price is used may be unable to perform the work
![Page 18: Chapter 8 Pricing Generally. Objectives Upon completion of this chapter, you will be able to: –Describe the general process of pricing a construction.](https://reader036.fdocuments.us/reader036/viewer/2022082413/56649e705503460f94b6d44c/html5/thumbnails/18.jpg)
Summary• Pricing an estimate consists of:
– Sorting and listing items, then applying prices
• Costs may exceed estimated prices when:– Takeoff quantities are too low– Productivity does not meet anticipated
productivity– Subcontractors or material suppliers fail to
meet obligations