CON 4003 CON 4003 CVE 4073/5073CVE 4073/5073

The Estimating Process The Estimating Process

Prof. Ralph V. Locurcio, PEProf. Ralph V. Locurcio, PE

Contract DocumentsContract Documentsor or

Bid SetBid Set

Contract Documents…Contract Documents…

1.1.The Agreement or ContractThe Agreement or Contract2.2.The SpecificationsThe Specifications3.3.The DrawingsThe Drawings

Important Note: Important Note: Unless otherwise specified this list is Unless otherwise specified this list is the the ““order of precedence” of the contract order of precedence” of the contract documents documents

Where Estimates are Where Estimates are Used…Used…

Need for a projectIs recognized

Owner appointsProject Manager

Project Manager develops project

program: scope & cost parameters

Project is entered into an annual

capital program

Designer prepares concept design & preliminary cost

estimate

Owner orders bid documents

Project Manager advertises for

construction bids

Contractors assemble team,

prepare & submit bid

Bids opened & reviewed by owner

(with designer)

Builder’s credentials &

bonding approved

Owner approves program

Project Manager advertises for

designer

Owner hires designer

Owner authorizes final

design

Owner selectsbuilder

Contract Signed

Notice to

Proceed

Resident Engineeroversees

construction

Project phase(s)completed

All work completed final inspection

made

Progresspayment

Final paymentOwner accepts

facility

Designer completes plans &

specifications

EstimatingEstimating

The Estimating Process-1The Estimating Process-1 Decision to bidDecision to bid Form the estimating teamForm the estimating team Estimate work planEstimate work plan

Type of estimateType of estimate ProceduresProcedures DocumentationDocumentation

Risk & contingency analysisRisk & contingency analysis Review & check the estimateReview & check the estimate Finalize the estimateFinalize the estimate

The Estimating ProcessThe Estimating Process

KickoffMeeting

WorkPlan

EstablishStandards

UpdateDatabase

PrepareEstimate

DocumentEstimate

ReviewEstimate

Adjust Estimate?

SubmitBid

ProjectExecution

ProjectCompletion

Yes

No

Revise

Lessons Learned

Feedback to improve data base

Re

ality Ch

eck

Estimate work planEstimate work plan Type of estimate required Deliverables by subcontractors Budget for the estimate Staffing Schedule Methodology Controls & reviews Presentation format & production

Types of EstimatesTypes of Estimates Conceptual estimateConceptual estimate

Decision on unitsDecision on units Adjustments for time & locationAdjustments for time & location

Detailed estimateDetailed estimate Material take-offMaterial take-off Equipment & cycle timeEquipment & cycle time Labor & productivityLabor & productivity Admin + overhead+ Admin + overhead+

logistics+taxes+profitlogistics+taxes+profit

Basic estimating Basic estimating procedureprocedure

Read the plans, specs & contractRead the plans, specs & contract Conduct a site investigationConduct a site investigation Decide on construction methodDecide on construction method Consider the construction Consider the construction

scheduleschedule Material quantity takeoffsMaterial quantity takeoffs Plan for equipmentPlan for equipment Plan for subcontractsPlan for subcontracts Estimate costs of labor & materialsEstimate costs of labor & materials Assess risksAssess risks Determine contingencyDetermine contingency Finalize bidFinalize bid

Basic estimating Basic estimating procedureprocedure

Read the Plans, Specs & Contract

Conduct Site Visit

Decide Construction

MethodPrepare Schedule

Plan for Subcontracts

Plan for EquipmentMaterial Take-Offs

Estimate costs

Determine contingency

Analyze Risk Factors

Finalize Bid

Conduct thorough site Conduct thorough site visitvisit

Physical characteristicsPhysical characteristics Sub-surface conditionsSub-surface conditions Site logistics for construction Site logistics for construction

layoutlayout Condition of roads & bridgesCondition of roads & bridges Storage space for lay-downStorage space for lay-down Security requirementsSecurity requirements Operational requirementsOperational requirements

Read the plans, specs & Read the plans, specs & contractcontract

Contract terms & conditionsContract terms & conditions Payment & penaltiesPayment & penalties Scope and quantities Scope and quantities Complexity of constructionComplexity of construction Completeness of plansCompleteness of plans Quality of materials Quality of materials

requiredrequired

Decide construction Decide construction methodmethod

Basic approach & teamingBasic approach & teaming Work breakdown structure & Work breakdown structure &

sequencesequence Skills of work crewsSkills of work crews Decision on work to be Decision on work to be

subcontractedsubcontracted Timing of individual activitiesTiming of individual activities Phasing of crews on sitePhasing of crews on site Procurement of equipmentProcurement of equipment Flow of materials & laydownFlow of materials & laydown Cash flow projectionCash flow projection

Work scheduleWork schedule

Based on contract provisionsBased on contract provisions Sequence of workSequence of work Operational constraintsOperational constraints Site constraintsSite constraints Weather & safety factorsWeather & safety factors Lead time for materialsLead time for materials Availability of subcontractorsAvailability of subcontractors

Material quantity takeoffMaterial quantity takeoff Study plans & specsStudy plans & specs Systematic breakdown of unitsSystematic breakdown of units Bid instructions, format & Bid instructions, format &

alternatesalternates Follow sequence of constructionFollow sequence of construction CSI category of materials & laborCSI category of materials & labor Check for duplicates & Check for duplicates &

omissionsomissions Document all workDocument all work Review & check for errorsReview & check for errors

Direct costsDirect costs

Materials, labor, equipmentMaterials, labor, equipment Subcontractor bidsSubcontractor bids Contact suppliers Contact suppliers Market factors applyMarket factors apply Establish and update cost Establish and update cost

data basedata base

Indirect costsIndirect costs

MobilizationMobilization Field officeField office InsuranceInsurance BondsBonds Taxes & permitsTaxes & permits CleanupCleanup DemobilizationDemobilization

Risk analysisRisk analysis Complexity of plans & specsComplexity of plans & specs Terms of contract & penaltiesTerms of contract & penalties Experience with ownerExperience with owner Timing of projectTiming of project Market factors for labor & materialsMarket factors for labor & materials Weather & safety Weather & safety Other uncertainties effecting Other uncertainties effecting

executionexecution Probability of occurrence of eachProbability of occurrence of each

Determine contingencyDetermine contingency

Percentage of base estimatePercentage of base estimate Determine high-cost risk Determine high-cost risk

factorsfactors Expected net risk based on Expected net risk based on

probabilityprobability Aggregate total project riskAggregate total project risk Establish contingency Establish contingency

The Estimating ProcessThe Estimating Process

KickoffMeeting

WorkPlan

EstablishStandards

UpdateDatabase

PrepareEstimate

DocumentEstimate

ReviewEstimate

Adjust Estimate?

SubmitBid

ProjectExecution

ProjectCompletion

Yes

No

Revise

Lessons Learned

Feedback to improve data base

Re

ality Ch

eck

CSI Master Format-1CSI Master Format-1

CSI Master Format-2CSI Master Format-2

CSI Master Format-1CSI Master Format-1

CSI Master Format-2CSI Master Format-2

Typical Excel FormatTypical Excel Format

RSMeansRSMeans

Bid summaryBid summary One line item cost for each CSI categoryOne line item cost for each CSI category

01 – General conditions = 01 – General conditions = $3000$3000 02 – Concrete =02 – Concrete = $1000$1000 05 – Metals=05 – Metals= $ 500$ 500 06 – Wood, Plastics=06 – Wood, Plastics= $1500$1500 Total ………………………….Total …………………………. $6000$6000 Contingency…………………...Contingency…………………... $ 600$ 600 Taxes………………………….Taxes…………………………. $ 396$ 396 Profit………………………….Profit…………………………. $ 700$ 700 Your bid………………………Your bid……………………… $7696 $7696

BiddingBidding

Issuance of Bid Issuance of Bid Documents…Documents… Prepare adequate bid setsPrepare adequate bid sets

Make “reproducible” set of Mylar drawingsMake “reproducible” set of Mylar drawings

Plan bidding process carefullyPlan bidding process carefully May issue pre-bid noticeMay issue pre-bid notice May include pre-bid conference to clarify owner’s intentMay include pre-bid conference to clarify owner’s intent Issue amendments to correct errorsIssue amendments to correct errors Avoid “irregularities”Avoid “irregularities” Documents are “close hold” to ensure competitionDocuments are “close hold” to ensure competition

Issue bid documentsIssue bid documents All sets must be identicalAll sets must be identical Keep accurate log of documents issuedKeep accurate log of documents issued Addenda must be mailed to all bidding firmsAddenda must be mailed to all bidding firms Answers to questions to all biddersAnswers to questions to all bidders

Avoid bid protestAvoid bid protest Process stopped pending review Process stopped pending review May be cause for rebidMay be cause for rebid Financial problems resultFinancial problems result

Bonds…Bonds… Bid bondsBid bonds

Avoids loss if bidder cannot/does not accept contractAvoids loss if bidder cannot/does not accept contract 5%-10% of bid price5%-10% of bid price Returned when agreement signedReturned when agreement signed Common on public contractsCommon on public contracts Bonds purchased from “surety” companyBonds purchased from “surety” company

Performance & payment bondsPerformance & payment bonds Intent is to protect owner from contractor failureIntent is to protect owner from contractor failure Insurance (surety) company guarantees completionInsurance (surety) company guarantees completion Payment bond pays labor & material debts of contractorPayment bond pays labor & material debts of contractor Prime often requires bonds of subcontractorsPrime often requires bonds of subcontractors Ability to obtain bonds depends on prior performanceAbility to obtain bonds depends on prior performance

Insurance…Insurance… General liability insuranceGeneral liability insurance

OperationsOperations Personal injuryPersonal injury Liability during constructionLiability during construction Automobile medical & physical paymentsAutomobile medical & physical payments Post-project liabilityPost-project liability

Builder’s Risk InsuranceBuilder’s Risk Insurance Covers perils during constructionCovers perils during construction Fire, lightning, vandalism, windstormFire, lightning, vandalism, windstorm Additional perils: collapse, terrorism, rupture, etc…Additional perils: collapse, terrorism, rupture, etc…

Bid Opening & Bid Opening & Evaluation…Evaluation… Technical evaluation & reviewTechnical evaluation & review

Will bid achieve owner’s intentWill bid achieve owner’s intent Is bidder’s plan competent & safeIs bidder’s plan competent & safe Are subcontractors qualifiedAre subcontractors qualified

Price evaluationPrice evaluation Rank order by low to high bidRank order by low to high bid Are all bids “responsive”; i.e.. meet all requirementsAre all bids “responsive”; i.e.. meet all requirements Bids may not be “qualified” in any wayBids may not be “qualified” in any way Review of “schedule of values” or estimated payment scheduleReview of “schedule of values” or estimated payment schedule Determine “apparent” low bidderDetermine “apparent” low bidder

Bid qualificationBid qualification Is bidder disqualified for any reasonIs bidder disqualified for any reason Are bonds, insurance & certifications adequateAre bonds, insurance & certifications adequate

Recording of bids & recommend awardRecording of bids & recommend award

Questions?Questions?

That’s all for today…That’s all for today…

Slides are on my web siteSlides are on my web site My web site:My web site:

www.my.fit.edu/~locurciowww.my.fit.edu/~locurcio

Schedule of ValuesSchedule of Values