Ch 4 Estimating

Roll Of Estimating

If the estimates are too low, the company may win work that it cannot complete and make a reasonable profit on, or worse yet, it may lose money on the project.

Estimating and the estimator play a key role in the success or failure of a construction company. If the estimates are too high, the resulting bid is too high and the company may loose work that it otherwise might have won. Without work the company goes out of business.

No other employee in the construction company has as great an impact on the success and profitability of the company as the estimator. Because so many people are relying on the estimate, It is important that every estimate is prepared with a high degree of accuracy.

Organization

The organization required includes a plan for completing the estimate and maintaining complete and up-to-date files. It must include a complete breakdown of costs for the project, both of work done by company forces (in-house) and work done by subcontractors.

A well organized estimate improves the probability of getting the work, facilitating the actual work in the field, and completing the work within budget.

The estimate information should include quantities, material prices, labor conditions, costs, weather conditions, job conditions, delays, plant costs, overhead costs, and salaries of foreperson and superintendents.

Organization

The estimator's work must be kept organized to the extent that in an unforeseen circumstance (such as illness or accident), someone else might step in, complete the estimate, and submit a proposal on the project.

Some key questions to ask yourself:

The estimating costs are often stored in spreadsheets, databases, or estimating software packages. The original paper documents may be stored in file cabinets and archived after a specified period, or they may be scanned and stored electronically.

• Are the numbers labeled?
• Are the calculations labeled?
• Where did the numbers come from?
• What materials are being estimated?

Notebook

Every page of the estimate should be numbered and initialed by the person who prepared that portion of the estimate. In addition, every page of the estimate should be checked and verified, and that person's initials should be placed on the page as well.

A notebook should be kept for each estimate prepared. The notebook should be broken down into several areas: the workup sheets, summary sheets, error and omissions sheets, proposal received from subcontractors, proposals received from material suppliers and manufacturers' representatives, and notes pertaining to the project.

A list of all calls made to the architect/engineer should be kept together, specifically who called, who was contacted at the architect/engineer's office, the date of the call, and what was discussed.

• Is this a job we are likely to get?

To Bid or Not To Bid

If we are unlikely to win the job, we will be better off spending our time bidding jobs that we are more likely to win.

• Can we make a profit on this job?

It is impossible for a contractor to submit a proposal for every project that goes out to bid. Here are some of the questions estimators must ask themselves when deciding whether or not to bid:

If not, we should not bid on it.

To Bid or Not To Bid

• Is a bond required? If so, do we have the bonding capacity to bid on this job? Can we get a bond for the job?

If a bond is required and we cannot get a bond we cannot bid on the project.

• Do we have the cash to fund the job? What is the retention rate?

We often pay for labor, some materials, and other expenses before getting paid by the owner. When we get paid the owner often holds retention. If we do not have sufficient cash to cover our cost until payment is received from the owner and to cover the cost of retention, we should not bid on the job.

To Bid or Not To Bid

• Where is the job located? Do we have subcontractors and material suppliers in the area? Are we familiar with the local market? Can we manage the project from existing office or will we need a local office?

Moving into a new area is a challenge, we need to make sure that we have the support system (suppliers, subcontractors, offices, etc.) in place to support the construction or can establish it.

• Have we successfully completed jobs of similar size? Do we have the expertise to successfully complete this job?

If not, we should look for other work to bid.

To Bid or Not To Bid

• Do the owners have the funding to pay for the project? Do they pay on time?

We may be better off bidding projects where the owner pays promptly.

• What is the reputation of the designers (architect, engineers)? Are they easy to work with? Are their construction documents complete?

Even the best of projects can turn into a nightmare when you are dealing with a difficult designer or poor construction documents. If we choose to bid, costs associated with dealing with a difficult designer and/or poor construction documents should be incorporated.

To Bid or Not To Bid

• Do we have the qualified personnel (both trade and management) needed to complete the project?

If not, can we hire the labor we need? Can we subcontract it out? Are the necessary labor union contracts in place? Can we bring in labor from surrounding areas? If we cannot staff the project with qualified personnel, we cannot bid the project.

• Do we have the equipment we need? If not, can we purchase, lease, or rent it?

• What is the reputation of the owner? Are they easy to work with?

If we cannot obtain the equipment needed on a project, then we cannot bid on the project.

If we decide to bid, costs associated with dealing with them need to be incorporated into the bid.

To Bid or Not To Bid

Once the contractor has decided to bid on a particular project, arrangements need to be made to pick up the contract documents. The accuracy required must be in the range of 98 to 99% for all major items on the estimate.

There are also projects for which a contractor is not allowed to submit a proposal. The owner may accept proposals only from contractors who are invited to bid; other projects may have certain conditions pertaining to work experience or years in business that must be met.

Planning the Estimate

Planning the estimate consists of four key activities: review of the construction documents (plans and project manual), site visit, dividing into work packages, and scheduling the estimate.

Site visit

Review Construction Documents

Schedule the Estimate

In small companies, the estimate is often prepared by a single person who may be responsible for both preparing the estimate and managing the project. In large companies, the estimate may be prepared by a team of estimators whose only function is to prepare the estimate.

Quantity Takeoff

Divide Into Work Packages

Planning the Estimate

Architectural drawings are usually prefixed with the letter A. Structural drawings with the letter S,or may be included with the architectural drawings, Mechanical drawings may be prefixed with M, P, or HVAC. Electrical drawings typically use the designation E.

The following is a list of steps the estimator should take when reviewing a set of construction documents:

Some jobs have no prefixes before the numbers, but in these circumstances the pages are typically labeled sheet 1 of 25. Typically, the front of the project manual or the drawings contain a list of all the drawings included in the set.

1.) Carefully check the drawings and the project manual to be sure that you have everything, including all addenda. Not all architects/engineering offices number their drawings in the same manner, so sometimes there can be confusion as to whether you have all the drawings.

Check all sources to ensure that you have received all of the drawings. If there are any discrepancies, check with the architect/engineer and complete your set.

Planning the Estimate

4.) Begin to examine the wall sections for a general consideration of materials, assemblies, and makeup of the building. Take special note on any unfamiliar details and assemblies; circle them lightly with a red pencil or a highlighter so that you can refer to them readily.

2.) Scan the drawings to get a feel for the project. How large is it? What shape is it? What are the principal materials? Pay particular attention to the elevations. Make a note of exterior finishes, the amount of glass required, and any unusual features.

3.) Review the floor plans, again getting the "feel" of the project. The estimator should begin to note all unusual plan features of the building. Make a note of what type of walls are used. Note whether enlarged floor plans show extra dimensions or whether special room layouts are required.

Planning the Estimate

7.) The submitted bid is based on the drawings and the project manual. You are responsible for everything contained in the project manual as well as what is covered in the drawings. Take notes on all unusual items contained in the project manual.

5.) Review the structural drawings. Note what type of structural systems are being used and what type of construction equipment will be required.

6.) Review the mechanical and electrical drawings, paying particular attention to how they will affect the general construction, underground work requirements, outlet requirements, chases in walls, and other items of this sort. If in doubt call Grant.

Planning the Estimate

Once the estimator has reviewed the construction documents and visited the site, he or she should have enough of an understanding of the project to divide it into work packages. A work package is a specific portion of the project's scope of work that will be assigned to a particular group.

Another important step is to visit the site after making a preliminary examination of the drawings and the project manual. By including the estimator and other members of the proposed execution team on the site visit expertise and estimate ownership will be enhanced.

It is a good idea to take pictures of the site to reference when preparing the bid.

When preparing the work packages, the estimator should make sure of the following:

Planning the Estimate

• All of the sections of the technical specifications have been assigned to a work package.

• When a section of the technical specs is assigned to two or more work packages, each work package responsibility has been clearly defined with no overlap.

• The notes taken during the review of the construction documents and the site visit have been addressed in the work package.

If part of the scope of work is not included in any work package, its cost will be left out of the bid and the contractor will have to cover these costs out of the contingency or profit.

If part of the project's scope of work is included in two or more work packages, its cost is included multiple times in the bid, which increases the likelihood that the contractor will lose the bid because the bid was too high.

Planning the Estimate

If there are multiple parties involved in creating an estimate it is essential that all parties have input into when certain items are required and that they understand the inter-relationships between the responsible parties.

Once the work packages have been defined, a schedule may be prepared for the estimate. The same care used in preparing a construction schedule for the project should be used in preparing a schedule for the estimate.

Another helpful tool when preparing an estimate is a bar chart schedule that details when the activities comprising the estimate will be completed. In addition, the persons who are responsible for those activities should be listed on the schedule.

Materials

Some waste occurs because it is more cost-effective to include the waste than it is to eliminate it.

For Example:

We can carefully hand grade the base gravel below a concrete slab to within a hundreth of a foot, but the cost to do so exceeds the cost of leaving the grade a little low and using a little more concrete.

The first step is for the contractor to add waste factors to the quantities from the quantity takeoff. Waste occurs on a construction project for three basic reasons.

Some waste is inherent in the design and cannot be avoided.

The third type of waste is one that occurs due to misuse of materials, poor construction practices, allowing materials to become damaged, etc. This type of waste should be minimized on the job

For Example:

If you were carpeting a 10' room you would have to order a 10' x 12' piece of carpet because carpet comes in 12' wide rolls.

Materials

Although on ocassion a manufacturer's price list may be used, it is more desirable to obtain written quotations that spell out the exact terms of the freight, taxes, time required for delivery, materials included in the price, and the terms of the payment.

Once a waste factor has been added, the quantity of materials must be rounded to purchase lots or standard ordering units. If you need 5.4 sheets of 7/16" OSB, you would round the ordering quantity to the next full sheet for 6 sheets. The materials are then placed on a bill (list) of materials. A bill of materials is prepared for different material supplier categories used on the job (e.g. concrete, rebar, and lumber).

The written bids should be checked against the specifications to make certain that the specified material was bid.

Materials

Contractors should take time to verify the sales tax rate. Other costs, including all necessary freight, storage, transportation, insurance, and inspection costs, if they have not been included in the supplier's quote, are added to the bare material cost.

Remember that the sales tax that must be paid on a project is the tax in force in the area in which the project is being built; Sometimes cities have different rates than the county in which they are located.

The invoice from the material suppliers, which will include these costs, will then be tracked against the budget. The total material cost is then entered as direct field costs on the summary sheet.

Labor

Next the productivity rate is established for the crew. Where possible, this should be obtained from historical data. The productivity rate is then adjusted by a productivity factor, which takes into account the unique job conditions.

Using the quantity takeoff, the estimator must include the cost of the labor performed by the crews in the direct field cost. The first step is to determine the crew mix to be used to install the material.

Estimating labor cost is covered in detail in chapter 7.

Labor

Next the wage rates for each worker classification used in the crew mix are determined. The labor burden is added to these wages to get the burdened hourly wage rate.

The quantity of materials from the quantity takeoff, the productivity rate, and the productivity factor are used to calculate the labor hours required to install the materials, and the labor hours are entered on the workup sheet.

Labor burden includes cash equivalents and allowances paid to the employee, payroll taxes, unemployment insurance, workers' compensation insurance, general liability insurance, insurance benefits (health, dental and life), retirement contributions, union payments, and vacation, holiday, and sick leave.

Specialty Contractors

Trades such as plumbing, electrical, and heating and air-conditioning have a tradition of being performed by specialty contractors, due to their specialized nature and licensing requirements.

The amount of work that the general contractor will subcontract varies from project to project. Some federal and state regulations limit the proportion of a project that may be subcontracted, but this is rarely the case in private work.

Using the quantity takeoff, the estimator must include the cost of the specialty contractors in the direct field cost. The first step is to develop a subcontractor plan, deciding what work is to be subcontracted out. The estimator then develops scopes of work for the work to be performed by the subcontractors based upon the work packages.

Specialty Contractors

Even if the estimator intends to subcontract the work, an estimate of the work should be prepared. It is possible that the estimator will not receive bids for a project before the bid date and will have to use an estimated cost of the work in totaling the bid.

If specialty contractors are to be used, the contractor must be certain to notify them early in the bidding period so they have time to prepare a complete and accurate estimate. If rushed, specialty contractors tend to bid high just for protection against what might have been missed.

All subcontractors' proposals are compared with the estimator's price; it is important that a subcontractor's price is neither too high nor too low. If either situation exists, the estimator should call the subcontractor and discuss the proposal with him or her.

Specialty Contractors

This confusion of submitting proposals last minute is compounded by specialty contractors who submit unsolicited bids. These bids come from specialty contractors who were not contacted or invited to submit a bid, but who find out which contractors are bidding for the project and submit a bid.

The specialty contractor's proposal is often phoned, faxed, or e-mailed into the general contractor's office at the last minute because of the subcontractor's fear that the contractor will tell other subcontractors the proposal price and encourage lower bids. This practice is commonly referred to as bid peddling or bid shopping and is unethical and should be discouraged.

Since these companies are not prequalified, there is an element of risk associated with accepting one of these bids. On the other hand, not using low bids from unsolicited subcontractors places the contractor at a price disadvantage.

Specialty Contractors

Throughout the estimating process, the genral contractor should be communicating with the specific subcontractors concerning the fact that they will submit a price quote and what scope of work is to be included within that quote. However, subcontractors will include items that they were not asked to bid and will exclude items that they were asked to bid.

In checking subcontractor proposals, note especially what is included and what is left out and how soon the proposal must be accepted. Often the proposals set up certain conditions, such as use of water, heat, or hoisting facilities. The estimator must compare each proposal and select the one that is the most economical.

Overhead and Contingencies

For activities that are performed by the company's crews, the duration of the activity can be calculated by dividing the number of labor hours required to complete the activity by the number of labor hours performed by the selected crew in one day.

When preparing the indirect field costs, the estimator should carefully check through the general conditions and supplementary general conditions, making a list of all items contained in the project manual that will affect the cost of the project.

For Example:

If it is estimated that it will take 110 labor hours to complete the masonry on a project and the masonry will be installed by a crew of three masons and two helpers working eight hours per day, the duration would be three days and is calculated as follows:

In order to determine the indirect field costs, the estimator must establish the project's duration. This begins by defining the activities (or tasks) required to complete the project and establishing durations for each activity.

110 labor hours

(3masons + 2 helpers) x 8 hours/day

= 2.75 days - say 3 days

Overhead and Contingencies

Using the project's duration, the estimator can prepare costs for items (such as cleaning, temporary facilities, field staff, and misc. equipment) that are required for the duration of the project. For cleaning, temporary facilities, and misc. equipment, the cost are equal to the daily, weekly, or monthly cost multiplied by the duration for which they are needed.

The estimator should establish durations for the activities performed by the specialty contractor in consultation with the contractors.

Using the activities, their durations, and information contained on the plans, the estimator must construct a logic diagram for the project, placing the activities in the sequence that they are to be performed to complete the project. From this, the estimator prepares a schedule for the project, including the duration.

Overhead and Contingencies

The burdened labor costs are combined with the field staff workforce plan to estimate the indirect labor costs for the project.

To these costs, the estimator must add the cost of permits, professional services (surveying, engineering, testing, etc.), bonds and insurance, and other overhead costs that are not tied to the project's duration. The bond and insurance costs are based upon the direct field cost plus an estimate of the indirect field costs, home office cost, and anticipated profit markup.

Workup Sheets

The workup sheet is used to make calculations and sketches and to generally "work up" the cost of each item. Material and labor costs should always be estimated separately. Labor costs vary more than material costs, and the labor cost will vary in different stages of the project.

The estimator uses two basic types of manual takeoff sheets: the workup sheet and the summary sheet. The workup sheet can be a variety of form contingent upon what is being quantified, and may be used for material, labor, equipment, or a combination of these.

Example:

A concrete block wall will cost less for its first f feet than for the balance of its height. The labor cost goes up as the scaffold goes up, yet material costs remain the same.

When beginning the estimate on workup sheets, the estimator must be certain to list the project name and location, the date that the sheet was worked on, and the estimator's name.

Workup Sheets

Setting up the workup sheets as computerized spreadsheets can increase the estimator's productivity and reduce estimating errors. However, spreadsheets should be carefully examined to ensure they are error free. Cells in the spreadsheets that contain formulas should be locked to prevent the formulas from being accidentally erased or changed.

All sheets must be numbered consecutively, and when completed, the total number of sheets is noted on each sheet (e.g. if the total number was 56, sheets would be marked "1 of 56" through 56 of 56).

Errors in spreadsheet programs can be costly and repeated over many jobs before the error is found.

The estimator must account for every sheet, because if one is lost, chances are the costs on that sheet will never be included in the bid price. Never alter or destroy calculations; if they need to be changed, simply draw a line through them and rewrite.

Following the CSI MasterFormat helps organize the estimate and acts as a checklist.

Errors and Omissions

The instructions to bidders or supplementary general conditions ordinarily states that if there is a discrepancy, the specifications take precedence over drawings and dimensional figures, and detailed drawings take precedence over scaled measurements from drawings.

No matter how much care is taken in the preparation of the contract documents, it is inevitable that certain errors will occur.

All important discrepancies should be checked with the architect/engineer's office.

Errors and Omissions

The most common error is the misplaced decimal point. Other common errors include.

Having priced everything, the estimator should make one last call to the architect/engineer's office to check the number of addenda issued to be sure that they have been received.

He or she should double-check the time, date, and place that the bids are received. He or she must carefully review the proposal to make sure that it is complete and that all requirements for the submission have been followed.

• Errors in addition, subtraction, multiplication, and division
• Omissions of items such as materials, labor, equipment, or overhead
• Errors in estimating the length of time required to complete the project
• Errors in estimating construction waste
• Errors in estimating quantities of materials
• Errors in transferring numbers from one sheet to another
• Adding a line to a spreadsheet and not checking to make sure that the new line is included in the total
• Errors in setting up formulas, items, assemblies, markups, and so forth in estimating software
• Using typical productivity rates and costs from estimating software without adjusting them for individual project conditions
• Improper use of estimating software because the user does not understand the limits of the software or the inputs required by the software