DUCTION TO CONSTRUCTION ESTIMATING By Brian L. Swope, MTM, CCM Bowling Green State University College of Technology WHAT IS AN ESTIMATE? It is an assessment of the probable total cost of a project Estimating take four basic steps: Identify the scope of project to be completed Break down the project into major and minor work items Measure the size of these work items Assess the cost of these work items Estimating is the tool to prepare bids and control cost during construction TYPICAL CONSTRUCTION PROJECT CYCLE Concept & Objective Replacement Design Operation & Maintenance Bidding Contract Award Commission Construction 1 BRIEFING STAGE Project functions Alternative solutions Evaluation of solutions Site conditions Locations Layout sketches w/cost Feasibility study Permissible costs Select solution DESIGN STAGE Scheme design Detail design Approved working drawing & specifications Cost estimate & production program Bidding & contract documents BIDDING DOCUMENTS Scope of works Bid & performance bond forms Bill of quantities General & special conditions Site/local regulations Traffic, cleanliness, labor laws, fire protection, permits, coordination, etc. 2 TYPE OF CONTRACT Contract Value Procurement Method Fixed price Adjusted price Cost plus Target cost Unit price Schedule of rates Lump sum Competitive Negotiated Package Turnkey Continuation Running Service ESTIMATES FOR DIFFERENT TYPES OF CONTRACTS Lump-sum contracts Defined scope of work for stipulated sum Cost-plus contracts Uncertain total cost of construction Used if work must get underway or is difficult to define Contract followed by costing of operations Unit-price contracts Measurement and payment Based on pricing schedule Breakdown of the work Estimated item quantities Enables owner to obtain competitive prices S l BIDDING STAGE Type of bidding Open bid, pre-qualification, negotiated bid, or Serial bid Bid invitation Cost estimate Bid submittals Bid evaluation Contract award 3 CONSTRUCTION STAGE Budget and schedule Submittals preparation, review, & approval Human resources and equipment plans Material delivery plan Site organization Coordination of subcontractors General supervision COMMISSIONING STAGE As-built drawings Punch list Repair defects Test, start up, & adjust Operation & maintenance manuals Train staff Hand over the project CONSTRUCTION PROJECT STAGES Briefing stage Design stage Bidding & award stage Construction stage Commissioning stage Operation & maintenance stage Replacement stage 4 ROLE OF ESTIMATING TRADITIONAL CONTRACTING Briefing Design Bid Build Maintain Traditional contracting methods are dependable and practical because The construction professionals are familiar with its structure, role, and risk allocation. It is reflected in and reinforced by industry customs and practices It is reinforced by statutes and standard contract documents It has proven to be reliable and satisfactory 14 TRADTIONAL CONTRACTING STRUCTURE Owner Designer/ Architect Subconsultant A Subconsultant B General Contractor Subcontractor A Subcontractor B 15 5 TRADTIONAL CONTRACTING The industry's familiarity & predictability generated standard procedures for Obtaining bonding and insurance Dealing with unexpected conditions Making changes Resolving unforeseen contingencies Well defined model of rights, duties, remedies It gives the owner Complete design and a stated maximum price before construction begins Exclusive control over the designer & contractor 16 DISADVANTAGES OF TRADITIONAL CONTRACTING It is not the most effective use of time and money Owner may lose the ability to react to market conditions & revised needs Competition solely on price may be counter productive The traditional contracting require expertise that some owners do not possess None of these shortcomings are fatal flows 17 MULTIPRIME CONTRACTING AND FAST-TRACKING Owner Architect Designer Prime contractor A Prime contractor B Prime contractor C Owner contracts directly w/ A/E and several multi prime contractors. Fast tracking is done by phasing the work Site works can start before finishing the design of HVAC, finishing works, etc. 18 6 MULTIPRIME CONTRACTING Subcontractors push for it The GC's mark up & profit is saved Someone still has to provide essential management, coordination, administration, and scheduling functions The owner can hire a CM to fulfill these functions and reduce liability Whoever fill the a/c gap has to have some authority or significant influence on key management, scheduling, & payment 19 CONSTRUCTION MANAGEMENT CONSULTANT Owner Construction Manager Designer/ Architect Subconsultant A Prime contractor A Subconsultant B Prime contractor B Subcontractor A Subcontractor B 20 CONSTRUCTION MANAGEMENT CONSULTANT CM typically offers diverse experience in design, construction, and management. The CM could be a general contractor hired to coordinate the work of specialty contractors The CM can be a multifaceted team Supervise design Provide input into site selection, financing, & accounting Provide input into constructability, cost control, value analysis, contract interfacing, quality control, and construction supervision 21 7 CONSTRUCTION MANAGEMENT CONSULTANT The CM can act as the owner's agent having responsibility w/o risk They can assume some of the risks borne by the traditional general contractor Various variation between two above mentioned scenarios. It is always necessary to examine the specific contractual obligations undertaken by the CM and the owner The role of the CM mostly depends on the nature of the CM (GC or Designer) 22 AGENCY CONTRACTION MANAGEMENT The CM is usually a design professional The CM takes no entrepreneurial risk for cost, timeliness, or quality of construction Subcontractors sign the contract w/ the owner The CM supervise & coordinate all aspects of the project from its inception to the end of construction The owner is liable to the specialty contractors if lack of coordination generate claims 23 PROGRAM CONSTRUCTION MANAGEMENT It is employed when the owner requires multiple projects to be constructed within a time period The program manager may provide design services; manage budgets, assist in selecting A/E, contractors, and subs; monitor and oversee multiple projects; and play a significant role in planning the owner's program. The Ohio School Facilities Commission is employing this program. 24 8 CM AS GENERAL CONTRACTOR The CM usually is a general contractor Assist in the design phase Provide cost info / value engineering Checks constructability The A/E still responsible for the design Acts as a GC during the construction phase The CM/GC duties, rights, and risks are similar to those of a GC Once construction is ready to start, the CM/GC enters into a fixed-priced contract w/ the owner The prices of the subs+ the CM/GC costs of performance and mark up are basis of the guaranteed maximum price (GMP) 25 THE DESIGN-BUILD The DB can take one of several forms Specialized firm in DB work A/E firm joint venture/subcontract with GC GC firm joint venture/subcontract with A/E The checks and balances that comes with using separate designer and constructor are sacrificed to some extent The DB method provides the owner with a single point of responsibility for potential delay and cost associated w/ design errors and omissions 26 THE DESIGN-BUILD The DB is liable for both design problems and construction defects Careful project selection and definition, contract formation, and project control minimize the risk to a manageable level. The most critical step is to arrive at a mutually understood and agreed upon definition of the project Draft a contract that reflects this agreement Limit the risk w/ contract clauses limiting the damage to a specific amount; i.e. DB fees, excluding certain types of damage such as lost revenues, etc. 27 9 THE DESIGN-BUILD If the DB is composed of different D & B entities, it is critical that responsibilities, liabilities, & roles are clearly defined. A/E mostly can get liability insurance for only design work Contractor mostly can get liability insurance for only construction work only DB is not a substitute for adequate design and sound construction management 28 THE SUCCESSFUL DESIGNBUILD PROJECT What works to avoid disputes on a traditional project works on DB projects. Fair allocation of risk Reasonable interpretation of the contract Clear scope of work Acknowledgement of responsibilities Acceptance of change Good faith cooperation between parties 29 ESTIMATING FUNCTIONS Feasibility study/conceptual estimate Description Purposes Cost Vs present value of future income Design phase Scheme estimate Value analysis Bidding phase Construction phase Budget Cost control 10 TYPES OF ESTIMATES Conceptual estimates are used to assess the feasibility of a project Preliminary estimates are used mostly during the design stage to ensure that the project cost does exceed the budget Detailed estimates CONCEPTUAL ESTIMATES The project feasibility is made by comparing the estimated cost with the project value Price/unit (rooms in hospitals, hotels) Price/unit area (homes, general buildings) Price/unit volume (warehouses) Produced from owner's notion of the construction; they lack design details Primary factors for project feasibility: Value and cost of development Cost profile embraces many constituents Some costs are easy to establish PRELIMINARY ESTIMATES AND COST PLANNING Prepared as design develops Informs whether design meets the budget Provides alternative design cost information Value analysis: improvement justification Can be subdivided into prices Groupings of building components 11 TYPES OF ESTIMATES Different project delivery systems use conceptual, preliminary, and detailed estimates at different phases of the project Although firm price lump sum contracts are used on most construction projects, owner may adopt the cost plus alternative when the scope of the work is difficult to define or when the design is not complete. DETAILED ESTIMATE Unit price contracts accounts for estimating the labor, equipment, material, overhead, and profit for each bid item A detailed estimate is the most accurate forecast of the cost of the project only if the scope of the project is well defined in drawings and specs Detailed estimate may still be required in cost-plus with a guaranteed max contracts DETAILED ESTIMATES Quantity take-off Recap, group, & sort quantities Pricing the quantities in terms of labor, equipment, and material Pricing subcontract work Pricing general expenses Indirect cost Site and office overhead Markup Summary & bid 12 Estimating and Construction Safety Occupational Safety and Health Administration Safety standards Failure to comply may result in fines or imprisonment Cost of poor safety on the work site Growing awareness Direct and hidden costs AREAS & PERIMETERS 13 AREAS & PERIMETERS SURFACE AREAS & VOLUMES 14 SURFACE AREAS & VOLUMES 15 CHAPTER 2 THE ESTIMATING PROCESS & PRELIMINARY PROCEDURES By Brian L. Swope, MTM, CCM Bowling Green State University College of Technology 1 OBJECTIVES Compile the goals and objectives of a contractor's estimating department Identify the sources of information about projects out for bid Distinguish open bidding from closed bidding Describe the process of prequalifying bidders and explain why it is done Describe contractors' marketing strategies and explain why these strategies are pursued 2 OBJECTIVES (CONT'D.) List and explain the factors considered when a contractor is deciding whether or not to submit a bid on a project Explain what is involved in the preliminary review of bid documents and the use of a query list Describe the purpose of the estimator's site visit and list the items that should be considered on a local project and on a remote project Identify the benefits of using computers and modern communication technology in the estimating process 3 1 THE BID ESTIMATING PROCESS Systematic approach w/ clearly defined objectives Profitable work Maximizing accuracy Maximizing productivity Effective estimating department utilization Company-wide cooperative approach that foster cooperation throughout the estimating & bidding 4 THE LOW OF AVERAGES The actual total cost of a project will be close to the total estimated cost of the different elements when they are reasonably estimated even though each individual element have been estimated a little low or a little high. 5 THE ESTIMATING PROCESS 2 THE ESTIMATING PROCESS Bid information Decision to bid Review tender documents Site investigations Price general Expenses Take-off Quantities Price own work Notify subcontractors Price subcontract work Management review Summarize , prepare, & submit bid Complete bid report 7 SOURCES OF PUBLIC BID INFORMATION Advertisements and web pages Government notices Construction associations News services (Dodge Reports, etc.) Bid information services Advertisement in papers & journals 8 SOURCES OF PRIVATE BID INFORMATION Invitation from Owners & designers Business contact & business news items Architectural and engineering consultants Construction news services Construction associations plan service centers Bid information services 9 3 TYPES OF BIDS Open Bidding Allows all qualified contractors to bid and be considered for award of work Involves publicly advertised bid calls U.S. government agencies use a \"Pre- Solicitation Notice (Construction Contract)\" Closed bidding Direct bid invitation Avoids having a large number of bids Prequalified bids Bids from prequalified contractors only EFFORTS TO COLLECT INFO Marketing Ensures company is on bid list Information gathering system Business contracts Constant monitoring Often pursued by contractors offering construction management services Construction news services Offer bid reporting services Convey project status 11 OBTAINING BID DOCUMENTS Two complete sets of bid documents are usually requested Estimate documents Subcontractor takeoff and estimate preparation Designers usually require deposits for bid documents Reimbursed upon return 4 DECISION TO BID Type of project Size and estimate of contract value Location Access Availability of subs & suppliers Quality of the Drawing & Specifications Reputation of the owner & A/E Specialized work Anticipated construction problems Safety considerations 13 DECISION TO BID (CONTINUE) Competition and the need for work Finance & bonding capacity Conditions of the contract Completion time Personnel Supervision and supporting staff Labor (union vs. non union, training, licensing, etc.) Cost of bidding Other projects being bid Equipment (owned or rented) 14 REVIEW OF BID DOCUMENTS Review specifications and drawings Obtain information for completion Highlight needed data & anything unusual Check for easily missed items Number may be enormous Some selection is unavoidable Select the estimating team members Scope of the general contractor's work Scope of the subcontractors' work Plan the take-off procedures Identify possible problems 15 5 LIST OF QUERIES Compiled list of all questions Single call is made to cover all items Often clarified in documents Designers May encourage questions, but avoid continuous phone calls Fax and e-mail communications Addenda or bid bulletin may result from queries 16 THE TEAM APPROACH Estimator Usually works alone on quantity takeoffs and cost estimates Quality is improved with input Should be encouraged to seek assistance Estimate review Brings team together to review work IT IS IMPORTANT THAT THE ESTIMATOR SEEKS AND GETS THE INPUT OF THE SUPERINTENDENT, PROJECT MANAGER, AND SENIOR MANAGEMENT INITIAL STUDIES FOR THE ESTIMATE Selection of the construction method Site investigation Investigation team Estimator, superintendent , design engineer, finance & legal personnel, etc. Site visit preparation & conduction (next slides) Development of construction plan & schedule 18 6 SITE VISIT PREPARATION Preliminary construction plan Scope of local subcontractor's work Local labor, material, & equipment Local suppliers & services Identification of local legal & financial requirements Questions to the owner & engineer Research local political entities 19 SITE VISIT PREPARATION Maps & charts Climatological data Tax laws Labor regulations Available transportation & cost General geophysical information 20 SOURCES OF INFORMATION CPA firms Attorneys Banks Contractors Surety bond producers Material suppliers AGC chapters Equipment dealers State & federal government agencies Engineering firms Insurance companies 21 7 SITE VISIT Access Electrical service Garbage disposal Adjacent structures Water supply Toilets Telephone Site history Obstructions Contamination Parking & storage Labor housing Soil data Security Local subs Ground water table Soil disposal Others Site conditions 22 COMPUTER & OTHER TECHNOLOGY IN ESTIMATING SYSTEMS Computers Indispensable tool Perform many operations Not foolproof Requires understanding of basic estimating concepts Can be gained by working through them manually Other Technology Fax machines Cellular telephones E-mail & Internet Computer-assisted design SUMMARY Use systematic approach to estimating Required due to number of people and amount of data Bid calls Many sources of information Several factors to consider Encourage team approach Utilize site visits and latest technology 8