10. Further Issues in Estimating

Question 1

What should the report of the contractor’s estimates contain?

Answer 1

> Project description;
General method statements;
An indication of risks within the project that may not be adequately covered by items contained in the bill of quantities;
Contractual issues that may remain unresolved;
The financial consequences of the design process – i.e. are their areas that may present technical risks or are there areas that have been poorly designed (remember the contractor may have more expertise than the designer on some matters;
Notes of the major assumptions made in the preparation of the direct cost estimates (such as assumptions made in preparing operational rate build ups);
An indication of its profitability;
Market and industrial conditions that may be pertinent to the project (for example, an upswing in certain sectors of the construction industry may push up prices greater than inflation;
Direct costs, broken down into resource areas, including subcontractors;
The Bill of Quantities with direct costs.

Question 2

What is the purpose of senor management ‘marking-up’ or ‘uplifting’ rates?

Answer 2

> Risk for individual areas or the project as a whole if it is considered the probability of losing money is considered intolerable;
Overheads to cover both central head office costs and site costs;
Profit which will depend on the prevailing market conditions.