ch. 12 Flashcards
Estimating Mistakes
Errors are normal in bidding procedure. There are errors in math, take off, judgment, morals, and special circumstances. In most occasions, the contractor who discovers an error in the bid submitted may notify the owner or primary contractor and either change the bid or withdraw the bid.
To minimize the possibility of a bid containing a mistake the bidder should establish office procedures which ensure that bids are checked by at least one person other than the estimator or the owner of the bidding company. The bid, when finalized and totaled, must be delivered to the owner. This procedure is very complicated and sensitive. In order for the bid to be responsive (acceptable in accordance with the instructions to bidder manual), all of the bidding documents must be completed and in place.
Extension Errors
Occasionally, certain aspects of a project or the project itself may require an extension (more time to complete the activity). It is important to correctly estimate how much time would be needed for the extension, however, analyze the numbers and don’t blindly accept computer results. Errors could cause a decrease in profit due to unforeseen costs in materials and labor.
Lack of knowledge of work
is an error that is avoidable when bidding on a construction contract. The contractors should develop step-by-step checklists to make sure they are not missing key elements of the work. If there is a gap in experience, they should subcontract the elements outside of their expertise.
Lack of Understanding Contract Administration Requirements
Errors due to misunderstanding the contract administration requirements are avoidable. Prior to writing up a bid and signing a contract, it is important to thoroughly review general/ special conditions of the contract and not just technical specifications.
Misjudging Escalation
Errors in judgment and morals are inexcusable and cannot be forgiven.
One possible mistake is to misjudge the escalation in costs associated with a job over time. In order to protect the firm against possibly losing profit from this mistake, an escalation clause should be incorporated in the contracts. The contractor could use futures (contracts to lock in prices) and pre-purchasing agreements to protect prices.
Transposition Errors
A transposition error in estimates occurs when there is a transposition (switching of digits) when recording amounts. This can be avoided by carefully rechecking figures after entering them.
Incorrect Take-Offs
Take-offs are estimates of materials needed for a construction project. This is an important estimate because it determines the amount of materials and the labor needed for proper installation of the materials. Errors in math and take-off are classified as material errors and may be excused if challenged, however, analyze the numbers and don’t blindly accept computer results.
Special Circumstances
Errors that are a result of special circumstances are excusable. Special circumstances are sickness, changes in the management of the company outside of the control of the bidder, and suppliers that change the basis of a proposal outside of the control of the bidder.
project cost control
information system, structure by a construction company, which is designed to assist the project manager and other managers within the company, in controlling construction costs.
begins with the preparation of the original cost estimate for a project.
After the contract is formed, a budget is created, using the activities and costs as determined in the estimate.
summary project cost reports are prepared at regular time intervals throughout the duration of a project
data for estimating
historical labor and equipment cost and production records are the only reliable source of information available for estimating these two critically importance components of project cost
production rates unit of output per unit of input, are fundamental to the estimation of labor and equipment cost.
unit costs are widely used for estimating labor and equipment expense because of the convenience of their application. kept up-to-date
Accounting codes
the coding systems used by contractors are not standardized but rather are structured by individual construction firms as those business entities see fit to suit their particular purposes.
one advantage of decimal system is that it is expandable so as to accommodate any level of detail that may be desired
project expense is often subdivided into two major subdivisions, in turn, has extensive internal breakdown into detailed items of cost.
job cost accounts
a function of each construction project, and profit or loss is evaluated for every project at the individual job level
monthly cost reports
after the work on a project begins, and throughout the life of the project, information contained in the job cost accounts is periodically summarized and reported in a series of cost reports.
reporting are structured to meet the specific needs of job management
information is provided such as cost to complete or estimated final cost
materials, labor, equipment, subcontractors, and total projects.
variance
project overhead
project indirect, is reported separate form project cost reports
cost accounting
to acummu;ate, report, and analyze labor and equipment cost and production information from an ongoing construction project, a contractor will establish a special system with a detailed set of project cost accounting
excessive detail will result in the objectives of the cost system being obliterated by masses of data and paperwork, as well as neddlessly increasing the time lag in making the information available.
