estimating

Question 1

what are the owners estimates and when are they performed

Answer 1

1. conceptual estimate - before bid
2. alternative design estimate - before bid
3. owners engineers estimate - before bid

Question 2

what are the contractors estimates?

Answer 2

1. contractors bid estimate - before bid
2. alternative construction methods - post bid
3. changes/claims estimate - post bid

Question 3

conceptual estimate

Answer 3

purpose: takeoff to get an initial idea, decide whether to proceed /w/ project
- feasability study
- hires A/E to provide order of magnitude estimate of cost
- they only know the general scope, very rough cost
- bldg - sq ft, road - km

Question 4

alternative design estimate

Answer 4

purpose: exploring alternative options to find the most feasable
- A/E - $ based on previous experience
- rely on bid abstracts for cost info
- QTO
- at the end of the process the owner decides on an option

Question 5

owners engineers estimate

Answer 5

purpose: a more accurate estimate developed by the owners engineer, cost against which to evaluate bids
- QTO
- past experience and bid abstracts

Question 6

contractors bid estimate

Answer 6

purpose: to put forward a bid
- QTO (detailed)
- based on in-house cost data base (records)
- consider cnstrctn methods
- determines whether they make money, so it must be accurate

Question 7

alternative cnstrctn methods

Answer 7

purpose: consider alternative construction methods to complete the project in order to maximize profit
- has been awarded job
- now, detailed review of how job is priced
- is there a better way to do the work? better cnstrcn method? - maximize profit
- the innovative contractor can save money

Question 8

changes/claims estimate

Answer 8

• estimate the cost for additional work outside the scope of the original contract
• when a change order or claim is filed, the contractor has to determine how much he should charge

Question 9

direct cost

Answer 9

any cost that can be associate with a discreet, physical part of a construction project

Question 10

indirect cost

Answer 10

any cost that cannot be associated with a discreet, physical part of a construction project

Question 11

bid formats - schedule of bid items bid vs lump sum bid

Answer 11

• includes the cost of bid items, and can also include lump sum
• lump sum includes lump sum only

Question 12

what are the 7 horizontal categories of cost, and why are there 7 categories

Answer 12

• Labour (L)
• Permanent Materials (PM)
• expendable materials (EM)
• subcontractors (s)
• equipment operating expense (EOE)
• repair and service labor (RL)
• rental, depreciation, write-off (R)

to seperate based on risk. by seeing amounts in each category, the contractor can get a handle on how risky the project is

Question 13

why are PM and EM broken up

Answer 13

to have a high risk and low risk material category

Question 14

PM

Answer 14

any material falling within the neat lines of a DWG

Low Risk
- Not productivity related
- Can be accurately determined and is therefore not volatile

Question 15

EM

Answer 15

any material falling outside of the neat lines on dwgs, plus temporary structures ie flasework, formwork, erosion ctrl

Less risk than direct labor but still potentially High Risk

 Not particularly productivity related but can be very difficult to determine accurately, so always risky
 In some projects can be highly volatile

Question 16

subs

Answer 16

• coverered by performance bond, low risk

Question 17

EOE

Answer 17

• FOG (fuel, oil, grease)
• tires
• small repair parts
• 3rd party overhaul

Highly related to kind of work being performed and can be fairly volatile on equipment intensive jobs

Question 18

RL

Answer 18

Shares risk attributes of direct Labor but normally will not be as high a cost

Question 19

R

Answer 19

Highly dependent on the type of construction project and
on the contractor’s business philosophy and equipment policy
 In-house rental
 Third party rental
 Operated and Maintained (O&M rental)

 With the exception of O&M rental this cost element is not
particularly volatile

 O&M rental, however is highly productivity related and is just as volatile as direct labor

Question 20

L

Answer 20

Highest Risk Cost Element
 Highly productivity related

Question 21

risk ranking from high risk to low risk

Answer 21

• L, RL, O&M
• EM
• EOE, R
• S, PM

Question 22

soft subs

Answer 22

• if a sub has not bonded you are taking on the risk
• a sub you know has a good rep, but no bond and also the lowest bid
• confident work will get done, but still want to cover the risk
• difference to next highest bidder

Question 23

productivity hedge

Answer 23

incase of an over estimation of productivity

Question 24

event

Answer 24

cover the possibility of a specific event like a strike

Question 25

7 vertical categories of cost

Answer 25

direct costs
indirect costs
escalation (labour, material, equipment) - accounting for costs increasing over time
interest - from financing, eg new equipment.
contingency - for unnexpected costs
markup
bond - bond premium, payed to surety. bond costs money

Question 26

5 categories of indirect cost and 2 examples for each

Answer 26

salaried payroll - supervisors
time related overhead - rental of office trailer
non-time related overhead (a one time expense) - office furniture
insuarance and taxes - insurance and taxes
construction plant in and out - installing utilities

Question 27

labour premium

Answer 27

(hrs paid-hrs worked)/hrs worked

Question 28

overtime

Answer 28

a/b/c

a = rate on weekdays, applies only to hrs in excess of normal shift
b = rate on saturdays, applies to PAID shift hrs plus time over wrkd hours
c = rate on sundays and holidays, applies to PAID shift hrs plus time over wrkd hours

any hours on weekend are overtime