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Tendering For Profitable

Building Work

A Guide to The Use of Estimating Data in


the Formulation of Budgets, Quotations
and Tenders
CONTENTS

INTRODUCTION ... Page 3


Introduction
Confidentiality
Continuous Improvement

HOW TO GET THE BEST FROM OUR SERVICE .. Page 4


Using The Estimating Service
The Project Documents
Foreword: Small Works Contractors
Foreword: Main Building Contractors
Foreword: Self Builders

CHECKING AND ADJUSTING ESTIMATES .. Page 11


General Pricing Considerations
Schedule Layouts & Rate Adjustment
Example: Bill Page
Example: Resource Analysis
Form: Price Adjustment Form
Site Check List and Report
Form: Site Check List
Estimate Adjustment Using Software

OTHER COSTS, OVERHEADS & PROFIT ... Page 23


Assembling The Estimate
Form: The Estimate Analysis Form
Provisional Sums, Prime Costs and Dayworks
Attendances
Preliminaries (General Site Costs)
Form: Preliminaries Form
Development Costs
Form: Development Costs Form
Overheads & Profit

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FORMULATING TENDERS ... Page 50
Tender Formation
Form: Tender Summary
Tender Presentation and Terms
Tender Performance

SPECALIST SERVICES ....... Page 56


Primary Services
Additional Services
Approximate Estimates
Design and Build Estimates
Labour and Plant Only Sub-Contracting
Using The Requirements Lists

TERMS AND CONDITIONS OF SALE Page 70


TSA Conditions of Sale

Tendering For Profitable Building Work


Trevor Sadd Associates Ltd
16 March 2004 (Revised 11 January 2005)
Cost Base 2002
Version 2.20

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INTRODUCTION

Introduction
The estimating service we provide has been designed to provide accurate, highly detailed,
low-cost, estimates from plans or specifications in a format that can be easily understood by
building contractors. It is our intention that every element of our pricing is transparent so that
our judgements and interpretations can easily be seen, checked and adjusted, as required,
prior to the tender.
This booklet sets out a number of methods that can be used to individually price work; it also
sets out the context within which estimating data is provided.
Whilst the methods and procedures above will be familiar to most estimators, we can, given
sufficient notice, modify systems to match those of individual builders.
This version of the booklet also includes a number of additional sections, which answer many
of the questions raised by builders during the various stages of the tender process. It also
further defines the distinction between rated work, preliminaries, development costs,
overheads, and profits.

Confidentiality
All information given, collected or supplied will always be held in the strictest confidence.
Furthermore, Trevor Sadd Associates (TSA) will not, without the specific permission of all
parties, undertake estimating work for competing parties.

Continuous Improvement
Trevor Sadd Associates (TSA) is committed to an active policy of continuous improvement
and it is expected that this service will change and evolve. We are therefore grateful for any
comments you may have in relation to the services.
To assist us in monitoring tender levels, it would also be helpful if you could provide us with
copies of your tender submissions together with any adjustments and mark-ups or the
completed Tender Return Forms provided with your estimate.

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HOW TO GET THE BEST FROM OUR SERVICE

Using the Estimating Service


Estimates and approximate estimates are usually undertaken in accordance with fixed fee
quotations based on your requirements and the drawings and specifications provided. The
booklet Products, and Services, Examples and Fees gives an indication of our fee
structure.
We usually confirm receipt of documents on a same day basis and subject to agreement on
fees and program (including fixing a return date) book work in. Work is started as soon as
payment is received and return dates are subject to builders supplying us with any additional
information (usually cost) that is required on the pre-agreed dates. Delay in payment or the
provision of relevant information may delay the return date
Details of how we establish each individual clients building costs are set out in the next
section. Builders will need to return the completed Builders Costs and Sources of Supply
forms with details of any sub-contractors, service or materials suppliers that are required.

Checking and Completing Your Estimate


When you receive your completed estimate you will need to:
STEP 1: Check that the estimate accords with your instructions and that you are comfortable
with the rates used. This usually requires that you:
read through the estimate and also allow for any issues raised in the 01: Pricing
Considerations, 03 Notes and Omissions and 99: Alternatives sections of the bill.
visit the site and check that we have correctly interpreted the drawings. A Site Check
List is provided in the next section.
modify any rates where your performance will be at variance with the averages
allowed. This usually requires that you consider the significant labour items. The next
section provides a Price Adjustment Form to record the changes. However, most
builders simply mark up and total their adjustments on the Bill with a red pen when
they read through it.
STEP 2: Cost the Preliminaries (General Site Costs) section and complete the Estimate
Analysis Form to include any adjustments from Step 1. Then add you overheads and profit.
STEP 3: Consider your desire to secure the works and complete the Tender Formation
Form with any further adjustments that are required.
STEP 4: Formulate an appropriate Tender Presentation setting out your bid including any
terms, conditions, Provisional Sums, Omissions, etc.

Tender Levels
Some of the enclosed forms are designed for larger projects and experienced smaller
builders may wish to allow percentages, rather than individually cost each item. They should
not, however, rely upon preliminaries, overheads and profits percentages allowed in the fee
calculation.

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The fee calculation is not an exact guide to local tender levels in your area. We do not
usually have sufficient feedback to accurately forecast tender levels. However it does give a
proportionate indication of the levels of overhead that would normally be required to manage
the type of work priced.

Using Charge-Out Labour Rates


Estimates can be calculated on the basis of charge-out rates (i.e. labour including some
element of preliminaries, overheads and profit). This is not however recommended, as it
tends to suggest that a fixed percentage should be charged on all works. We believe that the
preliminaries, overhead and profits should be reviewed on a project by project basis (see the
Other Costs Overheads & Profit section).
Our concern is that the use of fixed rates can make builders less competitive when tendering
for simple larger projects or cause them to under price complex smaller projects (i.e. make
insufficient allowance to cover overheads and profit).
Using fixed charge out labour rates can also make it difficult to calculate preliminary,
overhead and profit allowances.

Alternative Formats
Estimates can be set out in a range of formats for example
Building Sections (low cost format)
As specification
SMM7
SMM6
CESMM
Others
The Low Cost Format is set out so that complete sections of the building are shown
together. For example the ground floor section would show separate rates for excavation,
hardcore, blinding, DPM, concrete, insulation and the screed (See the example in the
Checking Adjusting Estimates section).

The Project Documents


To ensure that estimates reflect each individual builders on-site costs we recommend that
builders supply us with as much basic cost information as possible.
In many cases, a simple set of drawings with a few building notes will be perfectly adequate.
Clients should, however, consider that accuracy of any price is always dependent on the
quality of design and cost information supplied.
Please ensure plan copies are clear where further additional copies are to be sent to sub-
contractors or specialist suppliers.
Where possible, clients should also supply us with copy documents that we can retain on file.
If this is not possible we can provide a plan copy service and return your original documents
with the estimate.

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Retained copies are essential if you wish to discuss:
1) details of the completed estimate
2) alterations and variations
3) second stage negotiations
4) further or additional services

Basic Project and Contractual Documentation.


Drawings: location, site plans, layouts and surveys, building details, elevations, sections, etc.
Bills of quantities, schedules of works, specifications.
Details of the main contract particulars and supporting correspondence including: date of
possession and completion, contract type, major amendments, bonds, liquidated damages
retentions, payment, fluctuations, etc.

Basic Tender and Business Information


How you wish your tender to be presented (i.e. lump sum. sub-totals, rated schedules).
Return date.
Overhead and profit levels (for rated schedules).

Supporting Documentation
Structural calculations, specialist design guides, (NHBC, Housing Association, design and
build, etc).
Photos of: site, adjacent buildings, survey of condition, building fabric, etc.
Permissions: Planning, Building Regulations, etc.
Enquiries to, and plans showing the locations of, the major utilities / mains services etc.
Any Development items or costs.

Specialist Details for Material and Sub-Contractor Quotations


Details of any specialist material suppliers or sub-contractor prices you wish us to use.
Details of the terms under which material suppliers and sub-contractors will be employed.

Omissions and Amendments


Drawings that have been produced for Planning or Building Regulations often omit certain
information such as: sections through land or levels, drainage inverts, brick types, roof tiles
type, ceiling heights, door and window types.
Where clients are familiar with sites they can send us additional details from the site
checklist which will be incorporated during the take-off saving themselves re-calculating
costs after the estimate is supplied
All amendments should be faxed to us as soon as they are received as this can significantly
reduce re-measurement costs and reduce the risk of late returns.

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Foreword: Main Contractors
In pricing work for main contractors we have found that it is important for us to understand
how our clients estimating departments work so we can modify our own approach to mirror
those of our client.
Most estimators have a specific way in which they evaluate their own businesses
performance in relation to calculated or supplied costs. They will also have a better
understanding of their own costs in relation to tender levels.
Material and sub-contract quotations are relatively simple to collect, as are hourly costs for
labour and plant. The production rates we set for labour and plant may vary slightly from
those that your own estimator may be using. Any such variation can be eliminated or reduced
in one of the following ways:
1) the builder can supply us with examples of significant production or target rates to be
used for his own work.
2) the builder can supply us with a current priced bill for similar works.
3) the builder can cross check the production rate from the item description, with the labour /
plant column and the resource analysis. In practice this may only require that the builder
check the significant labour items.
Any adjustments can either be made on the estimating program prior to reprinting or
calculated on the estimate adjustment form, which automatically re-calculates the estimate
analysis form.
A range of estimating support services are also available to builders, such as:
measurement of buildings with scheduled quantities in a range of formats.
mail merged letters, forms, etc., from a range of specialist databases for builders
merchant, specialist material and sub-contractors quotations using standard or your
own forms.
a range of self-calculating (Microsoft Office) spreadsheet forms, which can be used
with the estimating data (see the Checking and Adjusting Estimates section)
a working computerised estimating program and their fully rated estimate on disc for
the estimator to crosscheck critical rates.
requirements lists.

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Foreword: Small Works Contractors (General Builders)
Although costing smaller projects is a relatively simple process, competitive tenders for
works under 75,000 tend to be erratic. It is not unusual to see a number of smaller builders
still actively under-pricing this size of project.
There appear to be five main reasons for such price variation:
1) the clients plans and specifications are often unclear as to the full extent of the work,
allowing builders to price for different works, on different terms, often using different
Provisional Sums.
2) builders operating in this market vary from individual tradesmen to medium sized
builders all of whom operate on a differing cost basis. Some smaller builders will work
for wages and will not specifically allow for management or overheads. Contractors
who are not VAT registered may be able to offer rates some 8 12% below those
who are registered.
3) an individual builders desire to win work (see the Tender Formulation section)
4) significant errors in the calculation of the estimate, often due to a lack of skill or
experience on the part of the estimator or a lack of time available in which to prepare
the estimate
5) builders providing differing levels of service or workmanship.
On average our clients win 40 - 50% of the work we price in the under 75,000 category.
These high percentages however tend to reflect the approach our clients have to business
rather than their desire to be overly competitive

Those builders who win a high proportion of the work priced exhibit one or more of the
following characteristics:
a) they rely upon active marketing, relationships with clients, or reputation to provide
them with a high proportion of work, which is not won solely on the basis of price (i.e.
negotiated contracts rather than won through competitive tender).
b) they specialise in a particular area of the market for which they are specifically skilled
or set up and tend to price only that sort of work. Some builders seek out more
profitable niche markets sometimes even creating a market of their own.
c) they are well managed, have a low cost base, usually having a good relationships
with a range of suppliers, sub-contractors, and own their own premises, plant, etc.
d) they have financial control of their business and clearly understand their own costs.
They are able to identify in their tender presentations or quotations what they have
included and what they have left out. They set out their terms and conditions clearly
and keep their clients promptly informed of any price variations or alterations in the
contract.
If you are not winning at least every third or fourth tender you may wish to consider the
suitability of projects and your approach to pricing. If you are winning a high proportion of
tenders, and not making a reasonable profit, you may wish to increase your margins. Further
notes relating to the formulation and monitoring tenders is set out later in this document.
If your business generates a good stream of enquires, estimating costs can be reduced by
excusing yourself from pricing work that: is less suitable, would not prove profitable or that
you are unlikely to win.

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Early considerations in such a selection process would involve checking:
a) that the client has a clear idea of the total costs and a satisfactory payment policy.
b) that the time period allowed and the contracts conditions are satisfactory.
c) that you have suitable management experience, plant, contacts, etc., to undertake
the works. Generally the cost of work reduces as projects get larger. Many smaller
builders struggle to win work outside of the own area of expertise, as they are unable
to achieve low enough material or sub-contract prices to be competitive.
Some builders may have to significantly lower base costs and margins when they are
looking to establish a presence in new area of the market.
d) that there is a good chance of winning the work, i.e. that the work is offered on a fair
basis to a reasonably small number of builders with a similar cost base and where the
client does not have a preference for any of your competitors.

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Foreword: Self-Builders
The estimating services are primarily written for builders and should only be used by persons
who have a reasonable understanding of the building process.
Most effective building businesses have usually, over many years of trading, built up a range
of skills, resources and relationships which allow us to individually cost projects on the their
behalf.
Specifically these builders will have:
1) management experience of similar contracts.
2) known costs for directly employed labour and agreed rates for labour only sub-
contractors.
3) negotiated competitive purchase prices with builders merchants and specialist
materials suppliers.
4) ongoing relationships with sub-contractors from whom they can select those who will
be able to supply competitive prices for any particular project.
5) their own or access to plant (much of which may not be directly charged for).

In most cases self-builders are unable to match the costs of established builders. They do
not have access to directly employed labour or own plant and are usually quoted higher rates
by suppliers and sub-contractors than would be paid by established builders.
Whilst initial budgets can be a little high, they are often invaluable in that they:
1) provide an overview of the projects total cost based on the current proposals.
2) identify potential areas of cost that may not have been considered (i.e. permissions,
utility charges, risk areas, externals, etc.).
3) identify unresolved areas in the design and specification.
4) provide a bench mark (in the form of a fully itemised and priced bill) from which:
a) the design and specification can be reviewed.
b) self- builders can test the competitiveness of their suppliers and contacts.
Requirement lists are also available as an additional service.
c) differing types of contractors can be considered (i.e. contractors who supply
labour only, can be compared to those who supply labour and materials or plant).
d) the use of a main contractor can be considered.

Estimates are not written to be used as specifications or bill of quantities as the descriptions
are designed to set out how we have priced the work rather than specifying exactly what is to
be done.
General advice on letting work is set out in the Consideration of Sub-Contract Bidding
Decisions sections of the Builders Cost Inquiry Return Forms booklet.

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CHECKING AND ADJUSTING ESTIMATES

General Pricing Considerations


Check that you have a complete set of original documents and that we have included and
complied with all your written and verbal instructions. We would recommend that you keep all
the original documents with your priced schedule and obtain further copies before you start
work on site. Keeping the original documentation together is essential if you require any of
the additional services offered by Trevor Sadd Associates (TSA).

Checking Your Estimate


Costs are calculated only for those items shown on your drawings or specifications and
transposed to our schedules. You are responsible for any price you submit (See TSA
Condition of Sale) so you will need to check the quantities, rates and base costs, etc., as you
see fit, to ensure that the works can be completed within budget.
The estimating service does not check or confirm the quality of the design. Those regulations
that are not specified may not be allowed for. Drawings that have been produced for building
under a building notice have not been checked by building inspectors and additional work
may be required. Insurance companies such as the NHBC may also require additional work.
General specification notes setting out that works will comply with a standard or regulation
can only be priced if the drawings or specification clearly state what is required...
Furthermore, designers can leave the extent of the works open to question or supply
conflicting information, or seek to make builders responsible for works that are unclear. (In
interpreting such documents. Generally TSA give covering letters and drawings precedence
over general specifications) Again you will need to clarify who will bear the cost of these
works which in some cases may only be inferred in the tender documents.

Having stated the above our estimators will always employ their best endeavours to seek
out ambiguities, omissions and errors and these will be set out within specific sections in the
bill.
01: Pricing Considerations - Includes factors that clients need to consider, when either
using and checking the estimate,
areas where the nature or extent of work is unclear
risks
errors discovered in the design or specification of the building
03: Notes and Omissions The bill contains items that are intended to be included with
the tender documents submitted to the builder. The bill details the extent of work priced
and points the client must resolve or include as part of his tender presentation.
99: Alternatives Includes items as set out in 01 and 03 but with a priced best guess of
what is required. In most cases Alternatives are costed and then mirrored out (or
deducted) from the schedules total. If these costs are required clients may need to add
back these sums.

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In each case you will again need to confirm our cost interpretation and amend the costs to
allow for what you will be contracted to undertake. Generally builders adopt varying
strategies dependant on the nature of the omission or error:
1) Seek further advice from the person letting the work
2) Omit the item - and clarifying the omission in the tender presentation
3) Price the item - and note its inclusion in the tender presentation
4) Omit the item and negotiate its inclusion at a later time
In some cases, however, care also needs to be taken to ensure that the completed tender
complies with Contract Administrators requirements as failure to do so can mean a tender
will be disregarded. (See Tender Presentations)

Schedule Layouts and Rate Adjustment


This section explains the layout of your estimate and defines the extent of what has been
priced. Each builder will need to use their experience and judgement, as required, to adjust
rates to reflect site conditions and their own business practices. (Under no circumstances
should this priced schedule be used without the builder checking its content and visiting the
site).
General site costs should be costed within the Preliminaries (General Site Costs) section.

The Bill Page


Bill pages form the core of all estimates; they are designed to clearly show how we have
priced the work. This section explains how the bill page is set out and factors you should
consider when adjusting costs.
Simple layouts showing all your costs make it easy for you to understand and adjust prices to
suit any special circumstances, or site conditions, see the example on the next Page.

Description Column
Most descriptions detail the nature of the work that is being undertaken. Descriptions may
also state how that work is to be completed. (i.e. if a foundation trench is to be excavated by:
hand, mini digger or JCB). Having visited the site you will need to decide if the working
method described provides the most suitable or economic method of undertaking the works.
Some descriptions will also refer to ways in which an item is being measured (i.e. in
foundation trench not exceeding 1.00m deep).
Works to be undertaken by gangs are usually shown at the end of descriptions as ratios in
square brackets (i.e. [G2:1] ratio of tradesmen to labourers).

Unit Column
Most items are measured by the nr (number), m, m2, m3, sum, Provisional Sum (PS) or
items. All areas measured in m2 are for areas exceeding 300mm wide

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Qty (Quantity) Column
The total quantity of any description. Quantities are generally rounded to the nearest whole
unit (as above).

BUNGALOW C - FLOOR Example Bill Page


Description Unit Qty Rate Amount Labour Material Plant Other

Excavate to reduce levels in firm soul not exceeding m3 33.00 3.83 126.39 - - 126.39 -
1.00m deep by JCB 3cx and set aside in spoil
heaps

Muck away soil including loading with JCB 3cx and m3 33.00 13.20 435.60 39.60 396.00
al tipping charges, etc

Compacting surface of excavations and surfaces to m2 100.00 0.36 36.00 30.00 6.00
receive filling with Bomag 71 single drum vibrating
pedestrian roller

Filling with imported hardcore, spread with JCB 3cx m3 15.00 34.64 519.60 73.50 382.80 63.30 -
average thickness not exceeding 250mm,
compacted in 150mm layers with Bomag 71 single
drum vibrating pedestrian roller

Blind surface with 50mm sand to provide smooth m2 100.00 2.54 254.00 75.00 112.00 67.00 -
surface to receive overlays or paving moved by JCB
3cx

Polythene damp proof membrane, 250mu, m2 100.00 0.94 94.00 60.00 34.00 - -
horizontal, lapped jooints

Floor insulation Celotex 50mm thick m2 100.00 8.24 824.00 90.00 734.00 - -
In situ concrete GEN2 to plain ground floor bed not m3 10.00 80.97 809.70 175.00 634.70 - -
exceeding 150mm thick with ready-mix (6m3)

Floor screed 1:3 cement-sand 65mm thick site m2 100.00 9.97 997.00 538.00 429.00 30.00
mixed [G1:1]

To Collection 4,096.29 1,041.50 2,326.50 332.29 396.00


Cost Base June 2002

Both floors and ceilings are measured gross through internal partition walls. External and
internals skins with all wall finishings are measured to the walls centre line. Builders should
make minor adjustments to these quantities prior to ordering materials from schedules.
Where plans are not fully dimensioned quantities will have to be scaled. Accuracy can be
impaired by distortions in copying and through the use of high ratio scales by the designer.

Rate Column
The unit rates can be analysed by dividing each resource total, i.e. labour, material, plant,
other by the quantity for that item. All resource costs are net of discount, and include waste.
Rates are calculated on an individual basis and may not be appropriate for other works.
Builders may, from time to time, also need to adjust rates to allow for various market
influences caused by volumes of work, shortage of materials, special events, etc.

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Amount Column
Provides a cost for each description totalled from the Labour, Material, Plant and Other cost
columns.

Labour Column
Where rates are not supplied, TSA calculate individual rates for each activity from your
hourly labour costs. Our database contains thousands of work descriptions, each with its own
production rate (i.e. a labourer taking just under 3 hours to excavate 1m3 of firm soil by hand
in foundation trenches).
These production rates (known as labour constants) are like those set out in price books,
they set out the average speed at which directly employed labour completes work. The
format of the bill pages allows clients to adjust labour rates where their levels of production
are at variance with our averages. i.e. you may adjust your estimate to reflect the costs of
using tradesmen or gangs who are quicker or slower than the average labour constant.
Within any estimate Labour costs are likely to show the greatest variation, as no two men
work at the same pace or produce the same volume of work.
Builders who pay tradesmen above the BATJIC rates for higher rates of production will need
to correct over-provisions in labour costs. A detailed discussion of this matter is set out in the
Labour Section of the Building Cost Inquiry Return Forms booklet
Individual labour constants can be calculated by dividing an item Labour Total by its quantity
and then by the labour or total gang cost as set out from your costs (see the Labour
Resource Analysis at the end of your estimate).

In competitive tender situations, some general builders may need to achieve lower labour
costs than those allowed, if they are to win the work. This need to reduce costs becomes
more evident as projects increase in size.
A few methods that can be used to reduce labour costs include:
increased production through training or improved management, foreman or trade
supervision.
improved procedures to reduce time lost, error, etc.
increased use of specialized or dedicated trades to achieve higher levels of
production or the use of gangs, semi skilled labour, apprentices and unskilled labour.
use of target rates and bonus schemes.
increased use of plant, i.e. scaffold, lifts, mechanical plant, etc
use of labour only sub-contractors on a priced or day-work basis (or improved
quotations from same).
use of domestic sub-contractors supplying materials to reduce site and overhead
costs.
Labour rates only reflect the cost of completing the items described and builders will need to
make specific provisions for overtime, travelling, preliminary items, etc.

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Materials Column
The Materials Resource Analysis sheet, at the back of your estimate, sets out your costs
including discount and waste levels that have been used in calculating your rates. All these
major cost elements are based upon your Builders Merchant or Builders Cost Inquiry Return
Form.
In some cases material prices will need to be discounted as builders are often able to
negotiate significantly lower prices when they have a firm order to place.
Some materials may be costed on a 'similar or better' basis to specified brands where such
substitution will not make any significant difference to the overall rate. (i.e. Osma for say
Marley PVCu drainage pipes). TSA use the brands stated in the Builders Cost Inquiry Return
Forms where brands are not specified
A few methods that can be used to reduce material costs include:
obtaining a number of quotations from alternative suppliers.
re-negotiating quotations down prior to ordering.
reducing waste though careful site management, accurate setting out and preparation
of beds etc.
using domestic sub-contractors who supply materials.
Prices for second hand or reclaimed materials are approximate as their costs may vary
dramatically based on their availability. You should check availability and cost prior to tender.
It is assumed that materials will be put out to quotation and delivered in bulk. An allowance
should be added if materials are to be collected on an "as required basis. No allowance has
been made for excess water in materials (i.e. aggregates).
Builders should make allowance for costs and overheads incurred in fixing materials supplied
directly by the client to allow for: damage, responsibility, ordering, and any problems
associated with the same.
Quantities in any quotations from Builders Merchants are approximate as they have been
sourced prior to detailed measurement.

Plant Column
Plant costs rates are set out in Materials Resource Analysis at the end of your estimate.
Where descriptions, which state that a plant rate includes a specialist operator (i.e. JCB), the
operators cost will be included within the plant column. Semi-skilled or unskilled operators of
general plant (i.e. Dumpers) will be costed separately within the Labour column.
All plant rates include fuel.
Plant rates are based on weekly hire rates with discounts of up to 15% dependant on the
size of the project. Builders who own items or account for certain plant as paid for against
earlier works may wish to reduce the allowance for plant in competitive tenders. In some
circumstances purchase of plant provides a cheaper option than hire.
Plant that is to be hired on a short term basis may need to be increased where builders have
not agreed terms with plant suppliers.
The collection, transport and return of plant should be allowed for within the preliminaries.

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Other Column
The other column is used to cost works such as
domestic Sub-Contractors (usually specialist firms who supply their own materials).
provisional sums, prime costs, contingencies, etc.
quotations.
small or unusual items priced with a general rate, or on a lump sum basis.
an Extra Over (E.O.) item where we have adjusted for any difference from a standard
TSA rate in pricing an unusual or optional item.
Most costs that are shown in the other column will be entered as bare or hollow rates and
will not show a breakdown of labour, material, plant costs in the resource sheet. With E.O.
items only the original standard rate items will show in the resource analysis sheets.
Larger builders establish a network of competitive Domestic Sub-Contractors through whom
they can reduce both their site and overhead costs. Many specialist Domestic Sub-
Contractors offer design, management, a pool of skilled and semi skilled labour, efficient
procedures, plant, bulk material costs, reduced waste. They also reduce the sections of the
builders tendering risk.

Cost Adjustment Form


The following form can be used to transfer adjustments to the Estimate Analysis Form with a
full breakdown of the cost elements.

Cost Adjustment Form


Code Page Ref Notes Labour Material Plant Other TOTAL
00 Nr. A-Z

Adjustment For Project Size


Working In Occupied Premises
Carried Forward - - - - -

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The Resource Analysis Sheets
A set of Resource Analysis sheets for the four cost groups (labour / materials / plant / other)
are provided at the end of each builders estimate. These lists show each items: net cost,
allowance for waste, discount etc.

Description Unit Supply Supply Disc Waste Total Supplier Cost Details
Qty Qty % % Cost Code

AG: Hoggin ton 1.0 12.00 5.0 12.600 01-Jun-02


AG: Sand ton 1.0 14.00 5.0 14.700 01-Jun-02
Cement OPC (Bagged) 25kg 1.0 4.50 4.0 4.680 01-Jun-02
Concrete GEN 2 Ready Mixed m3 1.0 60.45 5.0 63.473 01-Jun-02
Ins: Celotex GA 3050 50mm m2 2.9 20.48 4.0 7.345 01-Jun-02
Polythene Sheet 250mu m2 100.0 29.50 4.0 0.307 01-Jun-02

Cost Base June 2002

The Requirements Lists


A list of requirements (with approximate quantities) is also supplied with each Builders
Estimate. This list allows builders to consider the sensitivity of all cost elements. Again these
lists are provided in the four cost groups (labour / materials / plant / other)
Requirements lists should not, however, be used for ordering materials etc. unless the have
been adjusted or corrected for that purpose (see Using Requirements Lists on in the Other
Services section at the end of the booklet).

REQUIREMENTS
Schedule Name: BUNGALOW C - FLOOR 15-Mar-04
Cost Type: MATERIAL Page No: 1
Description Unit Cost Required Waste Total Unit Total Supplier Date
Code % Required Cost Cost

AG: Hoggin ton 30.375 5.0 31.894 12.0000 382.725 01-Jun-02


AG: Sand ton 16.100 5.0 16.905 14.0000 236.670 01-Jun-02
Cement OPC (Bagged) 25kg 65.000 4.0 67.600 4.5000 304.200 01-Jun-02
Concrete GEN 2 Ready Mixed m3 10.000 5.0 10.500 60.4500 634.725 01-Jun-02
Ins: Celotex GA 3050 50mm m2 100.000 4.0 104.000 7.0621 734.455 01-Jun-02
Polythene Sheet 250mu m2 110.000 4.0 114.400 0.2950 33.748 01-Jun-02
2,326.523

Cost Base June 2002

TF-17
Site Check List and Report
The list is provided to assist builders in checking estimates on site. It offers a list of common
areas where potential costs may not be clear from the plans or specifications supplied. The
list should not, however, be regarded as comprehensive and builders will need to apply
judgement in identifying costs areas that require reviewing.
Each estimate is based on what is shown in your plans and specifications and only extends
to what is detailed in the bill pages. Particular attention should be paid to:
drawings that have been produced to a planning or building regulation standard only -
often lacking much of the detail that is required for tendering.
drawings or specifications of conversions, alterations and repairs
sites where the condition of the property is significant to the extent of the work
sites where there are problems of access
sites where there are changes in levels

In all cases you will need to add those costs that are properly required to your estimate and
are to form part of your tender.
TSA will, where possible, identify any such areas that are not clear in the sections
01: Pricing Considerations
03: Notes and Omissions
99: Alternatives

Site Check List and Report


Project: Date Of Visit: By:
AREAS OF POTENTIAL COST COST ITEMS VALUE

ACCESS & PROTECTION


Overhead or height restrictions: cables, bridges overhead services, etc.,
shrouding same.
Weight restrictions: soft ground conditions, bridges, temporary hard-standings
risk of damage to drains etc.
Width restrictions, limiting access to plant (i.e. excavators) or deliveries (i.e.
crane off load or concrete mixing lorries)
Permissions and agreements for access, scaffolding etc. where work abuts or
adjoins a neighbours property, without cost to you (i.e. Party Wall Act).

CLEARANCE & DEMOLITION


Clearing any business, personal, domestic items (including carpets) and the
disposal or storage of the same
The removal of, storage, maintenance, reinstatement, or working round: trees,
bushes, plants, roots, hedges, gardens, etc.
The demolition and removal of, and reinstatement of buildings, hard-
standings, foundations, drains, patios, walls, fences, etc.

TF-18
Works associated with underground structures such as wells, cellars,
basements, septic or fuel tanks, soakaways, chambers, drainage,
Costs in: obtaining rights, connecting to, locating, services (i.e. water, gas, oil,
soft-water and foul sewers, electricity etc.).
Utilities crossing or adjacent to the site.

Evidence of hazardous, contaminated or waste materials such as asbestos


(As found in Artex, roofing felt, thermoplastic tiles) where specialist costs or
licences will be required for removal.
Evidence of contaminated soil such as waste from demolition (i.e. asbestos) or
from past use (i.e. oil, creosote, etc) or general waste materials including any
specialist costs or licences will be required for removal.
Additional distance or charges in removal of waste materials

ALTERATIONS & REPAIRS


Alterations or repairs extending beyond those shown on the plans, i.e. if an
opening has been formed in an existing wall. (NB we will have allowed to make
good the immediate plastering and touch in decorations, etc.)
Additional structural works such as: thickening, stiffening, underpinning,
repairs, etc., to accommodate the new works.
Features of the site or buildings such as imperial brickwork, etc

Adjacent areas that are not structurally sound or in need of repair prior to,
during or after demolitions (e.g. dry or wet rot, structural collapse, replacing
brickwork, dubbing out plasterwork, etc.)

GROUND CONDITIONS AND LEVELS


Work necessitated by uneven ground. All ground is assumed to be level
unless levels or sectional drawings are sent to us.
Working round, shrouding, protecting, repairs to, damage from, rerouting,
maintaining, underground private or public: water mains, electricity mains or
services, Telecom or other cables, oil or gas pipes, soil or foul sewers or
drains, septic tanks, land drains, soakaways, etc.
Where details of the ground strata are not specified, we will assume the
ground to be of a firm soil with a 150mm vegetable soil cover.
Extra work caused by capping, filling, or removing: underground tanks,
basements, wells, etc.
Thickening, deepening, widening or reinforcing foundations, oversite slabs, or
hardcore or designing of the same, or for associated works such as expansion
boards
Flooding or pumping ground water from foundations, etc.

Surrounding trees affecting foundation design.

More than 3 courses of external facing brickwork below DPC to suite ground
conditions
Extent of work required when not shown on drawings. I.e. external surfacing,
landscaping, fences etc.

TF-19
DRAINAGE
Laying drains below 1 meter deep. If drain invert levels have not been shown
on sectional drawings it has been assumed that the average invert level is
750mm
Condition of existing drains necessitating repair or replacement

Location of existing sewers, inspection chambers etc., including allowing for


depths
Breaking or making good surfaces (including roads or highways) for drain or
other services

SUPERSTRUCTURE
Right of support to adjoining property

KITCHENS AND BATHROOMS


Kitchen designs including units, fittings and wall tiles

Bathroom designs including sanitary-ware, fittings and wall tiles

SERVICES
Electrical and heating designs

Hot and cold water supplies

Works required to provide new feeds etc., to heating, water or electrical


services
Works required to upgrade the principal sources (i.e. boilers, fuse boards, etc.)
for new services.
Kitchen and bathroom designs including units and sanitary-ware.

PREPARATION & FINISHINGS


Special external finishes, brick bonds or specialist pointing

Finishings such as coving, curtain rails, specialist decorative finishes

Works of an above average quality of tradesmanship (i.e. such as quality of


painting and decorating required)
Special levels of preparation (i.e. special works to prepare cleanse, remove
surfaces, burn off, etc.

GENERAL
Any other unseen or additional work not shown in the estimate.

INADEQUATE DESIGN OR SPECIFICATION


Are there any descriptions where the extent or quantity or nature of the work is
unclear?
Are there any conflicts between descriptions on: covering letters, plans, bills,
specifications, preambles, etc?
Are there any Inadequate or open ended details or specifications.

TF-20
Does the specification seek to make you responsible for works which are
unclear

PRELIMINARIES
Any additional works or measure required in costing the preliminaries such as:
security or phasing. (NB also see Preliminaries Section)
Some site layouts suggest that a particular working method may be required
(i.e. hand rather than machine excavation). You should check that you agree
with our interpretation. For examples, existing walls, fences, changes in level,
planting, etc., are not shown on the drawings
Working in occupied premises. (i.e. working in occupied premises could add
significantly to the labour content of an item).
Working in special conditions such as an area in/under water or with limited
working space.
Are there suitable external areas available for the storage of plant, materials
etc?

OTHER NOTES

TF-21
Estimate Adjustment Using Software
The estimate adjustment form as set out in the last section can be used to record any
adjustments (with full resource analysis) to the estimate.
Estimates can be supplied on full working copies of our program discs. This additional
service allows customers to adjust quantities, resource costs, production rates, and margins
(preliminaries, overheads and profits) within the schedules. Adjusted schedules can then be
transferred back to our office (by disc or e-mail) for printing
A range of self-calculating (Microsoft Office) computerised forms, which can be used with the
estimating, program above can also be supplied, such as:
Preliminaries Calculator
Estimate Adjustment Calculator
Estimate Analysis Form
Tender Formulation Form

TF-22
OTHER COSTS OVERHEADS & PROFIT

Assembling The Estimate

The Estimate Analysis Form


The first page of your estimate, the Estimate Analysis Form, provides the builder with an
initial overview of the project costs.
This form can be completed together with any adjustments from the Adjusting Estimates
section. Costs should still, at this stage, represent the realistic site costs. Adjustments for
commercial considerations can be made at the Tender Formation stage.
The form has been broken down into fifteen different work categories so builders can add
appropriate overhead percentages to each.
the O/H % column shows what percentage of each cost category has been used in
calculating the overheads figure in the fee total.
the A% column shows what percentage of the site cost and the total cost the various
costs categories constitute.

Completing The Estimate Analysis Form


1) An Estimate Analysis Form will be provided with the first Fee Calculation column
completed with each estimate.
Totals from the summary sheet will have been transposed from the bill. If we have
calculated Provisional Sums for Domestic Sub-Contractors these will be shown with the
other Provisional Sums.
2) Copy any cost totals calculated for adjustment from the Cost Adjustment Form into the
Builders Adjustments column. Any late adjustments can also be made at this time.
This can also be used to calculate any other adjustments such as buy down, inflation etc.
3) Calculate new totals in the Estimate (New Total) for 1 above and then calculate and
insert your own Preliminaries (General Site Costs) totals.
4) Insert your normal allowances for overheads and profit in the Estimate (New Total)
column.
5) Lastly you should add for any day-works and any undefined provisional costs or
contingencies in the Estimate (New Total) column.
We do not usually make any provision for Development Costs such as: local authority,
planning, listed building, building regulation, design, utility, statutory undertaking, public body,
infrastructure charge, connection charge, or other fees, rates or taxes, etc., unless instructed
to do so.

TF-23
O/H Fee A Builder's Estimate
% Calculation % Adjustments (New Totals)
Own Works
Labour 20.0 17,500.00 40.0 - -
Material 5.0 15,000.00 34.3 - -
Plant 5.0 1,500.00 3.4 - -
Other 10.0 1,000.00 2.3 - -
35,000.00 80.0 - -
Nominated & Sub-Contract
Domestic Sub-Contractors 5.0 4,500.00 10.3 - -
Nominated Sub-Contractors - - - - -
Nominated Suppliers - - - - -
4,500.00 10.3 - -
Provisional Sums (Defined)
Provisional Sums (Specifier) 5.0 500.00 1.1 - -
Provisional Sums (TSA) - - - - -
500.00 1.1 - -
Adjusted Total 40,000.00 - -
Late Adjustments - - - - -

Preliminaries
General Site Costs - - - -
Development Costs - - - -
Other 9.3% - 3,730.00 8.5 - -
3,730.00 8.5 - -
Total Site Costs 43,730.00 100.0 - -
Overheads 4,675.00 - -
Profit 5.0% 2,186.50 - -
Dayworks - - -
Provisional Sums (Undefined) - - -
Other - - -
(Fee Total) 50,591.50 - -
VAT 17.5% 8,853.51 - -
59,445.01 - -

Late Adjustments & Estimators Notes

TF-24
Provisional Sums, Prime Costs and Dayworks
Provisional Sums are sums included in bills of quantities for work anticipated but insufficiently
designed or detailed to permit descriptions and measurements. These are sums of money
that are inserted to approximate the value of an item until a specification has been agreed at
which time the real cost can be charged by the builder to their client.

There are three types of Provisional Sums or costs:


1. Defined Provisional Sums
Sums where the nature, quantity and extent of the works can be defined.
2. Undefined Provisional Sums
Undefined sums can be further split into types:
I. those sums for specific items where the extent of which is not known
II. Contingencies or work which cannot be identified at the tender stage, usually
allowed for unforeseen circumstances.
3. Prime Costs (PC)
Prime Costs are used in Bill of Quantities and specifications where the PC sum is the cost to
the builder of specified materials, or works to be carried out by nominated sub-contractors or
provided by specific suppliers.

Profits and Allowances within PSs and PCs


Under SMM7 measurement rules defined PS and PC sums are allowed as net costs
excluding profit and undefined PS and contingencies should be deemed to include profit and
overheads.
These rules relating to overheads and profit are not universal to all specifier's or
measurement systems and further advice should be sought where the terms are unclear.
It is also important to establish whether Provisional Sums make any allowance for Builders
Work or attendances.

Dayworks
Are works ordered and paid for on an hourly basis. Specifier's may require builders to include
rates or values for such sums in tender sums or supporting information with the tender.

Attendances
General Attendances are sums which the main contractor allows for facilities which are
normally available to nominated sub-contractors and suppliers where they are provided by
the main contractor to meet his own needs and allowed for within the Preliminaries.
Nominated Sub-Contractors / Suppliers are sub-contractors or suppliers, sometimes utilities
who are selected by the designer or specifier and not by the contractor.

TF-25
General Attendances are distinct from:
Special Attendance, Special and additional works required specifically for the nominated
sub-contractors and priced for by the main contractor. Examples include: scaffolding,
unloading, covered storage, heating and drying out.
And
Builders Work, Items of builders work required for the nominated sub-contractor and
priced for by the main contractor.
Which should be identified and charged against specific rate or preliminary items.
General attendances are not usually allowed on Domestic Sub-Contractors (those
contractors selected and employed by the main contractor. Often specialist firms with some
element of management and supplying labour, material and its own small plant).

General Attendance
Whilst the value of Nominated work can form a substantial part of a bill, many contractors do
not price all the General Attendances and will rarely charge more than a single figure
percentage on any item. Pricing policies vary. Some Main Contractors find it simpler to make
provision for both Nominated and Domestic Sub-Contractors on a whole project basis within
the projects preliminaries.
However the costs associated with the employment of Nominated sub-contractors should be
thought about and consideration should be given to:
a) the likelihood of each Nominated Contract forming part of the Main Contract (On
some occasions Nominated Costs are included for the clients budget and will not
form part of the Main Contract).
b) the cost of managing or co-ordinating the works (Including the degree of responsibility
which will be placed upon the main contractor).
c) what additional services and facilities will be required by each Nominated Contractor?
d) the effect that each Nominated Contractor will have upon the co-ordination and
duration of the main contact.
e) The contractual risk associated with each Nominated Contractor. (Experienced
Contractors can usually reduce or negate most of this risk through: management
systems, careful adherence to the contract conditions, insurances and retentions).
f) the financial effect on the business.
g) how the Nominated work is to be let.
h) previous experience with the contract administrator and client.
i) whether costs should be allocated in any particular manor to accommodate changes
in the value of Nominated work.

TF-26
Preliminaries (General Site Costs)
The CIOB Code of Estimating Practice defines Preliminaries as the cost of administering a
project and providing general plant, site staff, facilities, and site based services and other
items not included in the rates.
To further define Preliminaries and assist builders in their pricing we have divided the pricing
process into five sub-sections:
A. The Importance of Understanding Preliminaries
B. The Three Step Approach to Pricing Preliminaries
C. Preliminaries Priced Examples
D. Further Advice on Pricing Preliminaries
E. The Preliminaries Tables
F. Using the Preliminaries Tables

A. The Importance of Understanding Preliminaries


Pricing the Preliminaries probably requires more judgement than any other cost area. It
requires that you have a clear understanding of what costs have been allowed within the
rated work, what general costs will be required to run the site and what costs are allowed for
within overheads. For many businesses these distinctions are not clear-cut. For example, a
smaller contractor will rarely separate and charge each hour of a managers or a foremans
time into:
1) completing trade work,
2) managing work on site,
3) pricing prospective projects
Moreover, to accurately price Preliminaries suggests that you are able to predict and cost
how a project will turn out (including a suitable allowance for all the problems that you will
incur)
Some builders with experience of a particular type of works may allow a percentage for the
Preliminaries (excluding Provisional Sums, etc.) based on previous projects.
The percentage approach can, however, be prone to risk for less experienced builders who
lack an understanding of the costs involved. For example, over the last week, we have
discussed projects with clients who have costed preliminaries varying from:
a 4.5% allowance for a specialist company tendering for a large new project
a 9.5% allowance for a new house
a 24% allowance for a small company tendering for a particularly tricky refurbishment
(lots of scaffolding and provisions for working in an occupied premises)

Pricing Preliminaries is also clearly a key stage at which clients begin make commercial
judgements relating to their desire to secure the work. For these reasons builders should
NOT rely on the average percentage allowance set out on the on the Estimate Analysis
Form We do not, unless specifically instructed, have enough information about each
individual companies working practices to properly cost this area of the work. Our allowance
should be removed and replaced with a properly costed figure based on your own
calculation.

TF-27
B. The Three Step Approach to Pricing Preliminaries
The accurate pricing of Preliminaries requires that builders anticipate all those general site
costs associated with a project. However, this is an area that is not always given the
attention of the rated work and few contractors will approach this area of pricing in the
same way:
Generally speaking the more difficult a project is to manage the higher the preliminaries
costs will be. Most of these difficulties or costs will be evident in the projects particulars. A
lack of design, poor access, onerous contractual conditions, dual use of the site by others,
etc.
We advocate a three step approach to the pricing of Preliminaries
1) the first step is to understand and price the known (or definite) costs
2) the second step is to consider and cost the commercial factors.
3) the third step is to consider how these costs and risks are to be allowed for within the
tender presentation
This three step process allows you to clearly identify the commercial (or variable) allowance
within the Preliminaries element during the adjudication process. This is especially important
if you are considering reducing the tendered sum

Step 1 - Pricing the Known Costs


Having established an accurate cost for the work, it is important for the estimator to under-
stand all the key factors relating to the project so that the predicable or known costs of the
Preliminaries can be calculated. These are the costs that you know that you will definitely
incur
Examples of the projects key factors
Layout of the site together with access and the usable areas
An outline project program setting out the order of works and the critical items
Key areas of work and the amount of labour and plant that each require
Works by the main sub-contractors
An outline security and safety plan
A list of the key contractual requirements
Any risks (to be noted and priced in Step 2)
The estimator can start to cost the known Preliminaries (once the key factors have been
established) using a check list such as the Preliminaries Tables.
At this stage it is essential that the estimator is aware what has been allowed for in the non-
preliminary site costs and the overheads so as to avoid the duplication of costs
The estimator should also restrict the pricing to a best assessment of how the project will be
undertaken noting any concerns to be costed at the second stage. A concern, for example,
relating to overtime may require knowledge of how the projects program will impact upon and
be affected by other contracts.

TF-28
Step 2 Pricing Commercial Considerations
The second and more difficult factor in pricing preliminaries is the balancing the risk and
reward against the likelihood of securing the work. This will depend upon:
the desire to secure work
the suitability of the work (including experiences of similar projects, skills, weather,
etc.)
the contractual risks
miscellaneous other factors (prestige of the works, etc.)

The desire to win the work will be further effected by the businesses workload and any other
opportunities in the market, for example:
secure projects
outstanding tenders (and the likelihood of success)
other opportunities.

In an ideal world, it is assumed that a builder would already have rejected projects with high
levels of risk.
However, in practice, contracting usually involves some risk and this can be dealt with in a
number of ways, for example
costed by the builder on an item by item basis, (based on the level of risk)
offset or sub-contracted to others
offset within the tender through the use of exclusion clauses (usually agreed prior to
tender)
instituting procedures and training
insurance
Further details of factors effecting such commercial decisions are set out in the Formulating
Tenders section and the Sub-contract Pricing Considerations section of the booklet
Building Costs and Sources of Supply
In most cases the analysis proposed can be simply achieved by pricing the items in two
columns.
Step 3 Presenting Preliminaries in the Tender Documentation
Care should be taken to ensure that any areas of uncertainty have been clarified and, where
appropriate, excluded in the tender presentation
The presentation of Preliminaries costs, like rated work, can have a significant effect on both
cash flow and profitability and these areas are further considered in the Presenting Tenders
section.
C. Preliminaries - Priced Examples
For the purposes of these examples we have used a simple bungalow for the first calculation
C1. We have then considered the extra over cost of the Preliminaries if we were to undertake
a similar amount of work on similar bases but in:
C2 the form of a large extension to an existing building

TF-29
C3 an inner city location

C1. A New Bungalow (60m2)


Based on a 14 week project, (rated cost 40,000) with architectural supervision (including
CDM regulations)
The site is reasonably secure site, with good access located on the outskirts of town. The
site owner (and client) is coving all the development costs including insuring the property and
supplying the electricity, water, etc., from an adjacent property.

Category Cost Description Unit Wks Rate Total Notes


P02 Management & Staff
Project Plan Nr 1 40.00 40.00
Contracts Manager Charged to overheads
Site Foreman Charged 2 hrs / day + bonus Wks 14 186.00 2,604.00 Cost 12.50 with 1.50 bonus
Quantity Surveyor Valuations and final account - Charged to overheads
P03 Site Accommodation
Site Office / Toilets With drying facilities Each 14 5.00 70.00 Cleaning only
On / Off site Each 2 20.00 40.00 Owned - no hire
P04 Attendant Labour Costs
Attendance On DSC Included in rates
Cleaning On Completion Nr 1 120.00 120.00

P05 Miscellaneous Labour Costs


Insurance's Contract Works Nr 1 150.00 150.00 1% of labour
P06 Facilities & Services
Telephone Mobiles Calls Wks 14 10.00 140.00
Health Safety & Welfare As foreman in P02
Security Compound Nr 1 60.00 60.00 Own units
P07 Temporary Works
Setting Out As foreman in P02
P08 Mechanical Plant
Excavating Equipment To/From Site Nr 2 18.00 36.00 In rates
Mixers / Compactors To/From Site Nr 1 - - In rates
P09 Non-Mechanical Plant
Small Plant & Hand Tools Sum 1 20.00 20.00
Scaffolding (External) Erect, Dismantle, Hire Nr 1 450.00 450.00 As quotation

Percentage of Contract 9.3% 3,730.00 Site Works 40,000


P14 Notes
Sections P01, P10-13 = Nil cost
Cost Base June 2002

TF-30
C2. A New Extension (Additional Costs)
In this second example we consider some of the additional costs over and above C1, that
could be incurred in connecting a new extension to an existing building

Category Cost Description Unit Wks Rate Total Notes


P02 Management & Staff
Site Foreman Charged extra 3hrs week Wks 14 36.15 506.10 Additional clients needs
P04 Attendant Labour Costs
Cleaning As Work Proceeds Wks 14 30.00 420.00 After breakthrough in rates
P05 Miscellaneous Labour Costs
Unproductive Time No noise before 8.15am Nr 1 100.00 100.00 Partial charge for some delays

P06 Facilities & Services


Security Making building secure Nr 1 250.00 250.00
P07 Temporary Works
Maintain Live Services Nr 1 200.00 200.00
P11 Contractual Conditions
Limited Working Space Some of site storage Nr 1 100.00 125.00 Some double handling

Additional Costs Percentage of Contract 4.0% 1,601.10

Cost Base June 2002

C3. An Inner City Project (Additional Costs)


The cost implications of working on inner city projects can be significant, for example: limited
access, providing support for neighbouring properties, increased security, limited working
hours, special licences or permits (i.e. for scaffolding, skips, etc.)
In this example we consider the some of the additional costs over and above C1 associated
with travelling, over and above those of the preliminary and overheads costs not shown on
the C1 site. No allowance has been made for any congestion charges or car parking fees.

Category Cost Description Unit Wks Rate Total Notes


P04 Attendant Labour Costs
Parking Wks 14 42.00 588.00 Off site parking allowance
P05 Miscellaneous Labour Costs
Travel Allowance 1 vehicles petrol allowance Wks 14 15.00 210.00 Own staff only
Travel Allowance Use of own vehicles Wks 14 35.00 490.00 Additional to overhead allowance
Unproductive Time Average 45min per day Wks 14 50.22 703.13 Total as paid to operatives
Percentage of Contract 5.0% 1,991.13 ADDITIONAL COST

Cost Base June 2002

TF-31
D. General Advice on Pricing Preliminaries
This section sets out a number of methods that builders use to further consider Preliminary
costs. Understanding the specific data calculated from part B, Step 2 together with methods
1 3 below provides the user with significant information about how variations to the duration
and value of the project can affect the tendered sum, as well as the risk, profitability, cash
flow of the project.
In most cases the analysis proposed in methods 1 to 3 can be simply achieved by setting
pricing out in added columns on your check list.

Method 1 Using Set Up, Fixed and Variable Cost Analysis


Builders most commonly separate their costs into three cost areas.
1) Set up Costs i.e. the initial costs involved in starting or setting up the site
2) Fixed Costs i.e. the on / off costs of moving plant
3) Variable Costs i.e. any cost that is relative to time or value such as management,
site huts etc
The advantages of this breakdown are set out in the Formulating Tenders section

Method 2 Using Ownership Cost and Hire Cost Analysis


Builders also vary in the way in which they charge for items. Contractors who own plant
such as site huts, scaffolding, etc., may wish to gain a competitive edge by charging these
items at cost (i.e. for delivery, set up, maintenance, removal, collection etc., together an
allowance towards the capital cost (or depreciation).
Another contractor may elect to, or have to, allow the full hire cost

Method 3 Using Labour / Materials / Plant / Sub-Contract / Other Analysis


If an element of off-site overheads are to be charged on some parts of the Preliminaries a
breakdown of resources can be used to provide a breakdown of the relevant cost areas

Method 4 - Using Percentages


As previously stated, some experienced builders like to consider Preliminaries on smaller
projects (like off site overheads) as a percentage of turnover. This approach requires a
significant amount of judgement.
One way to improve this approach, is to calculate the actual preliminaries costs of similar
completed projects for the first 12 sections of the Preliminaries Tables and then consider
these individual costs as percentages of the total cost

TF-32
The Preliminaries Tables
Date:
Preliminaries Summary
Category Notes Total Comment
P01 Employers Requirements -
P02 Management & Staff -
P03 Site Accommodation -
P04 Attendant Labour Costs -
P05 Miscellaneous Labour Costs -
P06 Facilities & Services -
P07 Temporary Works -
P08 Mechanical Plant -
P09 Non-Mechanical Plant -
P10 Miscellaneous and Unlisted -
P11 Contractual Conditions -
P12 Adjustments -
P13 Specifier Costs -
-

Site Costs Preliminaries % (As a % of Site Costs)

Preliminaries Costs
P01 Employers Requirements
Ref Category Cost Description Unit Wks Rate Total Comment
01 Accommodation
02 Telephone
03 Connection/Installation
04 Call Charges
05 Equipment
06 Others
-

P02 Management & Staff


Ref Category Cost Description Unit Wks Rate Total Comment
01 Contracts Manager
02 Programmer
03 Project Plan
04 Site Plan
05 Quantity Surveyor
06 Agent
07 Engineer
08 Support Staff
09 Site Forman
10 Trade Forman
11 Watchman
12 Others
-

TF-33
P03 Site Accommodation
Ref Category Cost Description Unit Wks Rate Total Comment
01 Site Office
02 Mess Room
03 Drying Facilities
04 Storage
05 Containers / Stongbox
06 Toilets
07 Others
-

P04 Attendant Labour Costs


Ref Category Cost Description Unit Wks Rate Total Comment
01 Transport & Haulage
02 Unloading & Distribution
03 Attendance On DSC
04 Cleaning As Work Proceeds
05 Cleaning On Completion
06 Reinstatement
07 Others
-

P05 Miscellaneous Labour Costs


Ref Category Cost Description Unit Wks Rate Total Comment
01 Travel Allowances
02 Lodging Allowance
03 Parking Charges / Costs
04 Congestion Charges
05 Insurances %
06 Employers Liability
07 Contract Works
08 Others
09 Unrecoverable Costs
10 Exclusions
11 Theft
12 Inclement Weather (Exceptional)
13 Overtime
14 Unproductive Time
15 Costs Excluded In 'All In Rates'
16 Others
-

P06 Facilities & Services


Ref Category Cost Description Unit Wks Rate Total Comment
01 Telephone
02 Connection/Installation
03 Call Charges
04 Administration
05 Health Safety & Welfare
06 General Provisions
07 C & D M Regs. 1994
08 Control Of Noise
09 Fire Protection
10 Others

TF-34
11 Power & Lighting
12 Connect & Disconnect
13 Installation
14 Units Used
15 Fuels
16 Water
17 Connect & Disconnect
18 Installation / Standpipes
19 m3 Used
20 Temporary Drainage
21 Security
22 General Measures
23 Site Perimeter
24 Compounds
25 Other
26 Clearing & Disposal Of Rubbish
27 Drying & Humidity
28 Contractors Testing & Samples
29 Asphalt / Concrete
30 Seasonal Building
31 Others
-

P07 Temporary Works


Ref Category Cost Description Unit Wks Rate Total Comment
01 Setting Out
02 Access Roads / Paths
03 Provide
04 Maintain
05 Hardstandings
06 Pumping & Dewatering
07 Hoardings & Fencing
08 Advertising & Notice Boards
09 Support Existing Structures
10 Protection
11 Weather (Water, Temperature)
12 Site Features
13 Maintain Live Services
14 Finished Work
15 Materials
16 Others
-

P08 Mechanical Plant


Ref Category Cost Description Unit Wks Rate Total Comment
01 Cranes,
02 To / From Site
03 Erect / Dismantle
04 General Use / Standing
05 Piling
06 To/From Site
07 Erect / dismantle
08 General Use / Standing
09 Excavating Equipment

TF-35
11 General Use / Standing
12 Forklifts
13 To/From Site
14 General Use / Standing
15 Dumpers
16 To/From Site
17 General Use / Standing
18 Mixers / Batching Equipment
19 Limited Vehicle Access
20 Hoists
21 Mixers / Batching Equipment
22 Pumps
23 Breaking
24 Compressing, Consolidating
25 Wackers, Vibrators
26 Rollers
27 To/From Site
28 Finishing
29 Others
-

P09 Non-Mechanical Plant


Ref Category Cost Description Unit Wks Rate Total Comment
01 Small Plant & Hand Tools
02 Hand & Power
03 CCTV (Drains)
04 Ladders & Access
05 Warning & Traffic
06 Traffic Control
07 Road Signs
08 Props & Trenching
09 Others
10 Surveying Equipment
11 Scaffolding (Internal)
12 Scaffolding (External)
13 Putlog Erect, Dismantle, Hire
14 Independent Erect, Dismantle, Hire
15 Alter & Adapt
16 Hire After First Month
17 Support
18 Access
19 Mobile & Towers
20 Coverings
21 Lifting Equipment
22 Other
-

P10 Miscellaneous and Unlisted


Ref Category Cost Description Unit Wks Rate Total Comment
01
02
03
04
-

TF-36
P11 Contractual Conditions
Ref Category Cost Description Unit Wks Rate Total Comment
01 Defect Liability Period
02 Firm Price Allowance
03 Inflation Before Contract
04 Inflation During Contract
05 Cost Of Cash Flow
06 Local Authority & Utility Fees
07 Licenses & Fees
08 Bonds & Warranties
09 Performance Bonds
10 General Conditions
11 Special Conditions
12 Restrictions
13 Phased Work / Specific Order
14 Partial Possession
15 Limited Working Hours
16 Limited Working Space
17 Late Completion
18 Rates & Taxes
19 Professional Fees
-

P12 Adjustments
Ref Category Cost Description Unit Wks Rate Total Comment
01 Deduct General Attendances (Double Entered)
02 Deduct Items Charged To Rates
03 Deduct Items Charged To Overheads
04 General Adjustment
05
-

P13 Specifier Costs


Ref Category Cost Description Unit Wks Rate Total Comment
01 Defined Provisional Sums
02 Undefined Provisional Sums
03 Contingency
04 Dayworks
05
-

P14 Notes

TF-37
F. Using the Preliminaries Tables
In using the three step approach to pricing Preliminaries a check list, such as the
Preliminaries Tables, can be invaluable. The list is not comprehensive and builders will need
to carefully check the requirements of the tender documents and use their own experience in
ensuring that they have included all the costs

Considering The Cost Implications of Using the Preliminaries Tables


Builders will, when using the Preliminaries Tables, also need to consider the cost
implications of each heading or item for example:
P06 Water - allowance for: connection, installation, distribution system, removal,
making good, standpipes, tanks and pipe work.
P08 Excavation Equipment - allowance for: delivery to site, (possible standing time),
maintenance, collection from site.
P08 Scaffolding External - allowance for: delivery to site, erecting, protecting,
security, maintaining, checking and certificating, lighting, loss or damage, adapting,
dismantling, collection from site.

Factors Affecting Costs In More Than One Section


Preliminaries are usually priced on an individual basis considering the actual cost
implications of the project. If, for example, the work is in occupied premises, we would
probably need to establish the cost over a number of sections:
P02 - Management
P04 - Cleaning as work proceeds
P05 - Unproductive time
P06 - Heath and safety, maintaining temporary services
P07 - Protection of the works
P11 - Special conditions, limited working space

P01 Employers Requirements


Employers requirements are usually as stated in the contract documents and should be
charged as such
P02 Management and Staff
A view should be taken as to the duration of the contract and how the project is to be
managed and administered.
This usually requires that relevant staff are charged out on a cost per week or month over the
contract period. Working foremen can be charged in the number of hours or days spent in
administering the works. Time should also be allowed for planning, etc, as well preparing
records for interim valuations and the final account.
Where a site foremen carries out other duties, normally priced within other sections of the
Preliminaries (such as setting out, safety work, etc.) care should be taken to ensure that
costs are not duplicated.

TF-38
On smaller sites, Contracts Managers and Quantity Surveyors (with their attendant costs)
usually form part of a builders overhead charge. However these costs may be moved to
Preliminaries where such staff:
are based exclusively on one site (i.e. larger projects)
are contracted in for a specific project

P03 Site Accommodation


The level of contractors site accommodation required will usually be self-evident and should
include: hard standings (P07), delivery, cost or hire, heating, cleaning, collection, making
good, etc. Temporary services for accommodation may be taken for here or in section or P06

P04 Attendant Labour Costs


This section provides for general labour based tasks that may be required for the project,
such as cleaning attendance on sub-contractors
The unloading and distribution item is significant on sites with difficult access such as high
buildings where, for example: materials have to be moved to remote areas by hand

P05 Miscellaneous Labour Costs


This section primarily allows for additional costs in providing labour such as transporting
workers to site together hourly costs such as overtime and unproductive time.

Examples of factors that would have a significant effect on the these costs would be
Location for example an inner city site could require higher allowances for:
Transport costs, time lost in transit, parking costs,
higher plant on/off costs, skips licences, restrictions and waiting time
Similarly very remote sites, where there are limited sources of supply can incur
significant amounts of time lost in transit, higher plant on/off costs, etc.
Regulations limiting hours, noise, etc., as set out in other sections could lead to
unproductive hours
Working in or near occupied premises - for example works to a partially occupied shop or
school could require higher allowances for:
Unproductive time due to higher levels of regulation, control, implementing
increased security, safety routines, limited working hours, etc., as set out in other
sections
Overtime rates or incentives to reduce complete certain areas of work during times
when the premises are closed or to reduce overall contract period
A project program should be used to identify the potential for overtime and can assist in
identifying potential period of unproductive time.
Inclement Weather - for example works to the exteriors of building, especially works
involving re-roofing.
Unproductive time where trades cannot work due to exceptional wind, rain, frost,
etc.
TF-39
Most rates make a limited provision for inclement weather. However the decision to allow
an additional cost is usually a case of balancing in the risks of loss against other works
you are likely to be available for those trades to undertake during the same period.
Allowance should be made to protect or cover in certain works in P07
A substantive allowance would be required if you had to complete un-seasonal works
(such as external decorating in winter) where you had sufficient internal work over the
same time period.

P06 Facilities and Services


General costs, facilities and services required in running the site, administrative staff, utilities
costs, etc.

P07 Temporary Works


This section allows for any temporary works that that will be required in providing the main or
rated works. Costs vary from providing temporary access roads to specific tasks such as
setting out.
Particular attention is should be paid to the cost of securing and protecting both existing
buildings and services together with works in progress. Care also need to be taken to
establish ground conditions and water levels when constructing basements, tanks, drains
and forming foundations

P08 Mechanical Plant


The cost of most smaller plant (and fuel) will be included in the rates. However provision
should be made for bringing plant on to site and removing the same.
Larger plant that is not allocated to a specific area of the work (i.e. a tower crane) would be
allowed for within the Preliminaries. A smaller crane say brought in for the some steel
erecting would be charged to that area of the work
Care should also be taken to allow for the additional costs associated with phasing or
standing time if projects cannot provide a continuity of work

P09 Non-Mechanical Plant


This section includes for a range of plant which may not be included in the rates
A detailed project program is often essential in making proper allowance for the more costly
items such as access equipment or scaffolding.
Specialist quotations should be sought for high, supporting or bespoke scaffolding or lifting
equipment where costs cannot always be predicted.

P10 Sundries and Unlisted


This section can be used for any specialist or sundry Preliminary costs that do not naturally
fall within the other classifications

P11 Contract Conditions

TF-40
The contract conditions section sets out a number of areas which may need to be priced.
The list can be expanded to include specific clauses within the contract and in some cases
costs within the development costs section.
How individual contractors approach pricing this area will vary significantly. A contractor with
an empty order book may be unconcerned about clauses requiring an early start, a short
contract period, whereas another contractor with a number of secured contracts may budget
for overtime charges and liquidated damages for late completion.
Builders are generally advised to make allowance for any unrecoverable costs, For example
it is not uncommon for contractors to price concerns relating to:
Contract Administrators, where the have experience of: administrative problems, poor
design, indecision, late drawings, difficulty negotiating valuations,
Clients, where they have experiences of delayed payment or dispute
Lack of design information such as survey documents,
Contractual risks longer defects liability period, incomplete documents (i.e.
outstanding questions over rights of access),
Alternatively builders may, in some circumstances, be able to set out their own terms and
as such reduce their risk and costs

P12 Adjustments
In costing preliminaries contractors will also need to take care to ensure that they have not
duplicated any costs included in the rated work or in the off site overheads.
Furthermore care must be taken to ensure that costs are not duplicated within the
Preliminaries section. For example a foreman allowed for in P03 may undertake much of
the safety works required in section P06. Ideally the duplicated costs would be removed fro
the relative section and a note inserted explaining how allowance has been made
Alternatively the duplicated charge could be noted and deducted in this section

P13 Specifier Costs


These are usually costs that have been defined by the Contract Administrator within the
specification, (such as Provisional Sums, Prime Costs, etc.) that are to be included within a
tender.
Whilst they must be included in the tender they should be kept separate if you are comparing
the cost of preliminaries with other works

P14 Notes
Most Preliminaries calculations require a significant level of judgement and it is
recommended that estimators record the significant factors affecting their views. These
notes are often invaluable when analysing performance or considering the costs of future
projects

TF-41
Development Costs
Development costs usually only apply where work is being costed for a Developer or on a
Design and Build basis. However, this is not always the case and builders should, if in
doubt, ensure that such items are costed within, or specifically excluded from their tender.

The development cost table on the next pages are primarily used to:
1) set out the main cost areas that are used in calculating Development Cost Model
(DCMs) for developers when evaluating development projects, options and risk.
2) calculate residual land values (RLV) for valuation and purchase
3) providing Development Cost Model (DCMs) for bank funding
4) costing design and build contracts.
The Development Cost Tables include a few notes on section D02 to D04 to give you an
indication of use

TF-42
Project: DEVELOPMENT COSTS
Printed

Development Costs - (Category Totals)


1. Land Purchase -
2. Planning Drawings & Fees -
3. Detailed Design, Tenders, Supervision -
4. Adoption & Legal -
5. Building Control & Guarantee -
6. Connections, Mains & Infrastructure Charges -
7. Risk & Contingency -
8. Finance & Other Costs -
9. Sales Costs -
10. Developers Overheads & Administration -
-

Development Costs
1. Land Purchase
Ref Cost Description Notes Nr. Unit Rate S/Total
Site Costs -
Feasibility Study -
Site Investigation / Soil -
Land Cost -
Easements -
Agent Fees -
Legal Fees -
Stamp Duty -
Demolition -
Site Clearance -
Other Costs -
- -

2. Planning Drawings & Fees


Ref Cost Description Notes Nr. Unit Rate S/Total
Outline Permission -
Architect's Fees -
Planning Consultant
Local Authority Fees -
Detailed Permission -
Architect's Fees Scheme Design -
Planning Consultant Planning Amendment -
Local Authority Fees -
Section 106 -
Play Space Commuted sum -
Works -
Landscaping Commuted sum -
Works -
Other -
Other Special Conditions -
Other -
- -

TF-43
3. Detailed Design, Tenders, Supervision
Ref Cost Description Notes Nr. Unit Rate S/Total
Detailed Design -
Project Manger
Development Consultant -
Architect's Fees Detailed Design -
Structural Engineers -
Soil Engineer Site Investigation / Soil -
Quantity Surveyor Estimate & Development Cost Model -
Services Engineers Included In Fees Above -
Energy Rating (SAP) Included In Fees Above -
Secure By Design -
Tender Process -
Architect's Fees Production Information - RIBA Class 5
(20% x 9%) -
Quantity Surveyor Included In Fees Above -
Legal Advice Legal Advice On Contract -
Supervision -
Architect's Fees Planning and Operations On site - RIBA
Class 5 (30% x 9%) -
Quantity Surveyor Included In Fees Above -
- -

4. Adoption & Legal


Ref Cost Description Notes Nr. Unit Rate S/Total
Roads & Highways -
Highways Act 1980 Legal Charge (Council) -
Section 38 Agreement Admin Charge (Council) -
Legal Cost (Developers) -
Administration Charge (Own) -
Bond 2 years -
Supervision (5% of road value and street
lamps) Less 200 Admin -
Drainage Adoption -
Section 104 Agreem't TBA - Legal Costs (Water Server) -
TBA - Legal Costs (Own) -
Admin Charge (Own) -
Section 104 Bond Cost of 2 Year Bond - -
Supervision - -
Inspection CCTV Survey On Practical Completion
-
Other -
- -

5. Building Control & Guarantee


Ref Cost Description Notes Nr. Unit Rate S/Total
Building Control -
Planning -
Inspection -
Schedule 3 Plan Fee -
>100K<1M Inspect -
NHBC Guarantee -
10yr Buildmark -
Building Inspection -
Planning Supervisor Service CDM -
Collateral Warranty -
HAPM -
Local Authority / Zurich Guarantee

Other -
- -
TF-44
6. Connections, Mains & Infrastructure Charges
Ref Cost Description Notes Nr. Unit Rate S/Total
Sewer Connection -
Connection Fee -
Inspection Fee -
Road Permits -
Highway Reinstatement -
Internal Drainage Board -
Levy /acre (4047m2) -
Legal Costs -
Infrastructure Charges -
Water & Sewage - -
Mains Water -
Mains Extension -
Metered Supply -
Plan & Design Fee -
Electrical -
Mains -
Connections -
Diversions -
Street-Lighting -
Gas -
Mains -
Connections -
Telephone -
Mains -
Connections
Cable Television -
Mains -
Connections -
- -

7. Risk & Contingency


Ref Cost Description Notes Nr. Unit Rate S/Total
Risk Allowance
Contingency -
- -

8. Finance & Other Costs


Ref Cost Description Notes Nr. Unit Rate S/Total
Set Up Costs -
Development Finance -
- -

9. Sales Costs
Ref Cost Description Notes Nr. Unit Rate S/Total
Agent Costs -
Fees -
Advertising -
Legal costs -
Solicitor -

- -

10. Developers Overheads & Administration


Ref Cost Description Notes Nr. Unit Rate S/Total
Construction Work -
Development Costs -
- -

TF-45
Overheads & Profit
Overheads A Definition
Overheads are those costs that are not directly charged to a project. I.e. they are the indirect
costs to running the business (owning, marketing, managing, administering, financing etc.).
For the purposes of this section the term Overhead is used to describe the off-site or usually
the main office costs. This is distinct from the Preliminaries or general costs in managing
individual sites.

Calculating Overheads
Overheads are most easily considered within the context of a business plan or budget where
it is easy to see the how different types of work or levels of turnover affect these business
costs. Business plans may need to be modified to ensure that overheads are covered where
significant changes in the work a proposed.
For most businesses, overheads can be considered as a percentage to be added to the
direct costs. This is not, however, always a suitable method for builders where there can be
significant fluctuations and differences in the:
types of work
cost of managing the work
level of turnover
the overheads of businesses
For example if we consider the type of work. The overheads (as a percentage of turnover)
for a builder engaged in alterations and maintenance will usually be far greater than for
those of a builder who specialises in new work.
One approach that starts to address the relation of work type to overheads is for builders to
charge the majority of their overheads against the managed labour element of the work. This
commonly used model offers four advantages
1) the directly employed labour force is often relatively constant in relation to overheads.
2) there is often a common relationship between the work type and the number of hours
required to manage or administer the labour of that work type
3) it has some recognition of the effect labour has in using managers time. The
availability or cost of skilled managers is often cited as a limiting factor in the size of
building businesses
4) a significant number of the risks involved in construction relate to the labour element
of the work
Lower percentages can then also be allowed for the costs associated with the management
of (or overheads on) on materials, domestic sub-contractors and plant.
Again this is most easily calculated in relation to a specific business plan or budget relating to
a level of turnover for a particular work type. Budgets are also a useful starting position from
which to consider how other types or volumes of work will affect the overheads.

TF-46
When preparing or reviewing a business plan budget it can be useful to make the further
distinction between two types of overheads and the profits
fixed off-site overheads: i.e. head office: permanent office staff, rent, heating,
lighting, etc.
variable off-site overheads: i.e. workload related costs stationary, telephone
calls, postage, etc.
profit.
The fixed overhead total provides you with the minimum level of overheads that you must
charge on any given amount of turnover. However, if turnover increases significantly care
must be taken to ensure that there is sufficient capacity within the fixed cost or if changes are
required to the structure of the business (i.e. new offices, permanent staff etc.)
Builders who are pricing for different types or categories of work may need to consider if they
are able to re-structure their overhead charges in way that will be competitive. By this we
mean, that a company who undertake both renovations and new work may find that
renovation work uses more of the fixed overhead cost and as such a higher proportion of
these cost should be passed onto the builders client

Collecting Accounting Information


For those businesses completing large projects and who have business plan budgets based
a management accounting history (that maintain the distinction between cost centres such
as preliminaries and overheads) the calculation of overheads should be a relatively
straightforward task.
However, for smaller businesses those distinctions can become blurred. Even for those with
business plan budgets few make the distinction between preliminaries and off site
overheads relying on a taxable accounts format.

Using A Simpler Model


First and foremost it is recommended that builders draw up a simple business plan budget
setting out figures on an annual basis showing:
1) Sales (with separate totals for any significantly different size or types of project)
2) Direct Costs (including Preliminaries)
3) Overheads
4) Capital Items and Finance
5) Profit
Within this format a decision has to be made as to how and where the managers costs are
charged for. For smaller owner managed businesses this cost may in practice be spread
across sections 2 and 3.

TF-47
Getting Data From Taxable Accounts Data
Most businesses can derive much of the data they require for businesses planning from their
taxable accounts records if they relate to a similar work type and load.
In the case of limited companies this is a relatively straightforward matter, however, sole
traders and those in partnerships should note that, for the purpose of pricing, a charge
should made from the working partners profit to the to relevant: site cost, preliminaries or
overhead for the time expended in such activities.
Furthermore care should be made to identify items which for tax purposes are charges to
overheads but that are for the purposes of planning on site preliminaries costs.
If you have any doubts relating to overheads you should discuss this section with your
Accountant.

Capital Plant & Equipment


Where builders have significant items of plant they will need to decide how they are charged
for. We usually charge for plant usage at the rates provided. Transport on and off site should
be allowed within the preliminaries.
Some larger builders prefer to lower the cost of plant charged to the work by charging the
capital element of ownership to the overheads of the business. If this is the case builders will
need to advise us of how costs are to be allocated.

Competition
When tendering a commercial decision will also need to be taken as to the amount of
overheads that can reasonably be allocated against a project. As a percentage this sum may
vary depending upon the nature of the work.
Generally speaking, the cost of managing new, larger, simpler projects (such as new
housing) is much lower as a percentage than that required to manage complex smaller works
(such as repairs). As larger projects are usually easier to price, organize, order and
administer, we generally reduce the fee total for overheads and profit as work becomes
simpler and as it increases in size.

Profit
We usually allow very low percentages of profit on the basis that most builders will expect to
enhance profit levels through some element of buy-down if they win the work.
An adjustment for buy-down can be made at the tender adjudication stage on the tender
summary.
Setting profit levels, like overheads, will always be the commercial decision of the contractor
and will involve a number of factors similar to those set out in the Consideration of Sub-
Contractor Bidding Decisions Usually however the level of profit comes down to two factors:
1) the builders desire to win the work.
2) how important price is perceived to be in securing the work.
Profit levels can be considered both as a percentage of turnover and as a return on capital
employed (ROCE).

TF-48
Pricing Bill of Quantities
Builders will need to supply us with overheads and profit figures for all sections of the
estimate analysis form where an itemized priced bill is to be supplied:-
labour
materials
plant
domestic sub contractors
nominated sub contractors (including percentages for general attendance)
nominated suppliers
defined Provisional Sums
percentages or rates to be allowed for day-works

TF-49
FORMULATING TENDERS
Tender Formation
This section differentiates from the earlier section in that we consider Estimating as the
process of predicting construction costs and Tendering as the separate and subsequent
commercial function based upon the estimate.
Clearly tendering decisions are the province of each individual builder. This section provides
you with two forms which can be used to calculate your tender and record its performance.
Extent of Services
This estimating service does not predict tender prices. The figures in the Estimate Analysis
Form have been provided as an approximate sum from which our fee is calculated. Tender
levels can vary significantly from district to district depending on changes in local demand.
Estimates as produced by TSA should always be cross checked against your past estimates
and tender analysis to evaluate the effects of any variations prior to considering tender
levels.
TSA cannot provide other than the most general legal or accounting advice and builders
should check any significant contractual or commercial aspects of their tender with the
relevant professionals (i.e. solicitors and accountants). You should also note that the rates
apply to the instructions, plans, specifications as originally supplied to TSA and that you will
need make provision for any subsequent changes prior to tendering.
Completing the Tender Summary Sheet
The Adjudication Changes column on the Tender Summary can be used to provide for any
cost adjustments you wish to make against the following items in converting your estimate
into the tender calculated in the Tender (New Totals) column.
1. Correction of any errors and adjustments for local market conditions.
2. Evaluation of risk and contractual obligations.
3. General commercial considerations.
Suitability of the project (i.e. management experience, type of work, location, project
size, quality of work, etc.).
Desire to win contract over competition (including reviewing previous tenders and any
negotiations with suppliers and sub-contractors).
Desire to establish a relationship with a new client / specifier or move into new work
type or area.
Current workload and other tenders outstanding / offered (during the contract period).
Finance and management resources required.
Clients budget (can in some circumstances, such as negotiated contracts, be a
factor).

4. Any items missed in the Estimate Anaylisis Form.

TF-50
Tender Summary
Adj Estimate Adjudication Tender C
% (New Totals) Changes (New Totals) %
Own Works
Labour 3.2% 18,000.00 576.00 18,576.00 42.2
Material -2.0% 15,000.00 - 300.00 14,700.00 33.4
Plant 0.0% 1,500.00 - 1,500.00 3.4
Other 0.0% 500.00 - 500.00 1.1
Late Adjustments 0.0% - - - -
35,000.00 276.00 35,276.00 80.0
Nominated & Sub-Contract
Domestic Sub-Contractors 0.0% 4,500.00 - 4,500.00 10.2
Nominated Sub-Contractors 0.0% - - - -
Nominated Suppliers 0.0% - - - -
4,500.00 - 4,500.00 10.2
Provisional Sums (Defined)
Provisional Sums (Specifier) 0.0% 500.00 - 500.00 1.1
Provisional Sums (TSA) 0.0% - - - -
500.00 - 500.00 1.1
Preliminaries
General Site Costs 0.0% - - - -
Development Costs 0.0% - - - -
Other 2.0% 3,720.00 74.40 3,794.40 8.6
3,720.00 74.40 3,794.40 8.6
Total Site Costs 43,720.00 350.40 44,070.40 100.0
Overheads 11.0% 4,725.00 38.54 4,763.54
Profit 5.5% 2,186.00 19.27 2,205.27
Dayworks 0.0% - - -
Provisional Sums (Undefined) 0.0% - - -
Other 0.0% - - -
50,631.00 408.22 51,039.22
VAT 17.5% 8,860.43 71.44 8,931.86
59,491.43 59,971.08
Tender Performance
Other Tenderers Names Nr Gross Tender Net Tender % Over
7 -
6 - -
ABC Builders 5 - 55,200.00 8.2%
Unknown 4 - 54,000.00 5.8%
A Jones Builders 3 - 52,300.00 2.5%
B Smith Builders 2 - 52,000.00 1.9%
TSA Builders 1 - 51,039.22

The C% column can be used show any new breakdown of overheads and or profit. Again
(Undefined) Provisional Sums Contingencies, Day-works, etc., must be added.

TF-51
Lastly, you are responsible for assessing the VAT liability of any work and your right to
reclaim VAT on your purchases. All costs within the estimate exclude VAT (on the basis that
you are registered for and can reclaim all this VAT),

Tender Presentation and Terms

Terms and Conditions


Where builders are tendering under the provisions of properly prepared documentation, they
are generally advised to ensure that they cost and comply with the relevant conditions as
failure to do can lead to a tender not being considered.
In assessing the risk, as set out in 2) above builders should, if not provided with an
acceptable contract, clearly state when tendering:
the extent of the works that have been allowed for and which works have been
excluded.
their general terms and conditions including payment and the period the tender will
remain open to acceptance.
any special terms, conditions or exclusions that apply
any Provisional Sums or Prime Costs included.
The ability to create or vary the terms or conditions of a tender can offer significant
advantages to the tenderer.
Certain tender situations can also allow builders to provide alternative design solutions or
specifications. This can provide a potentially profitable niche for builders to negotiate
profitable savings.

Presentations
In presenting work builders often consider price to be the clients main purchasing or buying
criteria, however there are often other as important factors that affect the clients buying
decision for example
Reputation.
Quality demonstrated by past work.
Reliability demonstrated by references.
Alternative design.
Completion dates.
A well presented estimate can bring this to the fore.

Breakdowns
Tender presentations allow you to select different profit margins for every item and decide if
you want to show quantities, rates, amounts, or only show descriptions. Two examples of
layout are shown below.

TF-52
TENDER PRESENTATION - LAYOUT 1
Project: Bungalow 16 Type C
GROUND FLOORS
ID Description Unit Qty Rate Amount

E Blind surface with 25mm sand, consolidated to m2 100 2.25 225.00


provide smooth surface to receive overlays with JCB

F Polythene damp proof membrane 250mu laid with m2 100 1.17 117.50
150mm lapped joints

G 100mm GEN. 2 oversite concrete laid to ground floor m3 10 85.61 856.10


bed, tamped to receive insulation (Ready Mix)
H 50mm Jablite SD floor insulation m2 100 4.98 498.00

TENDER PRESENTATION - LAYOUT 2


Project: Bungalow 16 Type C
GROUND FLOORS
ID Description Unit Qty Rate Amount

E Blind surface with 25mm sand, consolidated to m2 225.00


provide smooth surface to receive overlays with JCB

F Polythene damp proof membrane 250mu laid with m2 117.50


150mm lapped joints

G 100mm GEN. 2 oversite concrete laid to ground floor m3 856.10


bed, tamped to receive insulation (Ready Mix)
H 50mm Jablite SD floor insulation m2 498.00

Providing your clients with costed schedules or breakdowns can assist negotiations where
the extent of the work required is unclear, or where your client needs cost advice prior to
ordering works. However, care should be taken when using estimates in negotiations as they
are written for builders and usually require a fair amount of editing if they are to form the
financial basis upon which a contract is to be agreed.
Furthermore clients do not often understand the terminology and implications of making
changes to priced work which can prove time consuming and lead to misunderstandings in
agreeing variations. In most cases variations and final accounts take far longer (two to three
times) to negotiate and settle on the basis of rated schedules
If your clients are to retain such schedules or if they are required as part of the contract
builders may wish to consider re-allocating certain costs or margins to:
ensure a positive cash flow.
allow for the risks associated with potential increases and decreases in work. (with
many contracts this can be as, or more, significant than the works as specified).
provide a breakdown that will be acceptable to the client.

TF-53
The Presentation of Preliminary Costs Within Tenders
In some cases the commonly used valuation methods of adding a proportionate percentage
to time based or cost based valuations can leave the contractor with a significant cash
shortfall.
Whilst it is unlikely that a contractor will be paid in advance, cash flow can usually be
significantly improved through the accurate costing and charging of preliminaries.
Many of the high set-up costs associated with the construction process are costed within the
preliminaries and as such could be identified and charged on the following basis
1) set up costs.
2) other fixed costs.
3) variable costs.
Furthermore an accurately costed preliminary figure can provide a measure of additional
security in the charging of variations.
If a breakdown of costs is to be provided it is worth considering whether some elements of
the preliminaries should be shown as part of the rated work to which they apply.

Tender Performance
Comparison
The Tender Summary Form provides space to compare tenders with and without provisional
sums and to calculate the percentages above the mean and lowest costs.
Analyzing a range of tenders can provide builders with an indication of tender levels within a
particular area. However, such data is usually only useful if:
the work is let with proper documentation on an independent basis.
the work types are similar and can be competitively undertaken
the contract period and conditions are not such that they will have a significant effect
on the price.
all the work is priced in a consistent manner
Smaller contractors and sub-contractors will usually find it difficult to gauge tender levels as
most work is not let in the above manor and is subject to greater variation (see Foreword to
Small Works Contractors)
However this approach can prove useful in building up a knowledge of local market condition
and competition.
It is our usual practice to analyse the performance of all estimates and tenders. Where
possible, we would be grateful to receive tender return letters within 21 days so we
close files whilst work is still relatively current.
Successful Tenders
Having won the work, well written estimates can provide buyers and contracts managers
with invaluable project information. Estimates can be considered as the basis of a project
plan from which orders can be placed or a bench mark from which alternatives can be
considered. Examples of such uses are set out in The Benefits of an Accurate Estimate
and the Additional Services Based on Estimates Sections.

TF-54
Builders who have a disproportionately high success rate in tendering may be able to
increase their profitability by pricing a larger number of projects with higher margins.

Lessons From Losing Work


Builders may need to question their business practices if they are costing work in a
consistent manor and not winning an acceptable proportion of the work tendered for.
Success rates can often be improved by concentrating efforts on those projects in which the
firm has a higher chance of winning and reducing or eliminating time spent on enquires
where work is less likely to be forthcoming. To this end builders need to establish the level of
risk associated with each project, for example:
Is the work likely to proceed? i.e. is the tender sum within the clients budget.
How many other firms are pricing or have priced the work? If the work is being priced
for a main contractor, have they secured the work (see Consideration of Sub-
Contractor Bidding Decisions)
Are all tenderers pricing for the same works?
Is the work let on a fair basis? i.e. has the client a preferred tenderer who may be
negotiated with after tenders are received.
Can your firm competitively undertake the type of work offered i.e. have you won
projects in the same location of a similar size and type.
Tendering for works you are unlikely to win can be an expensive waste of money and
resources, as can overpricing work you do not really want.

Having established the quality of an enquiry, it is important to ensure that the real costs of
the business are being accurately reflected in the tender. For example:
Materials has an adjustment been made to reduce the builders merchant and
specialist materials costs if lower rates are available from alternative suppliers or if
further discounts would be available at the order stage.
Labour & Plant have real costs been used (based on directly employed staff) and
are the works such that targets can be agreed to reduce rates
Sub-Contract can domestic or labour only sub-contractors be used to greater effect.
Were the right contractors provided with accurate information in reasonable time?
Preliminaries has owned plant been charged at hire rates? Can the project be run
more effectively? Have the risks associated with the work been over priced?
Overheads and Profit are your costs and expectations in excess of your
competitors.
Errors are there any spurious assumptions or significant errors in the calculations.

TF-55
SPECALIST SERVICES

Primary Services

Builders Estimating Systems


9 A pricing system designed for builders who wish to price smaller projects (usually under
200,000) for themselves. Systems allow builders to price work in a fraction of the time
using traditional methods with just a few sheets of paper and calculator or a
spreadsheet.
9 Pricing systems based on either each individual builders costs or local rates.

Estimating Services
9 A range of services including pricing works from plans, specifications, bills of quantities
etc. including materials only and specialist quotation services. Services can also include
assisting builders in the preparation of the preliminaries and overheads calculations

Tender Presentations
9 A range of services including: assisting builders during the adjudication process, adding
margins, considering risk, drafting presentation letters and rated bills etc.

Approximate Estimates
9 A service is designed for building contractors who wish to consider the approximate
costs of a project (at much lower fee levels).
9 Works can be calculated to varying degrees of accuracy from; simple comparative
studies based on rates per m2 (internal floor area) through to a more detailed analysis of
comparative rates (usually laid out on a 'Sectional Basis').

Additional Services
Data collected in builders estimates can be used to provide the basis of the following
additional services

Cost Reduction
9 Alternative Design Solutions - We can review your design and provide alternative
construction options to reduce site costs.
9 Specification Analysis - TSA can also analyse specifications and suggest alternative
materials, brands, specifications, etc., to reduce site costs.

TF-56
Project Planning
9 Range of Estimate Layouts - Each estimate can be altered to a number of other formats,
each proving different benefits which can be useful in planning and managing the works,
examples include: a) by trade, b) as work proceeds, c) as specification, d) standard
method of measurement 6 or 7.
9 Planning - Detailed plans can be produced to enhance quality and improve profitability.
Priced schedules can be transposed on to accounts programs so you can check site
performance as work proceeds. Specific plans can be put in place to identify and reduce
waste levels and errors so business practices can be modified to increase profits.
9 Critical Path Plans & Gantt Charts - From the requirements above computer generated
plans can be produced setting out your project, showing gang sizes, durations,
completion dates, critical elements, etc.

Cash Flow & Profit


9 Rate Analysis - Separate printouts can be provided showing detailed analysis of rates
which you then can cross check against site performance with view to modifying future
tender rates or employment practices.
9 Cash Flow Forecasts - From the critical path plans set out above cash flow forecasts can
be generated. Showing income and expenditure.
9 Interim Valuations - You can mark up completed on a copy of your priced schedule and
we can quickly calculate the cost of work completed and printout a detailed interim
valuation.
9 Identifying Extras - TSA can analyse your documentation to identify extras that can be
charged
9 Final Accounts - Extras and measured rates can be calculated to form professionally
presented final accounts

TF-57
Approximate Estimates
Last Edited: 6 November 2003

The service is designed for building contractors who wish to consider the approximate costs
of a project. The approach is helpful in that it can provide these costs at a significantly
reduced fee level.
Works can be calculated to varying degrees of accuracy from; simple comparative studies
based on rates per m2 (internal floor area) through to a more detailed analysis of
comparative rates (usually laid out on a 'Sectional Basis'). Works are usually measured and
priced to tender total. Preliminary costs can be shown as a separate sub-total or spread over
the schedule.
It is important to recognise that rates will have been built up from averages of known site
costs with an appropriate market level of preliminaries, overheads and profits added rather
than on an individual contractors costs
Approximate estimates are not formal bills of quantities or specifications and are not usually
regarded as accurate enough to form a suitable basis on which to contract for fixed price
work
Unless otherwise stated Approximate Estimates will only allow for building works and
exclude:
V.A.T. which should be added at the appropriate rate
Development or owners costs such as: land purchase, legal, demolition, site
preparation, clearance, planning, design, specification, administration, costs,
adoption, building control, guarantee, connections and infrastructure charges,
finance, sales costs, etc.

Further care should be taken in the use of Approximate Estimates as they are usually
produced on a limited budget (I.e. less time is spent teasing out problems) often during the
design process when there are issues are still to be resolved.
Factors that can significantly affect the accuracy and overall cost of the work include:
1. The extent and quality of design information supplied
2. Future changes in the design or specification required for: Planning approval,
structural engineers, building regulations, etc. Many of these costs can be identified
prior to the works starting. However, some unseen works, such as deeper
foundations may only be calculable as the works proceed
3. Any works inadequately defined or excluded from the brief, or items that have not
been identified on the drawing or on the specification. (Examples might include floor
and wall tiling, fitted wardrobes, specialist fittings, provision for specialist electrical
items etc.)
4. Future changes to the quality of the specification and prime cost or provisional sum
items such as the quality of materials or fittings.
5. Utilities charges where service locations are unknown or where the design changes
6. Special or onerous contractual conditions such as; limited contract period, delayed
payment, partial occupation, phased works, high liquidated damages, liability clauses,
etc.
7. Inflation prior to the work being let, including shortages of resources, or changes in
local markets.

TF-58
8. Changes in legislation often in relation to building regulations or utilities.
9. Special buying arrangements or agreements that any contractor may have.
10. Disproportionate commercial adjustments for preliminaries overheads or profit.
In certain cases it may be appropriate to add a contingency or risk sum to an Approximate
Estimate to allow for such changes.

Clients will also need to check any Pricing Considerations within the schedule identifying
any other risks that are specific to the project.

TF-59
Design and Build Estimates
Last Edited: 12 April 2004

A key issue in the accurate pricing of Design and Build projects is to ensure that the extent
of the work can be properly predicted at an early stage. This usually requires that clients
(builders) generate much of the information that designers would produce during the
traditional methods of procurement. For example:
Project details (see page TF-6)
Specific details as to the extent of the works to be priced
Detailed designs and specifications

Trevor Sadd Associates are not designers, specifier's, structural or service engineers and
clients should make proper provision for the design and specification of the works.
Generalised off the cuff solutions that are not properly considered can put builders at
financial risk

Equally risky and usually more expensive are delays in the provision of design information or
changes to the design during the estimating process. Evolving designs with numerous
changes, or those requiring numerous requests for detail, are not advised for the following
reasons:
The work is more demanding, especially where the cost implications of change effect
a number of costs
Partial take-offs and multiple changes are more likely to lead to error
Changes can also duplicate the time and cost required to price the work
Delays in completing estimates
Costs incurred in clarifying the extent of works priced

Further to the early provision of design information clients should also be careful to clarify the
extent of, and how the works are be priced, for example
Those works that would be undertaken by direct labour and those works that would
be let on a: labour only, sub-contract or design basis.
Any contractual factors that effect the Preliminaries (see page TF-27)
Any Development Costs (see page TF-47)
Any other inquires or relevant correspondence
Particular care should also be taken where builders have a working relationship with the
persons letting the works or where they have undertaken parts of the work as it often the
case that certain understandings that are explicit to the builder are not clear in the
documentation provided

To assist builders in the proper provision of information we have set out below a few of the
areas that commonly lack definition.

TF-60
Areas That Commonly Lack Proper Design or Specification

Site Information
Demolitions
Site clearance
Levels - Cut and fill, the extent of works
Existing services locations location and depth
Contamination

Services and Utilities


Foul Sewer Connections location, depth, capacity, associated works, charges,
adoption, access, reinstatement, legal considerations, off site works
Softwater Drainage positive systems (items as above), soakaway systems, sizes,
locations, ground conditions (depth, percolation), reinstatement,
Mains Water
Mains Electricity
Gas
Cable Systems BT, cable TV, fibre optics

Roads and Hard Surfaces


Roads Design, Ground Conditions, Vision spays, Surfacing, Associated Works,
Charges, Adoption, Access, Legal Considerations
Street lighting
Hard surfaces and edges unadopted roads, parking, paths, paving
Roadwater - Sewer Connections location, depth, capacity, associated works,
charges, adoption, access, legal considerations, off site works

Design - Externals
Boundary walls, fences, edges design, materials
Off site works

Design - Buildings
Foundations - depths and designs
Floors depths and designs
Movement joints
Floor surfaces - designs, brands, areas
Partitions and screens - types, sizes
Windows and door types types, casements

TF-61
Specialist Design
Thermal insulation levels floors, party walls, walls, roofs, etc.
Sound insulation levels floors, party walls, walls, roofs, etc.
Kitchens
Bathrooms, cloakrooms, showers, en-suites
Specialist floor surfaces wall tiling, sheet
Specialist wall surfaces wall tiling, sheet
Fixtures and fittings specialist equipment, wall and floor units,
Services - electrical, heating, sanataryware

Structural Designs or Calculations


Foundations design mixes, reinforcement, additives
Floors - design mixes, reinforcement, additives
Ground Beams,
Columns, beams and posts - size locations, jointing, movement,
Lateral restraints and movement joints -
Roofs support, design, sizes, calculations
Structural Steel and claddings -

Achieving Standards
NHBC Standards
Building Regulations
Fire - Escape, Resistance, Surface Spread of Flame
SAP
Access - Building Regulations Part M
Secured by Design

Other Factors Effecting Accuracy


Factors that can significantly affect the accuracy and overall cost of the work also include:
Future changes in the design or specification required for: specific uses, planning
approval, structural engineers, building regulations, etc. Many of these costs can be
identified prior to the works starting. However, some unseen works, such as deeper
foundations may require a that a risk allowance is made as where the site has not
been investigated
Any works inadequately defined or excluded from the brief, or items that have not
been identified on the drawing or in the specification. (Examples might include floor
and wall tiling, fitted wardrobes, specialist fittings, provision for specialist electrical
items etc.)

TF-62
Future changes to the quality of the specification and prime cost or provisional sum
items such as the quality of materials or fittings.
Utilities charges where service locations are unknown or where the design changes
Changes in legislation often in relation to building regulations or utilities.
In certain cases it may be appropriate to add a contingency or risk sum to an estimate to
allow for such changes.
Clients will also need to check any Pricing Considerations within the schedule identifying
any other risks that are specific to the project.

Establishing a Cost Base and the Use of Sub-Contractors


Establishing an Accurate Cost Base
The risks associated with Design and Build usually require that additional attention is given to
the factors set out in Builders Costs and Sources of Supply so that an accurate base cost is
established. Accurate costs can assist in preventing compound errors where designs flex or
change.
The pressures of providing design information and designs effect on cost can lead builders
into the false assumption that bases costs are less important. This is rarely the case and
proper instructions should be provided

The Use of Specialist Sub-Contractor Services


Where builders do not undertake works on a direct basis significant sub-contractor
quotations should be sought. This is essential where the sub-contractors provide significant
elements of the design and time should be allowed.
Builders should make us aware of all the sub-contract quotations that they have sourced
(including their own instructions) so that we can properly quantify any effects on the other
related costs.
Again the late provision of information will seriously effect our ability in gaining sub-contract
information and can effect the quality and rate of prices sourced

Preliminaries
If the preliminaries are to be costed, builders should make us aware of how they are planning
to undertake the work including details of the:
Employers Requirements
Management of the Works and Site Accommodation
Facilities, Services and Temporary Works
Provision of Mechanical and Non-Mechanical Plant
Contractual Conditions (including the Anticipated Contract Period)
The Preliminaries section (see page TF-27) sets out further detail or factors on the pricing of
preliminaries such as: inflation prior to the work being let, special or onerous contractual
conditions such as; limited contract period, delayed payment, partial occupation, phased
works, high liquidated damages, liability clauses, etc.

TF-63
Development Costs
Design and Build contracts usually require that builders take on a significant proportion of the
costs set out in the Development Costs section (page TF-47)
If we are to be involved in costing these works, clients should specifically instruct us as to
their requirements including the cost such of items or details of the suppliers that would be
used

Terms and Conditions


Design and build usually requires that builders go much further in clarifying the extent of what
has been allowed for in stating the assumptions that have been made to complete the design
and the extent of work priced. In many cases, examples of similar tender presentations
showing what is acceptable to the client can save time when pricing the work

Overheads, Profit and VAT


Builders will, as usual, need to deduct any allowance that we have made for overheads and
profit and include their own calculations
Additional allowances should be made for the risks and responsibilities associated with
Design and Build contracts. These, depending upon their nature, may be allowed for within:
the rates,
the preliminaries,
the development costs
the overheads
the profit
V.A.T. should be added at the appropriate rate

TF-64
Labour and Plant Only Sub-Contracting
Last Edited: 28 May 2004

Pricing Labour Only Sub-Contracting (LOSC) or Labour and Plant Only Sub-Contracting
(LPSC) is usually more difficult and risky than pricing general building work. It is also the
most expensive in relation to the overall value of the tenders (about 60% higher) These
factors coupled with the estimating practices of some Main Contractors can lead some LOSC
into disproportionately high estimating costs

Selecting Which Work To Price


The first and most significant factor is to establish whether the Main Contractor has secured
the contract that you are pricing. Pricing a secure contract theoretically gives a LOSC a, say,
1 in 3 chance of winning the work, whereas an unsecured tender (i.e. the Main Contractor is
pricing in completion to win the work) gives a theoretical chance of a little as 1:15, assuming
five main contractors are tendering.
This ratio can, with a little work, be improved by resubmitting the tender to the winning
contractor
However, this brings us to an altogether more nebulous issue. Main Contractors (usually the
Contracts Managers) have preferred tenderers and it is not uncommon for work to be let on
a negotiated basis to such known tenderers even if they where not initially the lowest tender.
Furthermore this is not an easy issue to address, as the estimating departments of Main
Contractors who are always keen to create new relationships and generate additional prices
(so the can provide a competitive tender themselves) rarely admit this tendency of their
buyers to stay with known contractors. Estimators rarely have little say when it comes to
making buying decisions on behalf of large contractors

Our only advice in relation to the above is


have clear marketing objectives and do not price work that you are unlikely to win
find out who makes the buying decisions for the Main Contractors and make sure that
your marketing message gets to them so that your tender is properly considered
find out what the other prices submitted are make it a pre-condition of pricing
find out who your competition are and whether the Main Contractor is satisfied with
their work
find out what the main contractors buying criteria are and whether you will be able
to match them. For example, what is going to be most important factors to them in
letting the work? Say one is reliability - make sure you submission includes half a
dozen personal endorsements from contactable sources stating that your company
can be relied upon. Provide evidence of similar projects completed on time, etc.
raise any concerns with the Estimators and ask them to specifically refer you if your
tender is competitive. Ask to meet the buyer.
where possible make your quotations user friendly

In many cases marketing professionally to a few selected targets where you are
competitive will prove much more successful than the scatter gun approach of pricing
everything that lands on the mat.

TF-65
The situation (win ratio) generally improves significantly once a track record for reliability,
quality of work, etc., has been demonstrated and relationships have been formed.
Some years ago we priced work for two similar labour only contractors. Company As
tenders where priced at significantly higher levels than Company B. However relationships
and reputation were such that company A had a win ratio of 3 wins in 4 tenders, where
company B had a win ratio of 1 win in 14 tenders.

Understanding What is Required


To safeguard their position in relation to tender values LOSCs should ensure that they are
fully aware of what is required of them, specifically
the scope of the works - i.e. site access, plans, specifications, etc. (for example
groundworkers should ensure that they get plans, sections, and ground condition
reports. Bills of quantities in themselves are usually insufficient
the program and specifically when you will be required on site
what other works are required before they arrive on site and what other works are
going on at the same time
under what contractual conditions you will be employed and some sense of the main
contractors working practices
the services and facilities that are to be provided by the main contractor
payment terms
Unfortunately the estimating practices of main contractors, often omit significant information
and care must be taken to ensure that there is sufficient information to price the work. If the
site is up and running, a chat with the site agent or a sub-contractor on site can prove
invaluable in accessing the procedures, competency (or payment policies) of an unknown
main contractor.
For our own part, we like to see tenders properly qualified with specific terms and conditions.
However this can prove a barrier to securing the works and Labour only sub-contractors
must take care in the writing of such terms
A further list of factors are set out in the Sub-Contractors bidding decisions section of the
Builders Costs and Sources of Supply booklet.

Risks Associated With Working For Main Contractors


In most cases sub-contractors offering labour and plant only services are wholly dependent
on the main contractors (or developers) who are managing the works. The Main Contractors
management of the works can effect the sub-contactors production in any one of a number of
ways, For example
Lack of notice preventing the LOSC to properly plan
Late or non provision of materials, plant etc so as to provide continuity of work
causing standing or lost time
Changes to the program or phasing of the works
Poor and fast track programs leading to overmanned sites
Poor management or programming causing extra work or not allowing for the proper
completion of work

TF-66
Late variations without proper documentation (or works ordered without proper
distinction between priced work and daywork)
Late or the non provision of documentation
These costs and risks are often further compounded by the labour only sub-contractors need
to generate much higher rates of production than would normally be allowed for by the Main
Contractor employing labour on a direct basis.

The Importance of In House Adjudication


Real differences in the production rates of LOSCs coupled with the factors raised above lead
to significant variances in competitive LOSC tenders submitted to Main Contractors.
Variances often further accentuated on smaller projects by the variety of pricing methods
adopted.
In our view LOSCs should consider each project on its individual merits and will need to trust
in their own judgement when adjusting rates. We always recommend that LOSC consider the
ability of their own team to performances in relation to the constants used on the significant
rates.

Ongoing Management and Negotiation


Due to the specific nature of LOSCs and the particular practices describe above LOSC
managers need to ensure that they clearly understand what has been priced and under what
terms.
Most LOSC work requires some form of ongoing negotiation to ensure that production is not
compromised and to ensure variations and payment schedules are adhered to.
It is not uncommon for main contractors to vary orders, sometimes only letting part of the
works priced or to enter into second stage negotiations. LOSC managers should ensure that
they have a clear understanding of the extent of the works and the implications of changing
rates. Great care is required if rated bills are to be submitted

Designing Specific Strategies


Labour-only works vary significantly from groundwork to brickwork, carpentry, roofing and
sometimes-even plumbing, heating or electrical. However, in our experience, most
successful LOSCs have a clear view of the work to which they are best suited and build up a
set of systems and procedures that assist them in avoiding the pitfalls of working for main
contractors.
For some they are simply the common sense that comes from experiences for others
specific guidelines or terms and conditions. Whichever approach is used an understanding
of pricing (with rules of thumb for key rates) and feed back systems are essential

TF-67
Using Requirements Lists
Last Edited: 15 March 2004

Requirement schedules should be used with considerable care, as they are only accurate in
so far as the measured work within the bill represents what will be undertaken on site.
Particular attention should be paid to how work has been taken off (see Adjusting and
Checking Estimates) and to identifying any items within the bill pages that have been priced
as:
similar or better basis
different brands
extra over (E.O.) adjustments
bare or hollow rates (costs in the Other column)
with Provisional Sums, Prime Costs, Contingency figures
Domestic Sub-Contractors or Quotations
The above items (or combination of items) may not be shown in the requirement lists, or
need to be correlated or adjusted to match those items specified, rather than those taken
within the estimate.
(For example: GEN 2 concrete is measured with an E.O. for Sulphate resisting concrete in
the bill will be shown as such in the materials lists and will require that the user allow for
Sulphate resisting concrete rather than the GEN 2 shown on the requirements printouts)
In most cases bare or hollow rates from within the Other column will need to be manually
recorded from the bill and Labour, Material, Plant, Other allocated or adjusted for each.
Furthermore, users of the above list will have to adjust for any variations or changes in
quantities, specifications, staging or methods of production.

Cost Type - Labour


Shows total labour requirement for each labour element of the work
Shows the net unit cost for each labour element
Shows waste where appropriate
Does not show Domestic Sub-contract Labour or hollow rate labour (see Cost Type
Other)

Cost Type - Material


Shows total material requirement for each material element
Shows unit cost for each material element
Shows the percentage of waste allowed for each material element
Does not include small consumable items such as pipe lubricant etc.
Does not include Domestic Sub-Contract or hollow rate materials (see Cost Type
Other)

TF-68
Cost Type - Plant
Shows total plant requirement for each plant element for of the work
Shows net unit cost for each plant element
Does not show Domestic Sub-Contract Materials or hollow rate plant (see Cost
Type Other)

Cost Type - Other


May show some Domestic Sub-Contract items
May show some Provisional Sums, Prime Costs, Contingencies and the like
Shows tipping charges and the like
Shows any bare or hollow rated item that has been described in the bill
Does not show any labour, plant or material breakdown for the item described

The requirements schedules only allow for rated items and do make any allowance for items
usually provided for within Preliminaries section such as unproductive time, overtime,
cleaning, scaffolding, attendances, etc.

Requirement Lists are supplied under the same Conditions of Sale as the estimate and the
user shall act as the Principal in all matters and will need to fully check the documentation
prior to its use for any purpose.

REQUIREMENTS LIST LAYOUT

Schedule Name : Bungalow 16 Type C


Bill Name : Ground Floors
Cost Type : Materials
Element Name Unit Required Waste Total Unit Total Reference
% Required Cost Cost
Cement 25kg 156.000 4.0 162.240 2.25 405.60 Jewson
Concrete GEN 2 Ready Mix m3 10.000 5.0 10.500 49.37 518.38 RMC
Jablite 50mm SD Insulation m2 100.000 4.0 104.000 2.96 307.84 Jewson
Polythene Sheet 250mu m2 110.000 4.0 114.400 .29 33.75 Jewson
Sand: Course Screeding tonne 14.000 5.0 14.700 14.00 205.80 Atlas
1,471.37

Similar requirement lists are also available for Labor, Plant and Other (Sub-contractors etc.)
costs

TF-69
TSA TERMS AND CONDITIONS OF SALE
Last Edited: 15-Jan-2007

A. These terms apply to all services supplied by TSA and may be varied without notice or if additional services are used
B. TSA reserve the right to refuse or re-quote for any work submitted.
C. Whereas TSA shall take due care in preparation of the enclosed documents and schedules NO liability or responsibility shall
attach to Trevor Sadd Associates for any claim howsoever arising from:
a) misrepresentation of your requirements
b) conflict between oral and written communication between the purchaser or the purchasers representative and TSA
c) errors or differences in quantities, calculations or rates contained in the items supplied or totals,
d) omissions
e) errors in the documentation arising from the lack of a site visit by TSA
f) any design, specification, structural, specialist design or contractual errors whether proposed by TSA or others. TSA
are not designers, specifiers, structural engineers, service engineers or solicitors, and purchasers use any solutions
proposed at their own risk. Furthermore purchasers agree that they will verify any proposals with the relevant
professionals prior to use.
D. Complete responsibility is placed on the purchaser to check all the details of the documents prior to their use for any
purpose and the purchaser shall in all cases act as the Principal and no responsibility or liability shall attach to TSA or any of
its employees or agents in respect of any inaccuracy contained in any documentation or schedules provided by TSA.
E. The purchaser agrees to report in writing any error found in the documentation to TSA within seven days of its discovery.
F. All supporting products (including letters, e-mails, literature, documentation, DVDs, software etc. (in whatever form)
provided or sold by TSA (including: Tendering for Profitable Building Work, Builders Estimating Systems, Securing Profitable
Building Works, Builders Costs and Sources of Supply, etc.) are provided or sold under copyright and are only for use with
services provided by TSA.
G. All those items provided by TSA (including those described in F. above) are provided to assist the purchaser in the
formulating tenders and should not be regarded as comprehensive or applicable to every tender situation. The purchaser
must always rely upon their own experience and methods.
H. Where estimates are used as the basis of a competitive tender, the purchaser agrees to provide TSA with details (tender
sums) of any tender submitted.
I. Where invoices are not pre-paid or balances are due, they are to be paid by return of post. If payment is not received within
three days, interest will be charged on the outstanding amount at Barclays Bank Base rate + 8% until payment is received
plus 10.00 for each reminder sent. Balances overdue by 21 days are generally transferred to a debt collection agency
whose fees with any legal fees are also charged.
J. Estimate and Tender completion dates and delivery dates cannot be guaranteed by TSA and may in unusual or exceptional
circumstances be varied. Furthermore delivery date may be varied where:
a) delays in receiving payment
b) the purchasers instructions or the works specified changes
c) the late provision of information, whether by the purchaser or others in the provision of any relevant
information (including design, specification, contractual or cost information)
K. The 'purchaser' in the above text means the purchaser or any other user of any service provided by TSA and TSA means
Trevor Sadd Associates or anyone acting on behalf of the same.

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