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CHAPTER FIFTEEN

REQUEST FOR PROPOSAL

There are three broad management objectives that should be fulfilled in


writing a comprehensive RFP.
1. The RFP provide sufficient information for a bidder to prepare a
bid proposal that is responsive to each of the technical,
management, and commercial requirements specified in the RFP.
2. The RFP should provide the necessary information concerning
contract requirement.
3. The management requirements in the RFP should define how the
contract work will be managed by the owner and the contractor.

There are six commonly used sections of information that procurement


groups include in RFP’s.

INSTRUCTION TO BIDDERS

General Description of Work


These are the section are referenced in the general description
of the work.

What Must Be Included with Bid


The management requirements in the special conditions may
specify that bidders submit information such as quality, safety,
environmental and schedule program description.

Schedule of Bid Period Activities


The instructions define the date when bids are due. It is helpful
to provide the bidders with an estimate of the date when the contract
will be awarded. This date is consistent with project schedule. For
example, there may be a pre bid preparation period, these dates for
these meetings are define in the instructions. For example, there may
be a pre-bid meeting to explain the RFP and answer bidder question.
The owner may also want to schedule project site visits and meetings
with specific bidders to review their technical and management
capabilities.

Location of Work
The Instruction gives the location of the project site. Material and
equipment contract bidders need this information to determine

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shipping costs. If the project site is in a remote location, the Instruction
provides direction on how to get to the site.

Pre-Bid Meeting
Pre-Bid meetings can be held after the RFP’s are issued and prior
to the bid due date. The Instruction may also describe the purpose of
the meeting and how answer to question from bidders will handled.
The answers to the questions from bidders are normally handled in a
formal manner since they are supplement to the information provided
in the RFP.

Owner Contact for Questions


It is important that an owner designated one individual to act as
the contact person for questions from bidders during the bid period.
The answers to individual question from bidders during the bid period
that are not responded to at a pre-bid meeting are also important
supplemental information to the original RFP. The procurement group
representative assigned to a contract is often the designated contact
person for an owner.

Pre-Award Surveys
Pre-award surveys are performed by owners to obtain
information on technical and management capabilities. These surveys
are performed after the RFP is issued to the bidders and prior to award.
The survey can require detail presentations from bidders regarding the
technical and management approaches that they will take on contract.

Sealed Bid Requirements


The instruction defines the sealed bid requirement to provide
measure security that bid not have not been altered after they were
prepared.

Basis for Bid Evaluation


If an owner intends to give significant weight in its bid evaluation
to factors such as technical, quality, and schedule control capability as
well as quoted process, the bidders should be aware of this fact.

Ethical Standards
Ethical standard often come from corporate procurement
policies. They include such items as restrictions on gifts and
entertainment from suppliers and contractors to owner personnel.

Responsibility for Surety Bonds


If another section of the RFP does not specify the exact
requirements for surety bonds for a contract, the instructions clarify

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the types of bonds required and the cost responsibility for providing
the bonds.

Proposal Format
If the RFP requires that bidders prepare detailed proposals
describing how they will accomplish contract work activities, the
instructions define the format required for the proposals. Limits may be
placed on the length of different sections.

List of Bidders
Many RFP’s include a list of the companies in the Instruction
section, this approach has advantage of making the bidders aware that
they are involved in a competitive bidding process.

Letter of Acknowledgment
It is important that procurement groups receive feedback as
early as possible from companies that receive RFP’s regarding their
intent to the bid the work. To obtain this feed back in a timely manner,
the instruction often includes Letter of Acknowledgment.

DESCRIPTION OF WORK
The purpose of the Description of Work in the RFP is to define the
scope of work for a contract. Other section of the RFP for contract
such as the Specification and Drawings and the Description of Work
reference the other RFP section as required.

Engineering Contracts
Engineering contract RFP contains an overview of technical
features of a project. General information such as the location of the
project, existing facilities at the project site, and responsibilities for
licensing and permits is defined.
The division of responsibility between the owner and the engineering
contractor is explained in the description.

Construction Contracts
It provides the location of the work, existing facilities at the
project site, and the responsibility for obtaining permits and licenses
for a project. There is separate section of the RFP that contains
technical specifications and drawings. The contractor’s responsibility
services such as clean up, scaffolding, temporary office buildings,
warehousing, temporary electrical, temporary heat, security and
construction equipment are described in the description. The quality,
schedule, cost, safety, environmental, and other management
programs required to control the construction contract work can be
addressed in the description.

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PROPOSAL
Contains all of the pricing information required from bidders to
allow an owner to evaluate the costs of the bids.

Breakdown of Bid Price


It contains all of the price breakdowns required for bid
evaluations, contract management, and accounting needs for each
type of contract pricing. It is helpful to reference the Description of
Work and the specifications and Drawing section of RFP in defining the
scope of work for each bid price item.

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Revision and Extra Work
If unit prices are feasible for extra work, the proposal specifies
the unit prices required. If extra work will be handled on a
reimbursable basis, the proposal can request cost limits for the
reimbursable cost.

Escalation Formulas
The proposal request the formulas that will be applied to current
labor and material prices to determine escalation cost.

Schedule Completion Dates


If an owner wants a bidder to provide schedule dates for key
contract activities, the Proposal list the key schedule activities and
request that the contractor provides the dates.

List of Subcontractors
In addition to the names of subcontract firms, bidders should
provide descriptions of the subcontractor work scopes, subcontractor
experience, location of subcontractor offices, and telephone numbers.

Key Supplier or Contract Personnel


It is the person that will be in charge of the contract work and
will be the primary contact for an owner.

Length of Time Bid is Valid


If there is a possibility that the award of a contract will not occur
until a significant period of tie after bids are received, the proposal
requests the length of time that a bid is valid after receipt by an owner.

List of Bid Document Addenda Reviewed by Bidder


There are bid document addenda issued after the RFP is issued,
the proposal section requests that bidders list the addenda that they
have reviewed.

Notice of Conflicts or Errors in Bid Documents


Requesting that bidders formally notify an owner conflicts or
error in bid documents provides a formal mean of communicating
conflicts ad error.

Clarification of Bids
Although the intent of the RFP is to define the work scope in a
manner that eliminates the need or clarification and exception, there
may be items that are not clear that should be addressed. Excessive
clarification or exceptions may cause a bid proposal to be rejected.

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Bidder Signature
It contains space for the supplier of the contractor to sign its
complete proposal, includes the date the proposal is signed, the title of
the person signing, and any required identification numbers or license
numbers.

SPECIFICATION AND DRAWING


It is required by RFP’s for fixed and unit cost contracts. They’re
also required for target price and reimbursable with incentive fee
contracts since they define the basis of targets and incentive fees.

Service contract usually require a description of work in addition


to the specification and drawings in the RFP to clarify the work
activities that are the responsibility of contractor.

SPECIAL CONDITION

The special conditions section usually does not address the technical
requirements for a project. The procurement group works with the other project
groups to determine the extent that management clauses can be standardize in
the special conditions. In adequate definition of management requirements can
lead to poor management of a contract. Project management has the overall
responsibility for assuring that RFP’s adequately define management
requirements.

GENERAL CONDITION AND CONTRACT AGREEMENTS


Many of commercial term cover situations such as changes to
the original contract technical and management requirements or cases
in which the contractor does not perform in accordance with these
requirements. Other commercial clauses cover terms of payment,
invoicing, and responsibility for tax payments.

The purpose of including the Contract Agreement section in the


RFP is to show the bidders the contract format that will be used if they
are awarded to the contract.

The contract agreement usually includes the General Condition,


Description of Work, Proposal, Specification and Drawing, and Special
Conditions section in the contract by referencing these documents.

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CHAPTER SIXTEEN
OWNER BID PERIOD ACTIVITIES
Activities such as pre-bid meetings and responding to questions from
bidders received during this period increase the assurance that bidders
understand the requirements in the RFP. Activities such as pre-award surveys
and meetings with other owners that have previously contracted with one or more
of the bidders increase the owner’s knowledge of the technical and management
capabilities of the bidders.

PRE-BID MEETINGS

One approach that an owner can take assuring that bidders


understand the requirements contained in the RFP is to wait for
bidders to ask questions then respond to the questions. Another
approach that owners can take is to have all bidders attend a pre-bid
meeting that explains the important requirements and provides
uniform answers to questions from bidders.

Purpose
The benefit is to provide assurance that all of the bidders clearly
understand the requirements of the RFP. The question asked by the
bidders at the pre-bid meeting provides feedback on the clarity and
comprehensiveness of the RFP. Bidders that ask questions that
indicate that they have carefully studied the requirements of the RFP
usually have the capability to fulfill these requirements. Pre-bid
meetings are more common for service contracts than they are for
engineered materials and equipment contracts.

Timing and Location


The meetings should be scheduled after the bidders have had
time to complete detailed review of the RFP. If the bidders have not
completed their detailed review of the RFP, they will not have had
sufficient time to prepare a complete list of their questions on the RFP.

Attendees
It is important that the persons most knowledgeable is the
technical and management requirements included in the RFP attend
the pre-bid meeting and present the items that relate to their areas of
expertise. There are advantages to an owner in having the person who
will be the Project Manager for the work performed by a supplier or a
contractor attends the pre-bid meeting. If a bidders sends a person
from its sales force to the pre-bid meeting who will not be involved

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with the project after contract award, there is greater probability of
contract performance problem.

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Agenda
One approach is to assume that owner requirements are well
covered in the RFP’s that have been issued to the bidders and allocate
most of the pre-bid meeting time to answering questions from bidders.
Another approach is to have project personnel discuss the important
requirements to assure that they are clearly understood.

Typical agenda items for pre-bid meetings are:


1. Technical requirements
Define what work must be completed by a bidder. The primary
technical
Objectives of the contract work are emphasized in the
presentation. The supplier’s or contractor’s responsibilities for
licensing activities are addressed.
2. Quality Requirements
Define how the owner and the supplier of the contractor assure
that the technical requirements are fulfilled in the completed
work. If the owner intends to perform independent quality
inspections of the contract work, the nature and frequency of
these activities are addressed.
3. Schedule Requirements
Define when contract work must be complete and how the owner
and the contractor will manage the work to assure that schedule
requirements are achieved. The types and frequency of supplier
or contractor schedule and progress reporting are discussed.
4. Cost Requirements
It is defined in the Proposal section in the RFP. The procurement
group representative explains the scope of work for each of the
cost items. Payment schedule and invoicing requirements are
discussed. Owner approval requirements for personnel increase,
overtime and shift work are addressed.
5. Commercial requirements.
It is addressed at the pre-bid meeting by the procurement
representative. If a contractor is required to have specific types
of insurance coverage, the type and extent of this coverage is
defined.
6. Other Management Requirements
The manner in which the organizations of the owner and the
supplier or contractor will interface is defined including the
identification of key owner project personnel. The responsibility
for any special environmental testing is addressed. F the owner
intends to perform independent safety inspections of contractor
work, the nature of these inspection is discussed.
7. Summary of Requirements.

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It is includes any requested management information such as
quality programs, schedule programs, organization charts, and
resumes of key personnel. Information on commercial
requirements such as insurance coverage is included in the
summary.

Responses to Questions and Meeting Minutes

Certain questions from bidders are responded to by the owner


personnel responsible for the items on the agenda during the
presentation of the items. The answers are documented in the minutes
of the meeting prepared by the procurement representative. The
minutes are distributed to all bidders.

ANSWERS TO BIDDER QUESTIONS

If the questions asked by a bidder involve the technical or management


requirements include in the RFP, the procurement group obtains responses to
the questions from the proper project group or groups. These responses are
issued as addenda to all bidders on a form similar to the one indicated in Figure
16-1. The procurement representative is designated to centralized control of the
responses to questions from individual bidders during the bid period.

PRE-AWARD SURVEYS

The most significant advantage to pre-award meetings is that the


supplier or the contractor has read the detailed requirements in the
RFP and can respond directly to the requirements in a pre-award
meeting.

Purpose
The purpose is to obtain information regarding the technical and
management capabilities of the bidder that is in addition to the written
information requested in the RFP.

Timing and Location


If there is a pre-bid meeting, the pre-award meeting is scheduled
after the pre-bid meeting to allow the bidder the benefit of the
information obtained at the pre-bid meeting. The timing of the pre-
award meeting should not restrain the completion of a bidder’s
proposal since the technical and management approaches included in
the bid proposal should be the same as those discussed at a pre-award
meeting. An advantages meeting after bid proposals are received but
prior to contract.

Attendees

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The project procurement representative attends the meeting
since he or she is responsible for establishing the date and location of
the meeting, issuing the meeting agenda in advance of the meeting
and preparing meeting minutes for the owner. Project management
attends most pre-awarded surveys since they involve major contracts.

Project schedule or cost group members can attend the meeting


if the contract has a significant impact upon the project schedule or
cost estimate.

It is essential that a bidder has the key managers who will be


responsible for performing the contract work present at the pre-award
survey since a prime purpose of the meeting is to evaluate the
capabilities of theses managers. The individual selected by a bidder to
act as a project manager for the contract work takes lead role in the
pre-award meeting for the bidders.

Agenda
The agenda clearly states the type of presentations that are
expected for each agenda item and the positions of the individuals in
the bidder’s organization that should make the presentations.

The following sections address important points that should be covered


in the pre-award survey presentation by bidders for engineered
materials and equipment, engineering, and construction contracts.

Engineered Materials and Equipment Contract Presentation

Technical
The presentation addresses the extent to which the suppliers
intend to rely upon existing design to fulfill RFP technical
requirements.
The technical presentation describes the size and experience
level of the supplier’s engineering group. The number of
qualifications of the supplier engineering personnel required to
complete the contract work are defined.
Computer systems and computer assisted drafting equipment
used by the supplier are reviewed on the tour.

Quality
The presentation defines the quality procedures that the supplier
will use to control the quality of the work as well as the training
programs that the supplier has to assure that engineering and
production personnel are aware of quality requirements.

Production

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The tour of the bidder’s facilities includes the production area
and a discussion of the type of equipment use to fabricate the
material or equipment. The production area and a discussion of
the type of equipment used to control the production work for
the contract is defined. The current backlog of work in the
production facility is addressed.
Testing equipment in bidder’s facility is discussed by the
Manager responsible for conducting the testing.

Contract Management
Describe the type of project organization that the bidder will use
to manage the contract work. The types of updated contract
schedules and progress reports that the bidder will provide to the
owner are addressed. Payment schedule and invoicing
requirements for the contract are discussed.

Engineering Contract Presentation

Technical
The engineering procedures that will be used to control the
design of the project, the type and quantity of technical
specifications and drawings, design calculations and computer
systems required, are discussed. Owner requirements for
reviewing and approving specifications and drawings, the
amount of the detailed design and design calculations that will
be turned over to the owner at the competition of the design
work is addressed. Liaison personnel that perform the final
technical review of design changes for the bidder are defined.
The totals engineering staff currently employed by the bidder as
well as current and future objects that require the efforts of this
engineering staff are identified.

Quality Program
The Quality Manager or the Engineering Manager responsible for
design review for the bidder presents the quality program that is
used to assure that the design satisfies the technical and quality
requirements in the RFP.
Final reviews of the design after construction or manufacturing is
complete by the engineering contractor to assure that any
deviations from the original design documents have not
compromised design requirements are defined. This includes any
requirements for as-built drawings submitted by the construction
or the manufacturing groups.

Schedule Program

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The schedule presentation that includes the compatibility of the
bidder’s scheduling system with the project scheduling system.

Cost Control Program


If the RFP is for reimbursable engineering contract, the Project
Manager for the bidder presents the cost control program that
the bidder will use to control the cost of its work. This
presentation includes a definition of the level of detail for
budgeted engineering activities.
The Project Manager defines the type of cost reports that are
provided to track the material costs of items that the contractor
procures.

Construction Contract Presentation

Construction Management Organization and Staffing


The bidder presents its estimated staffing level craft personnel.
The estimates are broken down by the major crafts that will be
employed by the construction contractor.
Quality Program
The quality manager defines the quality procedures that will be
used to inspect the construction work.

Schedule Program
 Requirements of compatibility
 Detail in the construction contractor’s schedule
 Type and frequency of schedule reports
 Estimated personnel levels, overtime and shift works

Cost Control Program


 Control labor and material cost
 Detail of construction contract budget activities
 Contractors method of collecting actual hours and quantities
of completed wok for budgeted activities
 Type and frequency of contractor cost control reports

Safety Program
The safety procedures that will be used to assure the safety of
the craft workers are identified as well as the type of craft
training programs utilizing these procedures.

Environmental Control Program


The presentation addresses the specific environmental control
requirements in the RFP for the construction contract

Responses to Questions and Minutes

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The procurement representative at the pre-award survey is
responsible for preparing the minutes of meeting for the owner.

MEETING WITH OWNERS THAT HAVE CONTRACTED WITH


BIDDERS

The owner has the advantages during the bid period of knowing
the specific technical and management requirement that will be
performed by a supplier or a contractor.

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CHAPTER SEVENTEEN
BID PROPOSALS

A bidder must be well organize in reviewing and responding to the RFP


for a major contract.

INITIAL ACTIVITIES

Decision to Bid
The management personnel who will be responsible for
performing the contract work should be involved with the initial
evaluation of the RFP to determine if the bidder has the capability to
meet the requirements.

Factors that should be considered by the managers in evaluating the


capability of a bidder to meet RFP requirements include the following:

 Similarity of Technical Work; The bidder should have existing


personnel with the expertise to perform the contract work
 Current Workload; the bidder in this situation evaluates the
feasibility of hiring additional personnel to complete the new
work required by the RFP.
 Cost of Proposal; a bidder should evaluate the probability of
obtaining contract award against the cost of preparing the
proposal for the RFP.

Organization of Bid Proposal Team


The bid proposal team functions best if it is managed by a
Project Manager responsible for the preparation of the proposal. The
advantage of having the person for preparing the technical and
management commitments is having a person who is responsible for
implementing the commitment.
The bid proposal contains the detailed input from these groups
regarding the approach that will be taken to fulfilling the technical and
management requirements in the RFP.

Preparation of Bid Proposal Schedule


The Project Manager for the bid proposal work may prepare a
schedule of the activities that must be completed to submit the
proposal by the required date. The schedule indicates the groups that
have the primary responsibility for completing these activities for a
bidder.

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TECHNICAL SECTION

Detailed Specifications and Drawings


Bidders have two major concern in reviewing the detailed
specifications and drawings included in the RFP. The first concern is
with the quantity of work that they must perform to complete a
contract. If there are a significant number of drawings, the bidder
spends considerable effort in analyzing the drawing to determine the
quality of work.

The quantity of work affects the labor cost, material cost, and schedule
for completing the contract work. The second concern for bidders with
the detailed specification and drawings is the complexity of the work.
The complexity of the work defined in the technical documents has
direct impact upon the quality, cost, and schedule of work that will be
performed by a bidder.

Performance Specification
It can require a substantial amount of design work by a bidder
prior to submitting a proposal. The technical approach that they select
should represent the best combination of quality, cost and schedule
benefits to an owner in addition to meeting the performance
requirements.
Since the detailed design that a bidder proposes is the basis for
its fixed price bid, the technical section of the proposal defines the
design in as much detail as possible.
The technical section of a proposal can include engineering
procedures, detailed specification, and drawing prepared by the bidder
to properly define the details of the proposed design.

QUALITY SECTION

Engineers Materials and Equipment Contracts


Most suppliers review the quality requirements in the RFP
against their existing quality programs to determine if the existing
programs fully satisfy the RFP requirements. The quality section of
their proposals should describe the basic elements of their quality
programs. This description includes the procedures that used to control
the quality of the work, description of training programs for production
personnel, the types and frequency of inspections performed, and
quality documentation prepared by the supplier.

Engineering Contracts
The proper implementation of these technical requirements is a
primary objective of the quality programs of all the groups on a
project.

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Many engineering contractors have design review groups that
are independent of the groups that prepare the original design
documents. Bidders for engineering contracts describe their proposed
design review programs.
The engineering contractor is responsible for analyzing the
existing deviation and determining is the design integrity is
jeopardized by accepting the work as is.

Construction Contract
Construction inspection procedures often require that hold points
be established in the work performed by craft personnel to perform
inspections at the proper time in a work sequence.
Quality problems identified by a construction contractor with
materials and equipment furnished by others can take a significant
amount of time to resolve with suppliers.

SCHEDULE SELECTION

The start and completion dates in the RFP for the contract work
affect the pricing of the labor and materials required to perform the
work. Bidders use the specified schedule dates in the RFP as the basis
for developing the cost information that support their fixed and unit
price bids.

Required Schedule Dates


It is the responsibility of the bidder to develop a sufficiently
detailed schedule of contract work activities to substantiate that it
works can be completed within the schedule requirements in the RFP.
The durations of the activities in a bidder’s detailed schedule for
performing the contrast work are dependent upon the technical scope
defined in the RFP.

Schedule Program Requirements


The schedule section of a bidder’s proposal addresses the ttype
of scheduling program that the bidder intends to use to control the
schedule of its work and the degree of compatibility of the bidder’s
scheduling system with owner’s project schedule system.

OTHER MANAGEMENT SECTION

Organizing and Staffing Requirements


The management capabilities of the individual proposed for this
position in a supplier’s or a contractor’s organization are an important
factor in bid evaluations.
A bidder should study an owner’s project organization carefully
before structuring its organization in its proposal. The Structure of the

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bidder’s organization should parallel the structure of an owner’s
organization to the extent that t is feasible.

Owner Furnished Items


The bidder’s proposal states its requirements for office space
and whether it is providing any additional space. For example,
contractor personnel may have to wait until owner furnished
equipment is used by another contractor before they can perform their
work on a contract.

Safety Requirements
These safety programs must meet federal OSHA requirements as
well as specific owner requirements. A bidder needs to be
knowledgeable of these requirements to properly account for them in
the pricing section of its proposal.

Environmental Requirements
Construction contract involving the handling of hazardous
materials must comply with federal environmental requirements.

COMMERCIAL SECTION

Bidder’s Commercial Terms


A bidder’s commercial terms are more favorable to the bidder
than are the owner’s since they are prepared by the bidder. The
problem with this approach is that most owners are not willing to use
commercial terms developed by the bidder since they know that their
own commercial terms provide better protection for an owner.

Liability Requirements
RFP clauses that define the liability of a supplier of a contractor
for performance problems can impose a significant financial liability
upon a supplier or a contractor. Bidders should carefully evaluate
liability clauses and state their positions on liability limits in their
proposals.

Cost of Commercial Requirements


For example, insurance requirements in RFP’s can result in
additional insurance premium. If a contractor is required to furnish
certain bonds by the requirements in the RFP, the premiums for he
bonds are included in the contract price.

PRICING SECTION

Fixed Price, Unit Price, and Target Price Contracts

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Bidders for fixed price, unit price and target price contracts
prepare substantial estimating detail to assure that all specified
activities are covered in their prices and to be able to adequately
control the work after contract award.

Contract Scope of Work


The bidder develops its specific responses to the technical,
management, and commercial requirements in the RFP to define the
work that it will perform.
The level of detail in the bidder’s estimate is affected by two
factors. The level of detail is sufficient to prepare and estimate that
includes all of the work specified in the RFP. The level of detail also is
sufficient to prepare budgets that can be compared to actual costs.

Productivity and Hours


The quantity and complexity of the work involved are major
factors that affect the labor hours required to perform the work. The
managers of the groups that will perform the contract work assist in
estimating the hours.

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Labor and Material Cost
If the contract work will not be completed before wage increase
occurs, it is necessary to estimate the cost of future wage rate
increases. If there are extensive materials that will be provided by a
supplier or a contractor, a bidder can expend considerable effort in
obtaining prices for these materials.

Equipment Cost
Engineered materials and equipment contract require the
supplier to use specialized equipment to manufacture the item. The
bidder is responsible for determining the types of equipment required
to perform the contract work and the duration for using the equipment.
The costs of this equipment are included in the contract price.

Risk Analysis
There are many factors that can affect the bidder’s cost
estimate, for example;
 Underestimates of quantities of work
 Underestimates of the complexity
 Underestimates of Increase in wage rates
 Underestimates of material prices
 Underestimates of the amount and types of equipments required
to perform contract work.

Overhead and Profit


For example, suppliers and contractors have sales personnel,
executive personnel, office facilities, and support groups that are
necessary for their business. If the actual costs of a supplier or a
contractor exceed its estimated costs plus any contingency, profit is
reduced by the amount of the overrun.

Reimbursable Contracts
Reimbursable contracts with incentive fees that are based upon
expending less than a targeted cost figure can require a bidder
develop the targeted cost figure. RFP’s that specify that bidder submit
cost limits for items such as wage rates and travel expenses require
the preparation of these figure by a bidder.

JOINT VENTURE PROPOSALS

The advantage of join venture is that they allow companies to combine


their financial and management resources to fulfill contract
requirements. Joint venture contract approaches can result in
management accountability problems if responsibility are not clearly
defines.

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