Lecture 1

 The Estimating and Bidding process

 All-in rates determination and materials
adjustments
 Unit rate computation for construction items
 Price analysis
 Price and contract strategies
By the end of this course, you should be able to:
 Understand the step-by-step procedure adopted in
practice to establish cost estimates at the tendering
stage of construction projects
 Acquire the data and methodology required for
detailed cost estimation of construction work items
 Appreciate the design and development of reports
such as adjudication and tender evaluation reports
 Appreciate pricing strategies used by contractors to
achieve financial objectives
 Unit 1: The Cost Estimating Process
 Unit 2: Principles for Computation of
Estimates
 Unit 3: Tender Submission and Action after
Submission of Tender
 Unit 4: Building up Estimates
 Unit 5: Estimating for Preliminaries
 Unit 6: Price Analysis

 Harris F and McCaffer R. MODERN CONSTRUCTION
MANAGEMENT 4TH EDITION Professional Book
Chapter 9
 Hackett M, Robinson I & Statham G, (2007) AQUA
GROUP GUIDE TO PROCUREMENT, TENDERING &
CONTRACT ADMINISTRATION Chapters 3,4,8-15
 Amoah Mensah, K., (1995), MANUAL FOR
ESTIMATING
 Ashworth, A. & Hogg, K., (2007) WILLIS PRACTICE
AND PROCEDURE FOR THE QUANTITY SURVEYOR,
Blackwell Publishing, Oxford
THE CONSTRUCTION ESTIMATING PROCESS
Unit Objectives
By the end of this unit, you should be able to:
 Outline the sequence of activities which make up
the Estimating and Tendering Process for
construction projects;
 Explain what happens at each stage of the
estimating and tendering process;
 Explain what strategies contractors use during
estimating to improve cashflow.

 Tendering and estimating phase: Interface between
design and construction phase of a traditionally
procured contract.
 Tender Preparation is the total processes undertaken
by a contractor to estimate the net prime costs of the
works involved in a project
 The function of estimating is to establish the net
prime cost of completing the works indicated in the
contract documents
 Once the total estimate for a project has been
obtained, it can be converted to a tender figure by
adding a charge for head office overheads, profits
and allowances for contractor’s overheads.
1. Development of tender list and invitation to
tender;
2. The contractor’s decision to tender;
3. Project appreciation;
4. Enquiries and quotations;
5. Planning and temporary works;
6. “All-in” Rates and Unit Rate Pricing;
7. PC and provisional sums;
8. Project overheads;
9. Completion, adjudication and submission of
tender;
10. Action after submitting tender.
Tender List and Invitation to Tender
 The contractor will be expected to formally
respond to the client’s invitation to tender.
 Positive contractor response indicates to client
and his consultants whether the contractor has
the necessary expertise, experience,
management, resources knowledge of the
location to adequately construct their works in
the time required.
 Once a contractor has indicted his intention to
submit a tender, it will only be under very
exceptional conditions that such a contractor
should decide not to submit a final tender.
 When a contractor makes it to
onto a client’s tender list and is
invited to tender, the contractor
now needs to make a decision
whether or not to formally put in
a bid for the project.
 The conditions of contract for the project;
 The contractor’s workload or timetable;
 The type of work and resources needed for the project;
 The tender information provided;
 Commercial factors;
 Credit standing of the client;
 Source of funding for project;
 Knowledge of Client;
 Timescale for offer;
 Knowledge of competitors also interested in the project;
 Importance of the project to the client and the contractor;
 Knowledge of local conditions – availability of labour, plant and materials;
 Risks involved – cash flow, future business, etc.;
 Terms of payment for the project;
 The contractor’s overheads, mark up and profit; and
 The method of evaluation and award to be used for the project.
 This is the team put together by the
contractor to handle the tendering and
estimating process once the decision to
tender has been made.
 In general, some of the members who make
up the contractor’s estimating team are:
estimator, planner, buying officer, engineer,
plant manager, quantity surveyor, insurance
officer and operations manager.
 Estimating department must complete a Tender
Information Form.
 Acknowledgement or receipt of the enquiry must
be sent to the client or his consultant.
 Where an approximate cost of the project is
provided, this must be reconciled against any
advice given at the time of pre-selection.
 If no approximate cost is given, an early
assessment must be made by the estimator to
determine the approximate cost of the project
and the scope of works.
 Made by the estimator mainly responsible for the
production of the cost estimate.
 The estimator must then make a checklist of all
the documents received.
 In larger construction companies, these
documents may be inspected by the chief
estimator as well as other members of the
contractor’s organisation.
- The estimator will have overall
responsibility for the co-ordination of the views
of the other parties who examine the
documents.
To confirm….
 Whether the documents received are those
specified in the enquiry;
 That the documents and information are
adequate for assessing costs; and
 That sufficient time is available for the
production of a tender.
 Drawings;
 Specifications (including performance
specifications where possible);
 Schedules;
 Technical reports;
 Programme of work periods for major
nominated subcontractors; and
 Bills of quantity.
 The stage the contractor seeks to gain in-
depth understanding of the project’s
requirements and to devise a strategy for the
timely completion of the complex,
interrelated activities involved in the project –
after having decided to tender for the project,
Management of estimates
 All projects in an estimating department must
be entered in a tender register.
 Co-ordination meetings may be needed with
management and other departments within
the contractor’s organization to establish key
dates, decide on actions necessary and
monitor progress during the production of
the cost estimate.
Checking the tender documents
 After the contractor has decided to tender for a
project, the estimator must ensure that all the
tender documents have been received.
 A letter is sent to client or consultant to
acknowledge receipt of documents and confirm
that a tender will be produced by the due date.
 This letter sent to the client should also record
any discrepancies in the documents received.
 A timetable must be established which
highlights the key dates in the production of
the estimate and tender.
 This is the responsibility of the estimator.
 The conditions of contract, bills of quantity,
general arrangement drawings, specifications
and any supporting documents, such as soil
reports, site industrial relations policy, or
specialist information must be examined in detail
by the estimator or other personnel in the
contractor’s organization
 Any discrepancies in the tender documents must
be noted by the estimator for future reference to
the appropriate consultant for clarification.
 At this stage the estimator must consider in
more depth the consequences of such
conditions
 Any further particulars received during the
tender period concerning the conditions of
contract and appendix details, must be noted
and entered in the ‘Estimator’s Summary’.
Examine to confirm that……
 All forms of contract used are standard forms of
contract;
 Conditions of standard forms are amended;
 Non-standard payments or retention provisions
are included and the effects that such alterations
may cause regarding the contractor’s liability for
payments to sub-contractors;
 Bid bonds, performance bonds or parent
company guarantee are required;
Examine to confirm that……
 Insurance requirements are met by the
contractor’s standard policies, or can be obtained
within the current insurance market at
reasonable rates;
 Nomination procedures will be followed without
amendment;
 Liquidated damage requirements are acceptable
 Amendments to other project information have
been reflected in the conditions of contract.
 The estimator must have a thorough
understanding of the specification
 The attention of the consultants must be
drawn to any problems, particularly when an
estimator is concerned that poor
specifications could make his tender less
competitive.
Estimator should look for factors which will influence pricing such
as:
 Standard and completeness of the drawn information;
 Clarity of the specifications requirements and the quality
required;
 Buildability;
 Whether load bearing and non load bearing areas can be
identified;
 Extent of use of standard details indicating construction
experience;
 Evidence of design coordination of services and structural needs;
 The amount of information concerning ground conditions
 Problem areas and restraints on construction in the design.
 Put together by estimator
 Resolved through meetings
 Should be in writing
 All significant decisions communicated to one
contractor by the consultant, must be
communicated to all tendering contractors.
 Made once the preliminary assessment of project
has been carried out and a provisional method
and sequence of construction established.
 Opportunity must be used to examine the
general locality and to establish the extent of
construction-related activity in the area.
 Also visit local labour agencies and suppliers
 Comprehensive report must be prepared after
visit
 In practice, visits will normally be made to the
architect, but it helps to visit the consulting engineer,
services engineer and quantity surveyor, in order to
meet the personalities who will subsequently be
involved in the project.
 Detailed drawings, reports of site investigations and
any other available information must be inspected
and notes and sketches made of all matters affecting
either construction method temporary works or the
likely cost of work.
 A critical assessment must be made of the degree of
advancement and quality of the design.
 A contractor’s success in obtaining a contract
depends upon good quotations for materials,
plant and items to be sub-contracted -Which
typically account for over 70% of the value of
direct works
 The contractor must maintain comprehensive
records of project information sent to
suppliers and sub-contractors
 Standardized documentation and procedures
assist the methodical preparation of the
estimate and especially if personnel changes
at any stage
  Contractors must maintain comprehensive
records of suppliers, and sub-contractors.
 These records must include:
i. Details of past performance on site;
ii. Previous performance in returning complete
quotations on time;
iii. Extent of geographical operation;
iv. Size and type of contract on which previously
used;
v. Information concerning contacts; and
vi. Address, telephone and facsimile numbers.
 The programme of construction is a schedule
which shows the activities required to be
undertaken, the required durations, their
start and finish dates.
 The method of construction is a description
of how the contractor proposes to carry out
the required activities.
 The contractor’s plant requirements should
be established in the method statement and
the programme.
 The duration for which the plant is needed on
site will be established from the tender
programme.
 The estimator must firstly compile a
‘schedule of plant requirements’, in which the
type, performance requirements, durations
and special requirements for the plant should
be listed.
The options available for obtaining plant:
 Purchasing plant for the contract;
 Hiring existing company owned plant; and
 Hiring from external sources.
 Require the same details and information
about the sub-contract works as the main
contractor requires for his tender.
 Selection takes into account factors such as
proven competence in health and safety
matters and experience in similar work size
 Responses from suppliers should be recorded
on the resource abstract sheet or in a
materials quotations register.
 Any discrepancies and divergence from the
enquiry must also be recorded on the register
for later evaluation, before selection of the
quotation to be used in pricing unit rates.
 Rates for plant are entered on a Plant
Comparison Form for use during the pricing
stage.
 Any discrepancies and divergence from the
enquiry must be identified and also recorded
on the register.
 Quotations must be carefully checked to
ensure the plant offered meets any
requirements defined at the enquiry stage.
 The planning stage outlines how and when
activities proposed under the project will be
undertaken.
 This involves the operations likely to form
important and critical items in a programme.
 Principal quantities are usually provided in
bills of quantity for civil engineering work but
rarely for building.
 Written descriptions of how operations will be
carried out and managed during a project.
 A contractor will gain a competitive
advantage by finding innovative and the most
cost effective systems for temporary works
and materials handling.
 Shows a schedule of works involved and when
contractor proposes to undertake them.
 The contractor will not always be required to
submit a tender programme with his tender.
 In some cases, the contractor may only be
required to confirm by signing form of tender
that all works will be executed in accordance
with start and completion dates stated in
project information received from consultants
 Includes access routes, restrictions, areas for
storage and accommodation, temporary
service connections and distribution,
temporary spoil heaps, carnage, batching
plant, hoardings and scaffolding.
 Designed by the contractor and as such an
important opportunity to improve tender
competitiveness
 A mid-tender review meeting provides an
opportunity for the estimator to explain his
approach and others to give their ideas and
expectations for large projects.
Lecture 2

45
Unit objectives
By the end of this unit, you will be able to:
 Explain “all-in rates”;
 Compute “all-in rates” for labour and plant;
 Explain unit rates;

46
 Estimators need a clear and coherent strategy
for building up their estimate.
 Estimators should be able to read and
understand drawings and technical
documents, and clearly understand the
provisions of construction contracts.

47
Step 1
Establishment of ‘all-in rates’ includes:
 A rate per hour for the employment of
labour;
 Operating rate per hour (per day, per week
etc) for plant; and
 The cost per unit of material delivered and
unloaded at the site.

48
Step 2
 Use standards from the contractor’s data
bank or other sources.
 These standards are net unit rates which are
set against the items in the bills of quantity.
 Alternatively, rates received from sub-
contractors may be used.

49
Step 3
 This stage involves the incorporation of rates
from specialist trade contractors, including
those offering ‘labour-only’ services into
producing either the whole or part of a rate.

50
 Assumptions
1. State all basic facts on which build-up is
based. E.g.:
i. Cost of all resources
ii. Units that resources are costed in
2. what is included in these costs.
3. Output/production rates on which you have
based your calculations;
 Wastage rates for different materials; and
 Number of uses for formwork items.

51
 If a gang of two bricklayers and one labourer
is chosen,
 this gang can be used for most brickwork
items.
 Rate is calculated once – and re-used when
required

52
 The gang rate for 2 + 1 brickwork gang:
2 bricklayers@ GH¢6.00 GH¢12.00/hr
1 labourer @ GH¢4.50 GH¢ 4.50/hr
Total GH¢ 16.50/hr
Divided by 2 GH¢ 8.25/hr
 So – for each hour that a bricklayer works, half a
labourer hour is allocated (to supply him with
materials, clear up etc).
 The all-in-daily rate of any operative may be
defined as the total cost to the employer for
employing an operative’s services for “one
operative labour day’s” output.
 In this case, the employer is the contractor.

54
Built up from the following:
 The basic daily wage of the operator involved.
 Statutory additions such as employer’s contribution
to national provident fund, workmen’s compensation
insurance, rent and leave allowances.
 Trade union requirements of tools allowances for
tradesman using their own tools, uniform or
protective clothes and trade supervision.
 Social expenses like canteen subsidy, sick pay, death
benefits, medical expenses and transport allowances.
 Unforeseen expenses such as bad weather days,
idleness and overtime requirements for necessary
work required to keep delivery schedules.

55
 A typical computation of the all-in-daily rate starts with the
calculation of the effective number of working days per year.
For a typical year, number of days per year 365
less
no. of days for weekends in a year, 2 x 52 weekends 104
 National holidays in a year 13
 Annual leave 18
 Bad weather days 7
 155
 Hence effective working days/year 210

56
 MULTIPLYING FACTOR (Mf)
Description Labourer Carpenter Painter Mason Steel Bender

A. Basic daily wage as consolidated to cover wage + 1.00 1.00 1.00 1.00 1.00
rent ,leave allowance, canteen subsidy transport
B. MF/month at 27 days pay 27.00 27.00 27.00 27.00 27.00
C. MF/year (B x 12) 324.00 324.00 324.00 324.00 324.00
D. MF/working day at 210 days/year = C/210 1.543 1.543 1.543 1.543 1.543
E. Statutory additions: MF 0.150 0.150 0.150 0.150 0.150
i. social security 0.125 }

ii. Workmen’s comp. 0.025 }0.15

F. Social benefits:
1.027 1.027 1.027 1.027 1.027
i. medical expenses 0.200
ii. death expenses 0.294
iii. end of service award 0.533 (1.027)
G. Tools allowance
1.300 1.300 1.300 1.300
2.720 4.020 4.020 4.020 4.020
H. Sub total
I. Direct supervision at:
0.567 0.838 0.838 0.838 0.838
1.25H = 0.21H
6
(One headman to 6 operatives)
J. Total / working day is all-in-day labour 3.287 4.858 4.858 4.858 4.858
Multiplying factor)
K. If daily basic rate (usually recommended GH¢2.20 GH ¢2.20 GH ¢2.20 GH ¢2.20 GH¢2.20
government minimum wage) is
L. All-in-daily rate GH¢7.23 GH ¢10.69 GH ¢10.69 GH ¢10.69 GH¢10.69
M. Current all-in-daily rates GH¢7.20 GH ¢10.70 GH ¢10.70 GH ¢10.70 GH¢10.70

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 The all-in daily rate for an item is the cost to
the employer (the contractor) of employing
the services of the item of plant for one plant
day’s output. This thus represents all the
costs which the employer pays as a result of
using the plant for one plant day’s work.

58
 The main components of the all-in-daily rate
for plant are as follows:
i. The daily hiring rate (this normally includes
the operator’s wage) ;
ii. Delivery and installation (where necessary),
maintenance and removal expenses;
iii. Running expenses for fuel, oil and other
consumables;
iv. Administrative charges for co-ordination of
services relating to the plant.

59
 Description Achieved Average Repair and Running and Overhead
(1) (2) economic utilization renewals 5 consumables cost % of
life years days/years of annual % of annual annual
(3) (4) depreciation depreciation depreciation
(5) (6) (7)

Tipper trucks 5 150 25 25 10

Dumpers 4 200 20 25 10
Bulldozer 5 100 25 30 10
Wheel loader 4 150 30 25 10
Grader 4 140 33 25 10
Boiler 7 60 10 25 10
Concrete mixer 4 150 15 25 10
Crane(Mobile) 5 100 10 25 10
Crane(Static0 7 80 10 17 10
Compressor 5 80 20 25 10
Water pump 3 80 30 25 10
Poker vibrator 3 60 20 25 10

60
 The process of building up unit rates for an
activity involves the extraction of the
resources content in terms of materials,
labour and plant for each bill item.
 This is followed by a computation of the
respective costs of each of them.

61
Three distinct stages e as follows:
 Stage 1
 The establishment of ‘all-in rates’ for the key
items that make need to be considered. This
includes:
 A rate per hour for the employment of
labour;
 An operating rate per hour (or per day, per
week etc) for an item of plant; and
 A cost per unit of material delivered and
unloaded at the site.

62
 Use standard rates from the contractor’s data
bank or other sources.
 These standards rates may be net unit rates
which are set against the items in the bills of
quantity.
 Alternatively, rates received from sub-
contractors are used.


63
 Incorporation of rates from specialist trade
contractors, including those offering ‘labour-
only’ services in producing either the whole
or part of a rate.
 (The calculation and addition of project
overheads is a separate and subsequent
operation).

64
 Unit rates for measured items in the bills of
quantity (excluding preliminaries) consist of
any or all of the following basic elements:
 Labour;
 Plant;
 Materials;
 Sub-contractors;
 Overheads (site and head office); and
 Profit


65
 In determining the total material input in a bill of
quantities, the net material content and
associated wastes in respect of that material
should both be considered.
 With regard to material waste, this may be
classified into two - These are AVOIDABLE and
UNAVOIDABLE wastes.
 The classification of waste into these two
categories is based upon the causes of the waste
and the potential to minimize its occurrence.

66
 Avoidable waste Unavoidable waste
Pilfering Cutting waste
Carelessness Damage in transit
Poor quality work demolished to Stock pile or residual waste
be made good Utilization waste
Wrong utilization or preparation
Mistakes in ordering, both in
quality and quantity
Improper storage
Ineffective supervision

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Item Method used for Excavating in Gravel Soil Output
A 250HP-D8 Bulldozer in oversite excavation 150m deep 500m. sq / plant day
B 250HP-D8 in reduced level excavation 80cubic metres / plant day
C Manual excavation to reduce levels 3 cubic metres / man day
D Load and wheel excavated material 100m away 5 cubic metres / man day
E Load excavated material only- 10 cubic metres/ man day
F Filling excavated material around foundation 5 cubic metres / man day
Spread, level and compact excavated material in layers not
G 5 cubic metres / man day
exceeding150mm thick
H Spread and level hardcore in layers not exceeding 150mm thick 4 cubic metres / man day
6 cubic metres/plant day
I Compressor breaking through rock or concrete
per drill
J Compacting hardcore with mechanical compactor and operator 8 cubic metres / plant day
K Spreading and leveling only 10 cubic metres / man day
 Multipliers for different excavation types

Description Depth Category

Item ( Manual
output) 0-1m 0-2m 0-4m 4m

1 2 3 4 5 6

Surface not
A exceeding 1.000 - - -
B 30mm deep 0.85 0.75 0.06 0.05
C Basement 0.83 0.70 0.30 0.40
D Trenches 0.75 0.60 0.40 0.30
Pits
 Multiplying
` Type of soil Bulkage factor
factor
1 2 3 4

Gravel
A Compact soil 1.00 20.00
B (laterite) 1.00 22.00
C Soft rock 0.70 35.00
D Hard rock 0.30 50.00
E Loose soil and 0.60 33.33
sand
Item Description Depth
1 2 3 4

0.6 cubic
Fixing timber pooling 0.8 cubic metres/ gang metres / gang
A boards, day day
B walling and struts 1.5 cubic metres/ gang 1.00 cubic
Stripping day metres / gang
day

Unloading and stacking 4.00 cubic metres / man day or 150 pieces
C
of timber of 50x150x360mm
Lecture 3

72
 Estimating Process – 10 stages
 What all-in rates are
 Data / outputs etc.
 All-in rate calculation – plant / labour
 Worked example for labour
 MULTIPLYING FACTOR (Mf)
Description Labourer Carpenter Painter Mason Steel Bender

A. Basic daily wage as consolidated to cover wage + 1.00 1.00 1.00 1.00 1.00
rent ,leave allowance,canteen subsidy transport 27.00
B. MF/month at 27 days pay 27.00 324.00 27.00 27.00 27.00
C. MF/year (B x 12) 324.00 324.00 324.00 324.00
D. MF/working day at 210 days/year = C/210 1.543 1.543 1.543 1.543 1.543
E. Statutory additions: MF 0.150 0.150 0.150 0.150 0.150
i. social security 0.125 }

ii. Workmen’s comp. 0.025 }0.15

F. Social benefits:
1.027 1.027 1.027
i. medical expenses 0.200
1.300 1.027 1.027
ii. death expenses 0.294
iii. end of service award 0.533 (1.027)
G. Tools allowance
1.300 1.300 1.300
2.720 4.020 4.020 4.020 4.020
H. Sub total
I. Direct supervision at:
0.567 0.838 0.838 0.838 0.838
1.25H = 0.21H
6
(One headman to 6 operatives)
J. Total / working day is all-in-day labour 3.287 4.858 4.858 4.858 4.858
Multiplying factor)
K. If daily basic rate (usually recommended GH¢2.20 GH ¢2.20 GH ¢2.20 GH ¢2.20 GH¢2.20
government minimum wage) is
L. All-in-daily rate GH¢7.23 GH ¢10.69 GH ¢10.69 GH ¢10.69 GH¢10.69
M. Current all-in-daily rates GH¢7.20 GH ¢10.70 GH ¢10.70 GH ¢10.70 GH¢10.70

74
 Items need not be priced in the order they appear
in bills
 A better understanding of activities can be
gained by pricing one trade at a time.
 Computers also allow resources to be entered
either through a resource build-up screen for
each item or with the aid of a ‘spreadsheet’ type
comparison system where like trade items can be
viewed in a single table.
 If it is known that quotations for materials will be
delayed, the estimator can price labour and plant
first, and return to part-priced items later when
quotations are available.

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 Recommended that prime cost and
provisional sums should form a separate
section at the end of the measured work part
of the document which is being priced.
 Estimators must carefully check all the bill
pages, including preliminaries, to ensure that
the written-in sums are incorporated in the
final tender amount.

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Nominated suppliers
 The cost of materials from nominated
suppliers should be identified in the tender
documents as prime cost sums.
 A separate item is also given for the
contractor to add his profit.
 PC sums may also be written-in to an item
description (such as a rate for the supply of
facing bricks) for the estimator to incorporate
the cost in his rate build-up.


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 A nomination arises in construction contracts
where the selection of a sub-contractor is to
be made by the client or his representative.
 When this happens, a prime cost sum is
inserted in the tender documents to cover the
nominated sub-contractor’s charge.

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Items to be included in the bills of quantity for each
nominated sub-contractor are as follows:
 The nature and construction of the work;
 A statement of how and where the work is to be
fixed;
 Quantities which indicate the scope of the work;
 Any employers’ limitations affecting the method of
the works;
 A prime cost sum;
 General attendance item;
 An item for main contractor’s profit, to be shown as a
percentage; and
 Details of special attendance required by the sub-
contractor.
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 Defined as, ‘the labour, plant, materials or
other facilities provided by the main
contractor for the benefit of the sub-
contractor and for which the sub-contractor
normally bears no cost’.
 Built into main contractor’s tender and
consequently become a charge against the
client.
 In assessing sums to be allowed for general
attendance, the estimator must investigate
the facilities which will already be provided
for the main contractor’s use and determine
any cost which may arise by the nominated
sub-contractor’s use of any such facilities. 80
 use of temporary roads, pavings and paths;
 use of standing scaffolding;
 use of standing power operated hoisting
plant;
 use of mess rooms, sanitary accommodation
and welfare facilities;
 providing temporary lighting and water
supplies;
 providing space for sub-contractor’s own
office accommodation and storage of plant
and materials;
 clearing away rubbish. 81
 Other specific attendances which do not fall
under the category of ‘general attendance’
must be specially measured in the bill of
quantity as ‘special attendance’. Items to be
measured include:


82
 special scaffold to be added to contractor’s standing
scaffolding;
 the provision of temporary access roads and
hardstandings in connection with structural
steelwork, pre-cast concrete components, piling ,
heavy items of plant and the like;
 unloading, distributing, hoisting and placing in
position of items required as part of “special
attendance”, giving in the case of significant items
the weight, location and size;
 the provision of covered storage and accommodation
including power supply to these;
 power supply giving the maximum load; and
 any other attendance not including ‘general
attendance’ or listed above.


83
  Sum provided for work or for costs which cannot
be entirely foreseen, defined or detailed at the
time the tendering documents are issued.
 Included in BOQ for items of work which cannot
be fully described or measured in accordance
with the rules of the method of measurement at
time of tender.
 Three types of provisional sum under the rules of
SMM7:
i. Provisional sums for defined works;
ii. Provisional sums for undefined works; and
iii. Provisional sums for works by statutory
authorities 84
 With the exception of provisional
services provided by statutory
authorities, provisional sums are
deemed to include an allowance for
main contractor’s head office
overhead or profit.
 Provisional sums should allow for
overheads and profit

85
 Normally occur where variations cannot be
valued by measuring using the rates or
comparable rates, nor by negotiation before
an instruction is issued.
 Dayworks charges are usually calculated
using the definitions for prime cost and
overheads.
 Total Dayworks charges include the
following costs: Labour; materials and
goods; plant; incidental costs, overheads
and profit
86
 The Code of Estimating Practice defines
overheads as ‘the cost of administering a
project and providing general plant, site
staff, facilities, site-based services and other
items not included in all-in rates’.
 The contractor’s opportunity to price for
these items is in the preliminaries section of
the bill, the section containing the basic
background and contractual conditions of the
contract.

87
 Fixed Charge: as the cost of work which is to
be considered as independent of duration
 Time Related Charge as the cost of work
which is to be considered as dependant on
duration.
 Items in bills of quantity for Employer’s
requirements and Contractor’s general
overheads cost items are given for both
categories.

88
 A schedule which shows all the associated
project overhead items, the durations for
which they will be required and estimates of
how much they will cost
NB:
 Contractors and firms, carrying out small
repetitive works, may apply a fixed
percentage for overheads (about 10 – 15%)
instead of using a schedule.

89
Direct overheads –
 Those which relate to a particular project
including management and supervisors, site
accommodation, temporary services and plant.
 They can be calculated on a weekly or monthly
basis and converted to a total cost for the whole
project by relating these costs to the project
duration.
 The total cost is either included as a lump sum or
a percentage addition to the unit rates.
 It is also usual to include a figure for profit and
attendance on sub-contractors in the
preliminaries.
90
Indirect overheads –
 General costs relating to the contractor’s
business such as office rent, rates of pay for
general staff such as secretaries, pay-roll
staff, senior management and professional
support staff (who will have to be paid
regardless of the amount of work that the
contractor is winning) and the company’s
finance costs.
 Usually calculated for forthcoming years on
the basis of previous years’ costs, with every
project contributing towards them.
91
Extending bills of quantity
 The extension of the bill rates to
totals, collections and summaries
must be carried out in a manner that
eliminates clerical errors and also
allows the establishment of various
sub-totals relating to elements of the
work or trades as necessary.

92
 The estimator must prepare summaries of the
resources which make up an estimate so that
management can assess the source of labour,
plant, materials, services, possible discounts
available and price level as well as undertake
price comparisons among suppliers.
 The final summary brings together all the
parts of an estimate, with costs apportioned
between labour, plant, materials, sub-
contractors, site overheads, PC and
provisional sums.

93
 In times of relatively low and predictable
inflation, contractors are expected to submit
tender prices which remain fixed for the
anticipated duration of the work.
 The method of calculation of fluctuations in
costs is set out in the appendix to the
conditions of contract.
 Fluctuations in cost can be ‘full’, ‘limited’ or
none at all.
 Fluctuations in cost may give rise to both
increases and decreases in the final cost
94
 These are costs normally associated with
overheads, which will be calculated as a
proportion of the total value of work.
 Some bills of quantity provide items for these
costs on the final summary page. They are:
 Contractor’s insurances;
 Performance bond;
 Water for the works; and
 Professional fees for design.


95
 The final review of an estimate and its conversion
to a tender is the responsibility of management.
 This is a separate commercial function based
upon the cost estimate and it’s supporting
reports and documents.
 The need for a formal approach to finalising
tenders should be regarded as fundamental to
competent tendering.
 An evaluation of alternatives, scope to improve
profitability and risks which may be encountered
will be considered at each stage of the estimating
process and converted into costs at the final
review meeting.
96
 The desire to win the contract
 The amount of contract finance required;
 The contractor’s knowledge of the client and
consultants;
 The local market conditions; an evaluation of
their previous biding performance;
 Intelligence information on the client’s
budget and target; and
 Risk (technical and contractual).

97
 The effects of any changes to rates etc on bill
should be noted
 For example, a change to the basic labour
rate will affect all bill items concerning
labour.
 This will affect all net rates that have been
compiled by the estimator.
 With computer-aided estimating system, such
changes can be easily accommodated at the
end of the tender period

98
 The estimator must ensure that the procedure set
out in the tender documents for the submission
of the tender is followed meticulously.
 The form of tender and any other declarations
must be completed as required and signed by an
authorised person from the contractor’s
organisation.
 A letter should be attached to the forms to list
the documents, and confirm the amendments
received during the tender period.
 Any other remarks about the technical content or
price may be reviewed as a qualification to a
tender and so should be avoided.
The role of the estimating department at this
stage include:
 Responding to further requests by client
team,
 Attending tender opening
 Adjustment of errors
 Negotiation and award –if no tender meets
client’s budget
 Evaluating the tender efficiency.
 Advise management on future bidding
strategy
 When a tender has been successful, the
documents must be checked thoroughly to
ensure they reflect the exact content of the
documents used to prepare the tender.
 Contract documents should be checked to
establish that:
❖ the drawings are those which were circulated
with the tender documents
❖ the dates, penalties and particulars given in the
appendix to the condition of contract are those
stated in the tender document; and
❖ the submission bills have been copied correctly.
 When the result of a tender is known, the
tender performance form should be
completed where possible with a comparison
made between the estimator’s organisation
and the one with the lowest (or the accepted)
tender.
 Tender results can be reported at regular
management meetings so that all those who
contributed to the estimate can assess their
performance.
 Suppliers and sub-contractors who submitted
quotations should be notified of the results
as promptly as possible.
 Estimators must monitor their performance with
an analysis of results recorded over a period of
consistent estimating.
 If data are available from a large number of
tenders, it is possible to evaluate tender
performance in relation to; types of work (new
build or refurbishment), clients (public, private),
procurement routes (traditional, design and
construct, trade packages), and estimating
resources for further tendering.
 Large contractors should analyse performance
over time to ensure they win a proportionate
number of contracts in comparison to
submissions (at least 1 in 6).
 The contractor will keep track of submitted
tenders, number of tendering contractors, lowest
tenders submitted, their estimated cost of the
project, their tender sum and the maximum
profit potential for the winning contractor.
 From this information, they can calculate the
approximate % profit used by their competitors
and adjust theirs in the future to be more
competitive.
Example
 Building Procurement Inc. has tendered for 6
projects in June. Table 3.1 shows the break down
of the tenders of in comparison with competitors.
Table 3.1
Project No. Tenders Rank %Over lowest bid % Over mean bid
1 3 1 0 -2.3
2 6 5 11.0 4.9
3 6 1 0 -3.1
4 5 2 5.0 -3.8
5 7 1 0 -7.7
6 14 5 15.0 1.0