KYAMBOGO UNIVERSITY

Faculty of Engineering

Department of Civil and Environmental Engineering

Estimating and Tendering

TCB 4105

AY2021/2022

Prepared by Sam Bulolo

sbulolo@kyu.ac.ug
Objectives
1) To give students the concepts of construction project economics
2) To highlight the factors influencing construction cost.
3) To discuss specific costing techniques and their application to different engineering
options.
4) To give students an appreciation of the principles of, and procedures relating to,
estimating and tendering.
5) Advise clients/promoters on the costs of engineering projects.

Assessment:
Assignments, tests, and examinations shall be used, and their relative contribution to the final
grading is as shown below:
Requirements Contribution
Assignments 15%
Tests 25%
Final examination 60%
Total 100%
 1.0 CHAPTER ONE
1.1 General introduction

For any construction project, it is required to forecast its probable cost. The probable cost is also known as the
estimated cost. If the money available is more than the estimated cost, there is no problem. But if the estimated
cost is more than the money available, then attempts are made to reduce the cost either by reducing the work
involved or by lowering the specifications.
For any construction, two basic aspects namely – quantity and quality aspects, are involved. The quantity aspect
is governed by the dimensions of the proposed construction which are clearly shown in the detailed drawings of
the proposed project. The quality aspect is governed through specifications for the materials of construction and
workmanship. The quantity aspect decides the amount of work involved together with the quantities of materials
and the total estimated labour required for the proposed construction. These two aspects of construction lead to a
form or govern the estimate of the work.
Thus an estimate of a construction is a forecast of its probable cost and is a tool for planning and controlling the
proposed project with respect to quality, time and finance. The process of preparing an estimate is known as
Estimating.
It includes two items:
(i). Working out quantities and;
(ii). Abstracting.
The subject of estimating is simple, no complicated fundamentals are involved, but it requires good knowledge
of drawing and good perception, the one who understands the drawing can find out dimensions lengths, breadths,
heights - or depths etc. without any difficulty and can calculate the quantities of different items of the work
involved. In preparing an estimate one has to go into the details of each item, big or small, and nothing has to be
missed or left. Estimating makes one go through as he / she has to go deep into the details. The subject of
estimating cannot be learnt simply by studying the subject for few days front the book. One has to prepare few
estimates by his own hand keeping all the items of work in mind and discussing the prepared estimates with some
experienced estimator.
Accuracy in estimate is very important. If the estimate is prepared carefully and by considering all likely
conditions and circumstances, there will practically be little difference between the amount of detailed estimates
and the actual cost of construction. If the actual cost is less than the estimated cost, there is no difficulty as surplus
amount will be left with the owner. If, however, the estimated cost is more than the actual cost which is the most
likely case, the owner will be put into financial trouble and he will have either to suspend the work or alter the
specifications of the work. The reasons for exceeding the estimated cart may be omission of some items, changes
in design, some addition to the project, improper rates etc. but out of them increase in the rates is the main reason.
In preparing the correct estimate care should be taken to find out the dimensions of all the items correctly and
that no item of work or part thereof is left out. The rates of each item should be reasonable and workable. The
rates in the estimate provided for the complete work. which consist of the cost of materials, cost of transport, cost
of labour, cost of tools and plants, cost of water. Taxes, establishment and supervision cost, reasonable profit of
contractor etc.

1
In general, estimates can be broadly divided into two categories - approximate and detailed. Strictly speaking
all the estimates are more or less approximate, because the actual cost of construction cannot be born until it is
completed in all respects.
However, in case of detailed estimates, a complete schedule of all the possible items which are likely to occur, is,
prepared and proper unit costs are applied to them. Thus a detailed estimate gives an amount which is very near
to the final amount of the construction and is more accurate. The detailed estimate is prepared mainly for two
purposes.
(i). Execution processes of the project and;
(ii). Obtaining technical sanctions.
In preparation of a detailed estimate, the whole project is divided into various stages and then each stage is further
sub-divided into various items of work. The quantities of such items of work are accurately worked out from the
detailed drawings. The detailed estimates comprise the cost as follow:
(i). Total cost of various items of project
(ii). Allowance for the contingencies to accommodate unforeseen expenditure on missed items and small
variations in quantity and/or rate in different items of work.
(iii). Establishment charges for supervision.
(iv). Estimated cost for service charges which include water supply connections, sanitary arrangements and
electrical installations.
The items (ii), (iii) and (iv) may be expressed as some percentage of (i), and while doing so, local conditions and
designs of work has to be given due consideration.

1.2 Necessity of approximate estimate;

Approximate estimate of the structure of a project is generally worked out before its detailed estimate is taken in
hand. The approximate estimate is used for the following purposes.
(i). Making preliminary studies of various aspects of the project.
(ii). Estimation of a commercial project gives some idea about whether the investment in such a project is
justified or not. For non-commercial projects, the approximate estimates help in recommending such
projects on the grounds of their necessity, utility, etc.
(iii). This estimate gives fairly good idea regarding the approximate cost of the proposed construction and thus
it gives time to arrange the required finance beforehand.
(iv). This estimate, particularly in case of works of public utility, is very much useful in framing tax schedules.
This estimate is also used for fixing the value of project for the insurance requirements.

1.3 General principle of approximate methods of costing;

There are a number of methods by which approximate estimates of the structures can be prepared. But in general
principle, they all consist of multiplying the number of items or units in the proposed structure by the known cost
of a similar item or unit in a similar existing structure. This method involves two operations. Firstly, a unit is
fixed up and the number of such units in the proposed work is counted. Then by studying the similar existing
structures constructed in the vicinity in the near past then the actual cost of a unit is fixed up.

2
By multiplying the number of units with the actual cost of one-unit, approximate cost of the proposed work is
assessed.
Approximate estimating is carried out by the consultants before tender sum is known (pre-tender
estimating).
This can be done using the following:

1.3.1 Cost index

The actual cost of the unit is subjected to variation due to rise in prices of materials, labour and even due to
changed local conditions.
Cost index is one such method which helps in assessing the present cost of a unit. It is a simple device which
shows the relative changes in the cost of specific or group of items over a certain period of Time. Cost index is
prepared as follows:
First of all, the base period is selected and critical items comprising the index are decided. Weight is assigned to
each item and unit prices are collected periodically.
The cost index is worked out as follows:
𝐼 = × 𝑌

Where 𝐼 = cost index for nth year

S = Sum of percentage weights
Yn = unit price in nth year
B = unit price in the base year
Example:
Index in 1990 = 140, Today’s index = 150
Cost per hospital bed in 1990 = $180,000
What is the cost of a 200-bed hospital at today’s prices?
Total Estimated cost at today’s prices = 200 x $180,000 x 150/140 = $38.57 million
+ External works cost + Piling cost + External fire escape cost + Others

The cost index can be made more relevant by including a greater number of items. The cost index refers to the
changes in prices of the group as a whole and it indicates the average of certain specialized items contributing to
the cost of the structure. The cost index method is useful for big institutions or government departments, spread
throughout the country. The cost index of headquarter is decided and the cost indices are framed for different
parts of the country.
The cost index method suffers from following drawbacks.
1) The cost index assumes that there is rise or fall in all the construction materials and labour at the same
time. This fact generally proves far from truth.
2) This method does not take into consideration the availability of cheap labour and local materials. It also
does not reflect seasonal variation in the prices of materials and labour.
3) The cost index varies with different types of buildings, use of building, number of floors, specifications
of work, etc. Hence it is not possible to have an all-purpose cost index for the construction work.

3
 4) The prices of materials vary from place to place and even from shop to shop. So it is advised to use whole
sale prices rather than retail prices.
5) Modem design criteria, better planning, modem methods of construction, cause considerable economy in
construction cost. Hence the weights allotted to important items should be constantly reviewed and
modified to get the realistic outcome.

1.3.2 Superficial / Floor Area Method

This is used for brief design stage:

A Superficial area of building is measured between the inside faces of external walls with no deduction for
partitions, stairwells, lifts, etc. The Different construction type or standard of finish is measured separately.
Total Estimated cost = [Total area x Rate x Indexpresent/Indexpast] + External works cost + Piling cost +
External fire escape cost + Others
Example:
Index in 1990= 140, Today’s index = 150
Cost per m2 gross floor area for hospital 1990 = $1500/m2
What is the cost of a 24000 m2 gross floor area hospital at today’s prices?
Total Estimated cost at today’s prices = 24,000 x $1500 x 150/140 = $38.57 million.
+ External works cost + Piling cost + External fire escape cost + Others
Advantages
 Speed of application; easy to calculate
 More accurate than methods above
 Cost relates to floor area
 Easier to understand
 Most frequently used method
Disadvantage
 Difficult to make allowances for: shape, size, storey height, number of storeys, construction
methods, site conditions, etc.
 Do not know the cost of individual items.
Other methods include:
 Elemental cost method
 Storey-enclosure method
 Approximate quantities method
 Superficial-perimeter method
 Analytical estimating method
Read about the above methods

4
1.4 Elements of Estimating

1.4.1 Unit of measurement

F.P.S. System. The full name of this system of measurement is Foot Pound system. It is also known as English
system of measurement. In it, length unit is foot, and inches, weights or force system is in pounds and time is in
seconds. This system of measurement is still being used but it is fading out slowly.

The Metric System. The metric system of measures and weights was first adopted by France. It is called metric
system as 'metre' has been used as the primary unit.
The metric system of units called the centimeter-gram-second (C.G.S) system, is used in scientific circles while
metre-kilogram-second (M.K.S.) system is more common in engineering.
The adaptation of metric system has simplified the arithmetical operations of addition, subtraction, multiplication
and division. For civil engineering works the units which are commonly used are:
(i) metre for length
(ii) Sq. m for area
(iii) Cu. m for volume
(iv) kilogram for mass
(v) litre for capacity.
The unit of time is not used in estimating.
International System of Units i.e. S.I. Unit. The traditional metric system of measurement consists of only four
basic units - Metre. Kilogram, Second, Ampere. This system does not include the unit of Thermodynamic
temperature, and unit of light i.e. luminous intensity. The International system of units includes six basic units
covering all the units.
The six basic units are:
 Metre (m) for length
 Kilogram (Kg) for mass
 Second (s) for Time
 Ampere (A) for electric current
 Degree Kelvin (K) for thermodynamic temperature and
 candela (Cd) for luminous intensity.
The SI units cover the coherent units of system and only coherent units are designated as SI units. A system of
unit is coherent if the product of any two-unit quantities in the system is the unit of the resultant quantity.
Whatever be the system of units and whether it be coherent or non-coherent, the magnitudes of some physical
quantities must be arbitrarily selected and declared to have unit value. These magnitudes form a set of standards
and are called ‘basic units’. All other units are derived units related to the basic units.
Most of the countries have adopted to S.I. units. Uganda has also adopted this system of measurements. Adoption
of SI unit have little effect on the MKS system and the four units of metre, kilogram, second and ampere remain
the same and only two more independent basic units, kelvin (K) for temperature and candela for luminous
intensity have been added. So basic SI units are six i.e., Metre, Kg, Second, Ampere, Kelvin (K) and Candela
(Cd).

5
Supplementary Units. In international system of units, the plane angle and solid angles are treated as independent
quantities with SI units as radians (rad) and steradians (Sr) respectively.

Radian is the angle between two radii of circle which cuts off on the circumference a length equal to the radius.
Steradian is the solid angle which having its vertex in the centre or a sphere, cuts off an area of the surface of
sphere equal to that of square with sides of length equal to the radius of the sphere.

Derived Units. The derived S.I. units arc expressed in terms of the basic units. Derived units for S.I. units are
metre/sec or m/sec, for velocity, Newton (N), for force, Joule (J) for energy, Watt (W) for power.

Some derived SI units are expressed in terms of the basic units from which they are derived. Square metre (sq.m)
for area, cubic metre (m3) for volume, kilogram per cubic metre (kg/m3) for density, etc. are such units.

1.4.2 Estimate

As already stated in the previous section that the estimate is the forecast of the probable cost of a construction
project It is determined theoretically by mathematical calculations based on the plans, drawings, and current rates.
An estimate gives the probable quantities of materials, labour and likely expenditure to be incurred in the project.
The primary object of the estimate is to enable one, to know before hand, the likely cost of the work. There are
methods by which approximate cost of construction can be forecast but accurate estimate is prepared by detailed
estimate method.

1.4.3 Actual cost

Strictly speaking, all the estimates, either approximate or detailed give approximate costs only. Actual cost of
the construction can only be known when construction is complete in all respects and all the dues are cleared.
Account of all the expenditure is maintained day-to-day during construction work. At the end of the construction
when all the accounts are cleared, the actual cost is known. The actual cost should not differ much from the
estimated cost, worked out by detailed estimate at the beginning.

1.4.4 Essentials of an estimator

The one who prepares estimates is called an “estimator". The estimator should have a thorough knowledge of
reading the drawings and as a matter of fact, he must be in a position to visualise the structure even from its
drawings. Unless unity is established between the mind and the drawings of the structure, it is not possible to
obtain the correct quantities of the various items. It should always be remembered that the accuracy should never
be sacrificed for the speed.
Ability to achieve speed with accuracy is the secret of success of a good estimator. The qualities of a good
estimator are as follows. He must:
(i). Have a good knowledge of mensuration, and simple trigonometry.
(ii). Possess ability to read and interpret drawings accurately and efficiently.
(iii). be well conversant with construction methods and procedures, materials of construction, labour
problems, specifications, and local customs.
(iv). possess accuracy in calculations and costs as it is his responsibility to price the unit items in the detailed
estimate and to prepare the tender of the project

6
 (v). possess excellent personal qualities such as common sense, skill, experience, initiative, foresight good
judgment and patience.
Before preparing estimate of any work, the estimator is required to have following things with him.
 a complete set of detailed drawings.
 Cost analysis file of works executed, and difficulties experienced.
 Detailed specifications.
 Labour wage records.
 price list of materials.
 Schedule of rates.
 Scale to measure missing dimensions.
 Trade circular file of literature on materials and equipment etc.
 Handbook of references if any.
The procedure by which the quantities of the various items in a particular structure are worked out is known as
Taking out quantities.

1.4.5 Detailed estimate

To prepare a detailed estimate, the unit-quantity method is almost invariably adopted. In this method the rates per
unit work of each item including profit are considered first and the total costs for each I of the item is found
separately by multiplying the cost per unit of the rate by the number of units. After obtaining the cost of each and
every individual item of work and then adding them all together, an abstract of estimated cost is prepared. The
detailed estimate consists of two stages namely:
1. Details of measurement and computation of quantities and
2. Abstract of estimated cost
A complete estimate consists of estimated costs of all items. This is diagrammatically shown below.

Complete Estimate

Cost of Land Cost of legal Cost of main Contingency Water and Miscellaneous
expenses required contract or 5% of the electricity including
between the owner materials and work for extra charges transportation
and the contractor labour petty works during cost of owner
construction and other
visitors

Cost of drawing, Cost of supervision

design and of works
estimate

Prime cost or Cost of surveying Cost of examination of Defaulting taxes of land,

actual cost of land and site investigation deeds, tittle of land and street improvement, etc
execution of deeds

7
 2.0 CHAPTER TWO

2.1 Estimating and Tendering.

Most contractors have a director who is responsible for the estimating department, and this indicates the
importance of his function.

Construction contractors’ base tenders on estimate of the cost of the contract for executing the work described in
the contract document. This gives the estimating department a central importance to the commercial success of
the contract.

2.1.1 Definition, terms used and parties in Estimating and Tendering

2.1.1.1 Definition
Estimating is the process of producing an approximate calculation or judgment of the size, value, cost, duration
of a project, etc.

Estimation is also the prediction of what the key cost of material, land and plant, labour for constructing a facility
will be and a person who carries out estimation is called an Estimator/ Building Economist/ Quantity surveyor.

2.1.1.2 Terms used in Estimating and Tendering

i). Own builder’s work; this is work carried out by builder’s own operatives; employ people to work for you e.g.
National Housing employs masons, carpenters.

ii). Own subcontractor’s work; this is the work carried out by subcontractors on behalf of the owners. The
estimator is sometimes responsible for obtaining quotations from subcontractors who are capable of carrying out
the work in allocated period for the trade and to the required quality.

iii). Nominated subcontractor’s work; this is the work executed by subcontractor chosen by the architect. They
are normally selected for specialized works like installation of a lift.

iv). Nominated supplier; supplier selected by the Architect/ client to supply particular materials (special material
e.g. a lift).

v). Preliminaries: when preparing a tender for a contract based upon B.o.Q s, there are certain items of
expenditure usually termed project overheads that cannot be satisfactorily distributed among unit rates hence
some of the items are calculated as lump sums and they are placed in the preliminary bill e.g. general foremen,
site offices, storage sheds, operating costs, plant, tools, temporary roads, rubbish removal, overtime.

vi). Profits, this is the amount of money added to the net estimated cost as a return-on-investment capital
considering competition and source of capital.

vii). Accurate Bills of Quantity, a large part of the work of the quantity surveyor is the preparation of a BOQ and
its accuracy depends on the availability of full particulars of work required. The fuller and more detailed the
Architect’s drawings, the better the chance of an accurate bill with a minimum of extras arising during the progress
of the works.

8
viii) Established charges/ overheads; These include payment of salaries to the head office staff, head office
operating costs and similar items which are necessary for the administration of the contract, and which are not
normally charged directly to the actual cost of work.

ix) Approximate B.O. Qs; These are used at times when sufficiently full information cannot be given to enable
an accurate BOQ to be prepared. It may be a foundation contract in which the depth of excavation and thickness
off contract cannot be ascertained until the bearing surfaces are exposed.

Nevertheless, it may be known accurately in advance of what items are likely to occur in measurement. A bill can
therefore be prepared which though with approximate quantities can be used for tendering subject to a complete
measurement of the work as executed and revaluation at the tender rate. For example, if volume of excavation
increased, the quantity is changed but the rate remains the same.

x) Schedule of Prices; information may be so scanty or at times so short that not even an approximate quantity
can be given. In such a case, a schedule of probable/ possible items can be prepared giving descriptions similar
to those in a BOQ but without quantities.

There is difficult in making comparison of tenders with such schedules as there are no quantities. Comparison
however can be made between the major items.

xi) Prime cost contracts; information may be so lacking that an ad hoc (unplanned/ emergency) schedule of prices
may not be prepared, and no standardized schedule may be considered suitable. In that case, a form of prime cost
contract is used, i.e. one where a contractor is reimbursed his proven cost and paid an additional sum to cover
profits and overheads either as a percentage on that cost or a fixed fee.

xii) All-in contract (Turnkey/package deal); sometimes. the owner contemplating a construction wants to deal
with only one party for all the services like Engineering and construction. The owner gives his requirements in
broad outline to the contractor together with the site data. The contractors then proceed to prepare their own
design of the construction and finally, submit the same to the owner with the estimated cost of the project as per
their design on a lump-sum basis. Thus, the owner receives a number of competitive designs and after studying
the details, financial aspects and various other factors, the owner decides the design most suitable to him. The
construction work of the project is then given to the contractor whose design has been accepted by the owner.
This type of contract is suitable only under certain circumstances especially when the project demands special
considerations for its design and successful completion. ln short this contract involves all planning, design, plans
specifications, preparation of estimates and construction services under one contract on competitive basis. The
contract may be drawn either on a firm price basis or cost-plus basis. This contract is also referred to as all-in
contract and it is usually not suitable for majority of ordinary common civil engineering works.

xiii) Estimate Adjudication; after estimators have done their calculation of the approximate cost of the project
including profits and overheads, the work is presented to the management for adjustment, and this is the process
of converting an estimate into a tender.

It involves adjusting the estimates downwards or upwards or maintaining the same figure to prepare the tender
document.
9
xiv) Consultant’s Estimate, this is an average price from past record or the design estimate.

xv) Contractor’s Estimates, these are based on facts calculated from the proposed work.

xvi) Cost engineering; this is an area of engineering practice where engineering judgment and experience are
utilized in the application of scientific principles and techniques to the problem of cost estimation, cost control
and profitability.

xvii) Lump-sum contract; for this type of contract, tenderers are required to quote a fixed sum for execution of
the complete work according to the drawings, designs, and specifications supplied to them with the tender within
the specified time. Payment of items of works involved for any additions and alteration not covered by the original
work, is done according to the departmental schedule of rates.

xviii) Item rate contract; in this type of contract the contractors are required to quote rates for individual items
of work on the basis of schedule of quantities given by the department. This schedule indicates full nomenclature
of the items as per sanctioned estimate and estimated quantities. While filling the rates, the contractors are
required to express the amount in figures and words and also to work out the cost against each item. The final
total of the amount tendered for the work is also worked out.

xix) Percentage rate contract, in this contract the department draws up the schedule of items according to the
items sanctioned in the estimate with quantities, rates, unit and amount shown therein. In short, the department
prepares the item rates of the tender known as item rate tender. The contractors are required to quote their rates
which may be at par with the rates shown in item rate tender or percentage above or below them. The percentage
above or below or at par tendered by the contractor apply to the overall of quantities.

xx) Labour contract; in labour contracts, the tenderer undertakes contract for the labour portion. All materials
for the construction are arranged and supplied at the site of work by the owner. The labour contractor engages
labour and gets the work done according to the specifications. The contractor is paid for the quantities of work
done on measurement of the different items of work at the agreed rate in the contract agreement. Contractor uses
his own tools for working, but plants and machineries are arranged by the client. Scaffolding, centering and
shuttering etc. has to be arranged by the client normally but if provided in the agreement may have to be arranged
by the contractor. An agreement containing all conditions of contract, rates, bill of quantities etc. is prepared
before the work is given out to the contractor.

xxi) Cost plus percentage rate contract; in this system, the contractor is paid the actual cost of the work plus an
agreed percentage in addition to allow for the profit. In this system of tendering no bill of quantities or schedule
of rates must be prepared but the owner or the department should carefully define be actual cost and record exactly
what is permissible in the cost of the work. Contractor must arrange all the materials and labour at his cost and
keep proper account. An agreement is prepared with all conditions of contact in advance.

xxii) Cost-plus fixed fee contract; this type of contract involves fixed lump-sum payment to the contractor over
and above the actual cost of the work. This fixed fee shall cover overheads and profit to the contractor. The fee
does not vary with the actual cost of the work as in the case of cost-plus percentage rate contract.

10
xxiii) Cost plus fluctuating fee contract; in this type of contract the contractor is paid by the owner the cost of
construction, plus an amount of fee inversely variable according to the increase or decrease of estimated cost as
agreed first by both the parties. Thus, higher the actual cost lower will be the value of vice-versa.

2.1.1.3 Parties involved in Estimating and Tendering

i. Client’s/ promoter’s staff or their professional representatives.
ii. Consultant
iii. Contractor; planners, plant managers, site management staff.
iv. Subcontractors and nominated suppliers.

2.2 Importance of estimating

 One of the keys to commercial success is the estimator’s ability to estimate the cost of construction work
and to construct that work to the estimated cost.
 In competitive tendering, the tender is based on the estimated cost which represent as much as 90% of
the tender. The other allowances added to are overheads and profits which are smaller to make a
contractor win a tender.
 The work connected with the construction of a new structure of with alterations and additions to an
existing structure is invariably (always) the subject of a contract agreement. The essence of such a
contract is that a builder promises to erect a structure as shown on the drawing and in accordance with
the specification in return to a specific amount of money called contract sum.
 A prospective owner cannot give instructions to a contractor to erect a proposed project and accompany
it with an empty check to be filled later.
 If these practices were to be adopted, the result would be a cost-plus account with greater advantage to a
contractor and a great loss to the client.
 Virtually, all contracts are obtained by competition between contractors and the subject of builders
estimating consists of the process involved in arriving at the contract sum.

2.3 Process of producing an estimate.

2.3.1 The estimating process

Estimating is the process by which the cost of carrying out a quantified work activity can be established using
historical data, synthesis of the activity and computer-generated software information.

The contract estimate produced by the Estimator in conjunction with the pre-contract Tendering team is their
assessment of the cost of a contract; this has been derived from the information provided by the Client to the
Architect and Quantity Surveyor and research, investigations and planning carried out by the team. This will
include processes and document production which will assist the estimator to establish a cost to complete the
project. They include amongst others:

 Risk assessments

 Site investigation

11
  Resource availability

 Contract programme

 Sub-contract availability

 The drawings and specification

 Preliminaries and individual site conditions and location

 Form of Contract and requirements

 Prime Costs and Provisional Sums

When the Designer/Architect has produced the drawings for a building these are passed to the Quantity Surveyor
who will prepare the Bill of Quantities. This is a document which lists the items and describes the work that is to
be done to construct the building.

It specifies the details of each operation and itemizes the materials, parts and labour for each operation, it will
also include preliminaries, material specification details about the form of contract, P.C. and P.S. inclusion and
other factors which will affect how the work will be carried out and the quality and allowances to be incorporated.

Once the document has been prepared it is sent to the companies who are invited to tender for the contract. Each
company who wishes to tender will then cost each of the items to obtain an overall estimate.

Before a company decides to submit a tender for a contract they need to decide if they wish to price the contract,
considering all relevant factors, and finally determine what profit they expect, before turning the estimate into a
tender.

Estimators need to keep up to date with the factors which will influence costs such as plant, materials, and labour
availability.

The estimating process incorporates decisions about:

 equipment needs
 sequence of operations
 number of workers required
 physical constraints at the site
 conditions of contract
Allowances must be made for wastage of materials, inclement weather, or any other factors that may increase
costs. These will need to be incorporated into the estimate. Once these factors have been considered the estimator
will produce a cost summary for the contract and include profit and overheads; and move the process on to the
tender production stage.

12
2.3.1.1 Take off
The initial ‘take off’ content within any contract is vital and whilst various systems of approximate estimating
exist, none can be as accurate as using the Standard Method of Measurement (SMM) approved and accepted by
professional Quantity Surveyors and the Royal Institute of Chartered Surveyors, (RICS).
Being realistic in the form and amount of work output whether referring to machine or person is vital if the
contract is to be won and return to a profit.

2.3.1.2 Cost Calculations

The Estimator should possess the knowledge and understanding of the work items (as detailed within SMM) in
order to be able to place accurate figures against each of the Bills of Quantity measured work items and/or to be
able to complete the costing of the preliminaries and other such items. The Estimator will also carefully consider
the information provided by the Tendering team and incorporate this into the unit rates.

2.3.1.3 Units Rates

Units Rates are rates per unit of measured work within the Bills of Quantity, they are described in terms of Lm,
M2, M3, Tonnes, Item, etc.; all complying with the rules of SMM; for each unit of measured work the Estimator
includes a price at which he/she considers that the work can be completed.

The basic inclusions in the ‘unit rate’ will be:

 Materials
 Waste on Materials
 Labour in the form of an output constant multiplied by the craft persons ‘all in’ rate
 Plant (Specialist plant identified for a specific work item may be included within the unit rate but may be
itemized at the end of the Bills of Quantity section in which the description of the work was present;
general plant may be described within the preliminaries)
 Overheads
 Profit
Price books and computer software used for estimating purpose provide an excellent source of information, in
particular to confirm or query the Estimators labour constants but all such information should be taken as a guide
only and not used without interpretation of the constraints and opportunities identified by the Tender team as
applicable to the individual tender and contract under consideration.

2.3.1.4 Labour Constants

The establishment of accurate ‘labour constants’ is vital to the accuracy of the calculation of the unit rate; indeed,
the accuracy of the Estimators calculation of labour output could be central to the accuracy of the estimate and
tender figure itself. In addition to determining the cost of the contract to the contractor the labour constant will
determine amongst other factors the programme durations for the contract and hence cash flow.

2.3.1.5 Cost Estimate not Tender Figure

After all the work which has gone into the production of the Estimate for a contract it should be remembered that
the Estimators price to complete the contract is not the Tender Figure/ Price that will be submitted to the Client,
it is purely the cost of carrying out the work in the view of the Estimator and the Tendering team. The actual

13
Tender Figure/Price; the amount to be quoted to the Client which will secure the contract for the company will
be subject to a process usually referred to as: Completing the Estimate and Final Tender Review, Adjudication or
Settlement, a process by which the company take into account factors which will enhance their chances of success
or diminish these; it will also consider the amount of work they currently have and the importance of gaining the
contract, only then will a Tender Figure/Price be established.

2.3.1.6 Production of the Estimate

The first thing that needs to be done in the production of the estimate is to estimate the costs involved with the
project. Although this section deals specifically to the development of a project the principles will apply to all
construction work.

2.3.1.7 Estimating Construction Costs

The construction costs for a project will depend on the size, type of building, standard of finish required, location
(costs will vary according to the region in which the development occurs), the economic climate of the
construction industry i.e., if there is a shortage of construction work available firms will reduce the amount of
their tender to try and attract work.

If the opposite is the case and there is a lot of work available, firms will increase their tenders, as they will not be
too keen to obtain the contract which will stretch their resources, unless it is worth their while financially.

Building Costs can vary between builders/developers. This can be due to the size or purchasing abilities of a
company or the discount that it receives from suppliers.

Professional fees must be added to the cost of construction, and these will vary according to the project.

2.3.1.8 The Use of Price Books

Estimators may use ‘Price books’ as a means of determining unit rates; particularly where the Estimator does not
have a full understanding of the work to be executed

The skill of the Estimator rests with their ability to amend the published unit rates to reflect the true cost of
resources as obtained from quotations received for plant, labour and materials and combine these with their
calculations and requirements for overheads and profit.

2.3.1.9 Bills of Quantity

The Bills of Quantity description and format may be considered as a form of shorthand standardization of work
to be completed during the contract which is understood by other members of the construction industry.

2.3.1.10 Producing the Estimate

The estimate is a net estimated cost of carrying out the work. It considers all items of expenditure which are likely
to be required in order for the work to be completed. On completion the estimate is submitted to management to
enable them to determine if a tender is to be submitted and the price of the tender.

14
2.3.1.11 Turning the Cost Estimate into a Tender
The Estimator in co-ordination with the tender team will by this stage have completed the task of investigating
the true nature and extent of the contract under
consideration and produced documents and  Profit margins required
reference material to aid their final pricing of the  Preliminaries
contract.  Effects on overheads

They will have produced a pre-tender programme  Dayworks

early in the tendering cycle to ensure that the tender  Contingency sums included
is completed and received by the Client by the date  Preliminaries including contractual requirements
noted on the tender documentation. They will be
 Competitors
working as a team to produce that which they
consider will be the right price for the contract and
 The existing company workload

the strategy by which this price will be competitive  The need for the new contract.
and secure the contract.  Financial implications and cash flow analysis

2.3.1.12 Settlement / Adjudication Meeting  Risk analysis

 Health and Safety Plan.
The process of settlement or adjudication involves
 Cash flow with the new contract
considering amongst other factors:
 Cash flow without the new contract
 The Estimators report
 Company retention on selective tendering lists.
 Contract conditions and form of contract

 Site factors

 Past experience of the Client

 Analysing own work content

 Sub-Contract allocation.

 Prime cost and Provisional sum content

 Discounts available

 Non-Standard insurance requirements

 Liquidated damages applicable

 Complexity of the contract

 Programme constraints

 Likely variations

 Valuation dates

 Labour availability

15
The list is in reality extensive and many of these factors will already have been considered by the tendering team
and related to the estimator, but the final ‘settlement’ is in many respects left to the senior management of the
tendering company; on their shoulders rests the continuance of the company and responsibility for its profitability.

This process of estimation can be further summarized as below:

1. Acquisition of documents (plans, specification, B.O.Qs, Form of agreement, Conditions of contract) upon
acquiring information from client through newspaper, internet, friends.
2. Decision to tender considering resources, manpower, profitability, location.
3. Programming the estimate.
4. (a) Collection and calculation of cost information through site visits (labour, water, raw materials, power).
(b) Decision to tender after visit.
5. Project study.
6. Preparing the estimate having details of work and contract sum.
7. Calculation of project overheads and establishment overheads plus contractor’s profits.
8. Production of estimator’s report.

2.4 Techniques / Methods of Estimating

2.4.1 Unit rate estimating technique

This is based on the traditional B.O.Qs approach where the quantities of works are defined and measured in
accordance with the standard methods of measurement.

2.4.2 Operational estimating technique

This is a complex procedure based on calculating the total quantity of work involved in an operation (e.g.,
excavation and concreting) and estimating the total elapse time of the operation in weeks and combining this with
the selected resources (materials, labour and plant).

This method of calculation if favored by estimators involved in plant dominated activities e.g., excavation and
concrete works.

2.4.3 Other estimating techniques

 Global method – It is a crude estimating method which relies on the existence of data for similar projects
assessed purely on a single characteristic such as the size, capacity or output.
 Factorial technique – It is widely used of process plants e.g. water works where the key components
can be easily identified and priced and all other works are calculated as factors of this component.
 Spot (gash) technique s– Are direct cost estimates which are not based on calculation but based on
experience.
 Man-hour technique – It is a labour-based method. Work is broken down into unskilled, semi-skilled
and skilled according to the required standards.
 Empirical cost interference and production function approach.

16
2.5 Types of Cost Estimates for Tendering

These include the following:

 Pre-tender cost estimate (design estimate) – screening, preliminary, detailed, engineer’s, estimate
 Tender/bid estimate
 Control estimate

2.5.1 Pre-tender cost estimate (design estimate)

In planning and design stages of a project, various design estimates reflect the progress of the design.

A screening or order of magnitude estimate is one which is usually made before the facility is designed and
must therefore rely on the cost data of similar facility built in the past.

A preliminary or conceptual estimate is one which is based on the conceptual design of the facility at the state
when the basic technologies for the design are known.

A detailed or definitive estimate is one made when the scope of work is clearly defined and the detailed design
is on progress so that the essential features of the facility are identifiable.

The engineer’s estimate is one based on the completed plans and specifications when they are ready for the
owner to solicit bids from construction contractors.

In preparing the estimates, the design professional will include expected amounts for the contactor’s overheads
and profits.

2.5.2 Bid/ Tender estimate

A bid estimate is one submitted to the owner either for competitive bidding or negotiation consisting of direct
construction cost including field supervision, plus a markup to cover general overheads and profits. The direct
cost of construction for bid estimates is usually derived from a combination of the following approaches: sub-
contractor’s quotation, quantity take-off, construction procedures.

Contractor’s bid estimate often reflects the contractor’s desire to secure a job as well as the estimating tool at its
disposal.

If a contractor believes that the chances of success are not high, he puts in the least amount of possible effort in
making a cost estimate since always a lowest bidder will be the winner of the contract in most bidding contests.

2.5.3 Control estimate

For monitoring the project during construction, a control estimate is derived from available information to
establish.

 Budget estimate for financing

 Budgeting cost after contracting but prior to construction
 Estimated cost of completion during the progress of construction
17
 Both the owner and the contractor must adopt some baseline for cost control during the construction.

For the owner, the budget estimate must be adopted early enough for planning along with financing the facility.
The detailed estimate is often used as a budget estimate as it reflects the project scope. The budget cost must
always be revised periodically as is necessary either because of change orders initiated by owner or unexpected
cost overrun.

For the contractor, the bid estimate is used as a budget estimate which will be used for control purposes as well
as for planning construction financing. Revise the budgeted cost periodically to reflect the estimate cost to
completion as well as to ensure adequate cash flow.

Importance of the above estimates to different parties in any construction project

To Owner

Design/Pre-tender Cost estimate Bid/ Tender Estimate Control estimate

 Assessing best alternative  Choosing best bidder  Come up with control budget

To Contractor
Design/Pre-tender Cost estimate Bid/ Tender Estimate Control estimate

 Understand scope of work  Estimating tool  Come up with control budget

 Determine resource demand  Come up with best bid  Carryout cost analysis
 Execute work as per schedule

To Consultant
Design/Pre-tender Cost estimate Bid/ Tender Estimate Control estimate

 Choosing appropriate technology  To select best bidder  Valuing work done according to
 Design different facility components according to quotations to specifications.
 Allocating prices as drawn requirements of facility

2.6 Contract types

Contracts normally handled during the estimation processes include but not restricted to the following:

2.6.1 Contracts without Quantities

These contracts are normally restricted to minor works and the contract documents comprise of drawings,
specifications, and form of agreement.

 Drawings include plans, elevations, sections and large-scale details of proposed work.
 The specification is prepared by the architect to supplement the drawings. In the specification, the mixes of
concrete, types of bricks and quantities of any other work are stated, and methods of work are normally stated.

18
 A form of agreement is a legal agreement signed by both parties which states the builder’s contract to erect
the structure in accordance with the drawings and specifications and the client agrees for his part to pay the
contract sum.
Formally contractors would simply study the drawings and specifications and would rely of past data to quote the
contract sum. As competition grew keener, it became difficult to use it.

It became necessary to take off measurement and prepare quantities of work involved.

Applying prices to these quantities, one would come up with the total estimate of the work. The quantities
prepared were not only those of materials but specific elements in the structure like walls, roof, etc.

2.6.2 Contracts with quantities

These contracts are normally prepared for major works, and they are based on B.O.Qs. The B.o.qs are prepared
by the quantity surveyor on behalf of the client. Several copies of B.O. Qs are prepared and sent out to the
contractors who are interested in doing the work to enter in their prices or rate for the execution of the work.

When the contract is signed, the B.O.Q and prices become part of the contract agreement and will be used in
preparation of the final accountability and in the settlement of variations.

The provision of B.O.Q leads to accurate tendering as all those tendering have identical conditions on which to
work and this considerably reduces the cost of estimating.

Examples of estimating using unit rate technique

One

Compute the cost per ton for the provision and fixing a 16mm diameter reinforcement given the following data.

Data

Material purchase cost 4,000,000 per ton

Wastage 5%
Tie wires and spacers 2%
Cutting and bending 20hrs per ton
Fixing rate 10hrs per ton
Bar bending machinery within on-site cost
Site transportation within on-site cost
Labour for steel fixer 3500 per hr.

Solution
Purchasing …………………………………………… = 4,000,000 per ton
Wastage of 5% of purchase……………………………… = (0.05 x 4,000,000) = 200,000/
Add 2% of purchase for spacers and binding wires……… = (0.02 x 4,000,000) = 80,000/
Subtotal 1…………………………………………………………. = 4,280,000/ per ton

19
Labour = ((20+10) x 3500) = 105,000/ per ton

Sub Total 2……………. ………………………………………… = 4,385,000/per ton

Add 20% profits and overheads ………………………... = (0.2 x 4,385,000) = 877,000/

Total……………. …………………………… = 5,262,000/ per ton

Example Two

Compute the cost of dredging per m3 if a total of 300,000m3 of material is to be dredged from a harbor basin and
deposited off on land. From the work programme, dredging, reclamation and slope protection extends over a
duration of 6months.

Data

Hire rate for dredger $100,000 per month

Hire rate bulldozer $75,000 per month

Fuel cost estimated at 5% of the equipment cost.

Machine operator is paid $6.5 per hour for an average of 70hrs per week.

Bank man is paid $5.5 per hour for an average of 70hrs per week.

Assume a profit of 20% for the contractor.

Solution

Dredging

Cost of dredger hiring for 6months…………….. $100,000x6 = $600,000

Fuel cost……………………………… 0.05x$600,000 = $30,000

Cost of labour………………………. $(6.5+5.5) x70x26 = $21,840

Total cost of dredging = $651,840

Cost of disposal

Cost of bulldozer hire ………………………. $75,000x6 = $450,000

Fuel cost……………………………………. 0.05 x $450,000 = $22500

Cost of labour ……………………………… $(6.5+5.5) x70x26 = $21,840

Total cost of disposal = $494,340

20
Total cost of dredging and material = $(651,840+494,340) = $1,146,180

Cost per m3 $ (1146180/3,000,000) = $0.382 per m 3

Adding 20% for profits and overheads giving = $0.08 per m 3,

The total cost per m3, = $(0.38+0.08)

= $0.46

Assignment one. (To be submitted within one week after the Lecture).

a) Explain any six factors to be considered during the preparation of a detailed estimate.
b) Explain the different types of the estimates below:
 Item rate estimate
 Revised estimate
 Supplementary estimate
 Annual repair or Maintenance estimate
c) Prepare a preliminary estimate of a double storied new Building at the Department of Building and
Environmental Engineering of Kyambogo University having a carpet area of 1000m 2.
It may be assumed that 25% of the built-up area shall be circulating area. Walls occupy 15% of the built-
up area.
a) Plinth area rate = 2400shs per sq.m
b) Add 1% of building cost for extra than anticipated depth
c) Architectural treatment = 0.5% of building cost
d) Water supply, sanitary and electric installation
and other services = 20% of building cost
e) Contingencies = 3%
f) Supervision charges = 8%

21
 3.0 CHAPTER THREE

3.1 Tendering

This is the submission of a quotation.

A quotation is a price that a firm charge to offer a good or service.
Against corporate plan, senior managers will take the decision to bid for a specific contract. Decisions
are taken;
 During the pre-selection stage
 After careful examination of the contract documents
 After the estimate has been prepared and tender is ready to submit

3.2 Factors considered while taking the decision to tender

 Potential contribution of the contract to the company’s turnover in a particular sector; the overheads
recovered and the anticipated profits
 The likely demands of the contract on the company’s financial resources
 The company’s resources available e.g. the working capital and human resources
 Type of work
 The location of the project
 The type of client
 Contract deal

3.3 Tendering Procedures or Methods

3.3.1 Open tendering

The procedure is to advertise in the press inviting any firm that wishes to do so to submit a tender; bid
or offer. The advertisement will give an outline detail of the type of work, the scale program and any
other key features.
Any interested firm applies for the tender documents and there are usually no formalities other than a
little fee for the tender documents and discourage those who are not interested in the job or idle
curiosity. This system is commonly used by public bodies. E.g. local governments, public services
although it is also used by private institutions.
It’s usually stated in the advertisement and in the tender document that the employer does not bind
himself to the lowest offer as the advertisement does not bid the employer in any way but it is merely
an invitation to person or firms to make an offer and any offer made should be unconditionally
accepted.

22
3.3.1.1 Merits
 It gives a chance of tendering to a firm which wishes to dos so.
 Since there is no restriction, there can be no chance of favoritism.

3.3.1.2 Demerits
 There are a large number of tenders to evaluate hence much time and money wasted.
 There is normally pressure to accept low tenders.
 There is a high cost on the contractor’s side as he tenders for very many jobs and wins nothing
or only one.
 There is difficult in selecting the right firm.

3.3.2 Selective tendering

Here the procedure is to select a limited number of firms known to the architect/client and invite them
to tender and this procedure is mainly used by private firms or institutions.
Selection should be made sufficiently early for firms to be asked whether they will be willing to tender
at the required time. The criteria to be employed in drawing up the list of the selective firms will
depend to some degree on the character of the project as well as its size, location. Also consider
equipment available, standard of workmanship by firms, size of payroll, business record, and number
of strikes within the company, financial stability, and real willingness to tender.
3.3.2.1 Merits
 It’s possible to select the most competent firm.
 Since tenders are few, there is time and cost saving.

3.3.2.2 Demerits
 The firms are sometimes overloaded as they may be reluctant to decline some tenders at the
time they have a lot of jobs.
 It breeds/ brings favoritism and corruption.
 There is always reluctance to strike off incompetent firms from the list.
 Newly formed firms that are competent cannot tender for the job.
 There is always higher quotation than obtainable by open tendering as there is less
competition.

3.3.3 Single tendering

There may be circumstances in which only one firm will be able to satisfy the criteria for selection.
This likely happens when specialist or nominated contractors e.g. in installation of lifts, gas pipes
work, supply of some selected materials are involved.

23